In the fast-moving world of cryptocurrencies, trends take off and end so quickly that it can be difficult to catch them before they're gone. One of the latest crazes, however, has stuck around for quite a while and has made a big impact. The so-called "initial coin offering," or ICO, was popularized by Ethereum since its release about two years ago. In the time since the first ICO, there have been dozens of additional offering sof this type. One of the latest was by an organization called the Bancor Foundation, which raised about $153 million worth of Ethereum's currency ether throught he sales of digital tokens over a three-hour period on June 12th. This launched Bancor to the top of the list in terms of size of token sales, and it has continued to push the ICO to the top of newsfeeds as well.
What is an ICO?
An ICO is a means for a startup to finance itself by allowing potential users and customers buy up micro stakes. It is a way of turning the traditional means of fundraising for a launch on its head. In a traditional fundraising venture, a startup will seek out large sums from venture capitalists or other major investors. Many startups will launch on the strength of a small number of investors who have each donated a substantial amount of money. With an ICO, the stakes are much lower for the individual investor, and the financing is sourced directly from the future user.
ICOs have managed to bring in about $327 million this year, according to a report by Quartz. This has already outpaced the $295 million that has been raised through traditional venture capital sources for blockchain-related tech startups, according to research by CoinDesk. Much of the money earned through ICOs has also been obtained in the past three months, with total ICO figures hovering below $100 million in total prior to April of this year.
Bancor Paves the Way for New Token Policy
While Ethereum first launched the ICO, Bancor has taken it to new places. The Bancor Foundation indicated that its tokens will not utilize exchanges, the most common means of trading cryptocurrencies. Rather, the tokens themselves will do the matching between buyers and sellers, thanks to a set of automatically executed guidelines known as smart contracts which are embedded within each token.
Some analysts believe that smart contract processing of this type is the way of the future for cryptocurrencies. These tokens would function like ETFs holding baskets of digital currencies or as tokens that are tied to a specific exchange rate.
The ICO was not without its challenges, though. Some ICOs have seen their stock sell out in a matter of seconds, and Bancor also saw a huge level of interest. In fact, the publicity in advance of the sale drew so much attention that it caused a slowdown in the Ethereum network and delays of many hours in the processing time for transactions related to the sale.