With over 18 successful ICO projects to date, we are confident that our track record speaks for itself. Customers from Asia, Europe, and North America in a wide range of sectors have all enlisted us as a partner on their roads to ICOs, raising a total of over $US480 million. This success is only possible due to early mistakes that we made, from which we learned immensely, and derived a firm understanding of what goes into a successful ICO.
01. Emerging Way of Fundraising on Blockchain
Leveraging the power of decentralized technology, a new funding mechanism emerged. In 1H2017, over US$1.2billion was raised through this Initial Coin Offering (“ICO”) mechanism. Rather than a sale of securities, the object sold is a digital token or coin that is both scarce and validated based on advanced cryptography techniques. The are sold typically in exchange for major crypto-currencies, e.g. bitcoin or ether.
ICOs are still largely unregulated to date, and it often remains unclear whether a token represents 1) a digital currency, 2) an utility token, or 3) a security. Similar tools have previously been found in virtual economies with real economic value, video game gold farming as an example. However, never before have digital currencies been traded on such a global scale as now, and this is still yet only the beginning.
While tokens may offer functional value, speculation and volatility across crypto economies are rampant, and fraudulent practices are not uncommon. Nonetheless, underneath these turbulent waters are seeds for a massive transformation in how the world funds real solutions to real problems, becoming an alternative to classical capital raising means.
02. Types of Coins that Can Be Issued in an ICO
- The purpose of a digital currency coin is to serve as an alternative to fiat currencies and to facilitate an exchange in value.
- The design of the token focuses on technical performance, such as the speed of processing a transaction, security, and degree of transparencies available.
- With little intrinsic value due to their limited functionality beyond serving as a medium of exchange, their value is generally based on consensus.
- Examples include Bitcoin, Dash, and Litecoin.
- A utility token is used for a particular service or function on a blockchain-based platform.
- Developers can build in rules within the token, allowing it to serve some particular purposes. For example, Air Millage can be issued in a form of Tokens that will expire automatically
- The value of the Token comes from the facilitation of the platform where they are used. Thus the higher the value of the platform, the higher the value of the Token
- Examples: Ether, Filecoin, GEC
- A token may constitute a security coin if:
- it confers or represents ownership interest in a corporation, represents liability of the token holder in the corporation, and represents mutual covenants with other token holders in the corporation inter se
- it constitutes or evidences the indebtedness of the issuer of the digital token in respect of any money that is or may be lent to the issuer by a token holder
- it represents a right or interest in a collective investment scheme, or an option to acquire a right or interest in such scheme
03. Equity vs. ICO Investment: a Token Does Not Represent Ownership in the Company
- Investors spend cash for an ownership share of AppleX that operates AppStoreX.
- AppStoreX relies on fiat money supply to function.
- AppStoreX needs to share revenue with app publishers, pay for utilities such as data centres, and cover other operating cost, before returning the economic rewards to AppleX.
- Investors spend cash for an ownership percentage of the AppleYCoin, which is the only token accepted on the AppStoreY to pay for downloads.
- Built on blockchain, AppleYCoin enjoys the benefit of lower transaction costs between parties, such as app publishers and AppleY.
- AppleYCoin may be offered at a discount to outside investors before the whole AppStoreY is built, providing them with an incentive to subscribe early.