Hey guys, I’m Angelo. Welcome back to Crypto Coin Consultants! Today I’ll be teaching you about initial
coin offerings, or ICOs. But first, here’s your daily quiz question. Which was the first coin to ever hold an ICO? Bitcoin, Ethereum, Mastercoin, or Kin? Stay tuned to find out the right answer! 5. What is an ICO? ICO is short for initial coin offering. You may also hear it in the crypto world being
referred to as a “token sale” or “crowdsale.” An ICO is essentially another way in which
blockchain-based companies can raise public investment funds. Let’s take Facebook for example. When Facebook went public, they sold equity
(or part ownership) in their company in the form of shares. This fundraising process is called an initial
public offering, or IPO, and Facebook’s shares are now tradeable by the public on
the NASDAQ. Just like Facebook and even Google & Amazon,
blockchain-based companies offer investment opportunities through tokens rather than shares. And instead of being traded on the NASDAQ,
these tokens are tradeable on cryptocurrency exchanges, or just “exchanges” for short. 4. What’s the difference between an ICO & and
IPO? According to masterthecrypto.com, there are
five key differences between ICOs and IPOs; along with pros & cons to both: regulatory
oversight, credibility, utility, duration, and access. Regulatory Oversight
Companies looking to issue an IPO are required to create a prospectus, or a legal document
stating its intent to issue an IPO along with other forms of information so potential investors
can make better, more informed decisions. ICOs aren’t required to do that since there’s
little (if not, loose) laws regulating them. Instead, crypto-companies running an ICO release
whatever they choose to be released in a document called a whitepaper. There are no legal criteria that whitepapers
have to abide by, so crypto-companies are free to add or omit as much information as
they so choose. It is in their best interest, however, to
put together a proper business plan because, otherwise they won’t raise enough funds. So in reality, most legitimate, promising
ICOs have extensive, professional whitepapers outlining their business plans & roadmap. Credibility
For an IPO to take place, companies have to go through a rigorous verification process
to ensure the safety of their investors’ funds. Accounts are verified, investment banks have
to come in & underwrite, and all sorts of time-consuming procedures are done in due
diligence to make sure the company has a good track record & clear intent on what they plan
on doing with the money they raise. ICOs don’t have to go through any of that,
making it a little more difficult to assess the company’s credibility or even hold anyone
accountable in the event that someone chooses to run off with the investment money. BUT as I mentioned before…the more information
they provide in their whitepaper, the more transparent they are with their potential
investors, and the more favorable they’ll be in the public’s eye. Utility
As I said earlier, shares sold through an IPO represent ownership in a company. This entitles you to payouts in the form of
dividends while also giving you a vote during a shareholders meeting. But shares themselves can either go up or
down in value based on factors like news announcements about the company, current events, and just
pure speculation. While coins distributed through an ICO don’t
always represent ownership, they have a wider range of functionality. Like shares, some coins also pay out dividends. In addition, the value of the coins also go
up or down for the same reasons that shares do. But the main difference between coins & shares
is that coins can also be used as a form of currency within its blockchain’s ecosystem. Take Datum for example. Datum’s ICO ran from October 29th, 2017
till November 29th, 2017 and raised over $7,000,000 total! Right now, at this very moment, you’re watching
this video for free on YouTube…or so it seems. While you think YouTube is letting you watching
this for free, you’re actually exchanging it for one important thing: data. The reason why YouTube’s services seem “free”
is because they’re taking your data right now (like your age, location, and even user
behavior, like which ads you decide to watch for more than 15 seconds). They then sell it off to marketers & advertisers,
who pay top dollar to YouTube to serve you ads they deem most relevant with the highest
likelihood for making a sale. Datum is revolutionizing all this by allowing
you to upload whatever data YOU choose onto their platform, which is then encrypted & stored
in a secure manner to preserve your anonymity. Rather than paying companies like YouTube
for your data, marketers will pay YOU DIRECTLY instead, in exchange for your anonymized data! This entire transaction process is executed
seamlessly through the use of smart contracts, which I discussed in the previous video on
Ethereum, and payments are made in the form of DAT (Datum’s native token or coin). This entire exchange of DAT tokens for personal
data within Datum is just one example of how a cryptocurrency can be used within a blockchain’s
ecosystem. From here we can deduce that the more perceived
utility a coin has, the more likely it is to go up in value. Duration
I mentioned earlier that companies issuing shares are subject to very time-consuming
procedures in order to conduct their IPO. The entire process (including the IPO itself)
can take anywhere from 4-6 months. ICOs on the other hand are much shorter. It all depends on how much money the crypto-company
is trying to raise in total, but most leave their crowdsale open to the public for a month. But some ICOs have completed within only a
matter of minutes thanks to huge amounts of hype! Bancor, for example, raised a whopping $152
million in just 3 hours; that’s over $14,000 per second! Brave raised $35 million in 30 seconds, or
well over $1,000,000 per second! This goes to show not just how fast crypto-companies
are enabled to execute their projects & tasks, but also how much faith society has in crypto
nowadays & how it’s ever-increasing in adoption! Access
It’s normal for IPOs to be underwritten, meaning most shares are sold off to investment
banks, who then sell & distribute these shares to other private investors. It’s extremely difficult (if not, impossible)
for normal people like you & I to participate in any IPO. This means that unless you’re an investment
bank or big time investor, you likely won’t be able to touch a company’s shares until
it hits exchanges. Enter ICOs. While a certain number of coins is allocated
to private investors & venture capitalists during their private sale (aka pre-ICO), a
good majority of the coins are reserved for the public to buy into as well. Yes, that means you & I–unlike with IPOs–are
able to participate in almost any ICO we believe in, thus enabling us to grow our investments
multiple times over! All you really need to participate is Bitcoin
or Ethereum to be able to buy the coins offered during the ICO. 3. ICO regulations
While ICOs remained unregulated for the longest time, governments are now seeing the potential
behind cryptocurrencies & how easy it is for anyone & everyone to participate in an ICO. These governments are now trying to step in
to regulate. ICO regulations vary from country to country,
so you’ll have to do your own research to find out which laws apply to you. In July of 2017, the United States Securities
and Exchange Commission (or SEC) said that they’d now have the ability to apply federal
security laws to ICOs. The SEC would not classify every single cryptocurrency
as a security, but instead would make this determination on a case-by-case basis. Although this is making it more difficult
for Americans to participate in certain ICOs, some argue that regulations such as these
will help encourage adoption & funding from more mainstream investors. Another significant event in cryptocurrency
history was on September 4th, 2017 when the Chinese government announced that all ICOs
were banned throughout the entire country. In addition, they demanded that all proceeds
raised from ICOs be refunded to investors. In the wake of this event, the industry saw
a massive drop in the value of each coin as massive amounts were sold off. But just a week later, a Chinese official
stated that the ban was temporary until more concrete regulatory policies were in place. Cryptocurrencies in general have since made
a fast & rapid recovery! 2. Why are ICOs so important & what are some
examples? As I stated at the beginning of this video,
ICOs are simply another form of fundraising. Aside from the fundraising aspect & the option
for ordinary folks like you & I to participate in them, they more importantly give blockchain
companies the opportunity to proceed with their projects. Companies–and the progress they’ve made
on their roadmaps–vary during their respective ICO process; some already have a minimum viable
product being tested while others are still a proof-of-concept. ICOs allow these companies to make further
progress; thus creating more jobs, improving technology, and revolutionizing society as
a whole. I’ve already discussed a few ICOs of 2017,
but wanted to cover a few more. There’s Gnosis, which raised $12 million
in 10 minutes to help fund their platform for human & AI-based market prediction applications
and there was Filecoin; the largest ICO of the year, which raised $257 million for a
blockchain-based platform in which you can rent or lease out digital storage space, similar
to Storj, which I briefly talked about in a previous video. But don’t be fooled by the large & fast
fundraising rates because there are a lot of sleeping giants out there too! I believe WePower is going to be a game-changer
in the clean energy industry by tokenizing clean, renewable energy that can be sold to–and
used by–customers at discounted rates. There’s also Universa, who (in my opinion)
is providing a simple protocol for people to create their own apps, blockchains, and
smart contracts while also being able to carry out transactions at a fraction of the price
of Bitcoin & at a much faster speed. Don’t worry about writing all these down
because I’ll be providing links to them in the description below! 1. How can I participate in an ICO? I told you earlier that all you basically
need to participate in an ICO is either Bitcoin or Ethereum. Another thing you’ll need is an online wallet,
which is SUPER easy to set up & only takes a few seconds to create. But besides that, you’re set! Hang tight because I’ll be going over the
exact steps of how to buy into an ICO in a future video that I’ll be releasing here
on Crypto Coin Consultants very soon! So which was the first coin to ever hold an
ICO? If you guess Mastercoin, you’re right! Mastercoin, which was renamed to Omni in 2015,
conducted its initial coin offering in July of 2013. It’s built on the Bitcoin blockchain & allows
for more complex financial functionality in cryptocurrencies.