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The term ICO is horribly misleading. It sounds like IPO, which generally is a liquidity event that happens after a company has become established. An ICO happen

The term ICO is horribly misleading. It sounds like IPO, which generally is a liquidity event that happens after a company has become established. An ICO happens before there is a company or business, in any meaningful sense. But there is one similarity -- like an IPO, the sellers in an ICO are immediately liquid. What could go wrong?

DennisP 9y ago
The aren't necessarily liquid for the full amount. It's possible to make a smart contract that doles out the funds over time, or even lets contributors vote on releasing funds. Plus it's fairly standard to award the creators some of the new tokens, with a vesting period of at least a year. The general idea is to used the raised funds for development/marketing/etc, and the tokens as the reward; if the project fails, the token will be worthless, so there's a strong incentive to work at least until they can sell off the tokens.
- zekevermillion 9y ago
  OK, yes -- there are many cool technical possibilities. And per the other commenter above, it's not as if this is any less rigorous than an average seed round. OK, but when you have people investing multiple millions at a 100mm+ valuation, on an unproven team (and this is a charitable description in many cases), pre-product, there is a risk that the opportunity is being mispriced. There is a conflict -- on one hand, an ICO is "fairer" to developers in that they receive immediate compensation, and a larger share of the opportunity for the work they are doing. On the other hand, this mechanic is highly prone to fraud and abuse.
  - DennisP 9y ago
    I agree that some of the valuations are crazy. But that's not unique to crypto. The same thing happened in the dotcom era.
- jerguismi 9y ago
  Of course there might be good, honest and non-greedy actors among the crowd, but I think the bad apples will spoil the market.
kolinko 9y ago
Well, it's a new term, and the meaning constantly evolves. From what I've seen, the expectations raise every month - originally ICOs were just posts on forums, now you need to spend considerable amount of time preparing the business outline, building a team, and your own credibility. If I'm not mistaken, some ICOs launch with some serious coding before. The current requirements for a good ICO are quite similar to what you'd expect from a seed round, if not higher.

DennisP 9y ago

The aren't necessarily liquid for the full amount. It's possible to make a smart contract that doles out the funds over time, or even lets contributors vote on releasing funds. Plus it's fairly standard to award the creators some of the new tokens, with a vesting period of at least a year. The general idea is to used the raised funds for development/marketing/etc, and the tokens as the reward; if the project fails, the token will be worthless, so there's a strong incentive to work at least until they can sell off the tokens.

zekevermillion 9y ago
OK, yes -- there are many cool technical possibilities. And per the other commenter above, it's not as if this is any less rigorous than an average seed round. OK, but when you have people investing multiple millions at a 100mm+ valuation, on an unproven team (and this is a charitable description in many cases), pre-product, there is a risk that the opportunity is being mispriced. There is a conflict -- on one hand, an ICO is "fairer" to developers in that they receive immediate compensation, and a larger share of the opportunity for the work they are doing. On the other hand, this mechanic is highly prone to fraud and abuse.
- DennisP 9y ago
  I agree that some of the valuations are crazy. But that's not unique to crypto. The same thing happened in the dotcom era.
jerguismi 9y ago
Of course there might be good, honest and non-greedy actors among the crowd, but I think the bad apples will spoil the market.

kolinko 9y ago

Well, it's a new term, and the meaning constantly evolves. From what I've seen, the expectations raise every month - originally ICOs were just posts on forums, now you need to spend considerable amount of time preparing the business outline, building a team, and your own credibility. If I'm not mistaken, some ICOs launch with some serious coding before. The current requirements for a good ICO are quite similar to what you'd expect from a seed round, if not higher.