Initial coin offerings (ICOs), or token sales, are becoming an increasingly popular method for blockchain and cryptocurrency startups from around the world to raise funding. In the past year, ICOs have raised over a billion dollars for early stage startups.
An ICO is a method through which a project or venture raises funding by creating and selling its own cryptocoins and tokens in exchange for cryptocurrencies of immediate, liquid value such as Bitcoin or Ethereum. The practice is unregulated and enables startups to skip banks or venture capital firms as intermediaries.
An ICO campaign runs for a defined period during which early backers can support the project. These investors are usually motivated to buy a certain cryptocoin in the hope that the project or venture becomes successful after it launches, which could translate to a rise of the value cryptocoin.
ICOs in Singapore
In Singapore, several ICOs have taken place in the past year, raising millions of dollars in just a just a few days and some in a few hours.
Last year, Digix, a gold-tracking asset on the Ethereum blockchain, raised its crowdsale goal of US$5.5 million in under 12 hours. Digix provides a platform for trading gold-backed tokens. The company stores physical gold for each token issued on Ethereum.
In June, Singapore-based Cofound.it broke the record for the largest presale ever, raising US$14.8 million and subsequently canceling its planned ICO.
Cofound.it is a building a blockchain-based platform to connect startups with investors and experts for funding and advice. The platform is designed for startups in the blockchain space seeking to create their own cryptocurrency and token and sell it to investors.
Blockchain startup TenX recently raised close to US$80 million to support the development of a protocol enabling quick and secure transactions across different blockchains.
Cross Coin, a Singapore-incorporated SPV, is currently running an ICO to raise between US$1.5 million and US$5 million to develop a pool of 21 tech startups selected and accelerated by Starta Accelerator. The company said that the purpose of Cross Coin was to democratize venture investments by using crypto assets.
Upcoming ICOs in Singapore
ICOs are taken off in Singapore with several campaigns set to take place in the coming months. In particular, local startup Coss will begin its crowdsale in less than a month to raise capital to develop its platform.
Coss seeks to bring cryptocurrencies to the masses by adopting and facilitating crypto and blockchain-based services and products into a user-friendly and intuitive environment. It was launched in beta in April with a payment gateway/point-of-sale for online and offline stores, allowing merchants to accept payments in various cryptocurrencies.
Another organization in Singapore that is preparing for its crowdsale is the HelloGold Foundation, an organization launched by the team behind Malaysian startup HelloGold that is dedicated to accelerate the use of blockchain technology for use by the mass market.
HelloGold is known for having built the world’s first Shariah-compliant gold digital application that enables investors to buy, sell and hold gold online more conveniently and at a lower cost.
The craze surrounding ICOs has led critics to compare the phenomenon to the dotcom bubble in the 1990s. Many have warned of the risk of an imminent burst.
The cryptocurrency market amounts to over US$70 billion with Bitcoin and Ethereum dominating with market capitalizations of US$33 billion and US$15 billion respectively.
“There is a bubble factor and there will be many tears along the way as the market matures and go through the natural cycle of greed, fear, and poor risk assessment,” Daniel Santos, CEO of Token Advisors, told Inc.
Furthermore, the soaring cryptocurrency market combined with the lack of regulation has fueled the rise of ryptocurrency scams.
“ICOs like ‘jokecoin’ and ‘uselesscoin’ are still seeing hundreds of thousands of dollars invested,” John Wise, CEO of Loci, a patent search engine, told Inc.
“Scams, while not rampant, are out there, and they tarnish the image of all ICOs,” added Harbour co-founder and chief strategy officer Dylan Dewdney.
Featured image: Bitcoin decentralized money, via Pixabay.