Ever since the term Initial Coin Offering entered the public stream of consciousness a couple of years back, there seems to be varied opinions regarding this fundraising method. While some love the way it helps young entrepreneurs procure money for their biz efforts, there are those who criticize them since they are so prone to scams.
Even across various mainstream media outlets, ICOs have been criticized quite severely. However, despite the constant media scrutiny, the ICO market has flourished tremendously— this is exhibited by the fact that ICO projects were able to raise a whopping $17 Billion within the first six months of 2018 alone. This figure is substantially higher than the $5.6 Billion that was raised via ICOs during the whole of 2017.
The STO Route
Many of our readers may have heard about Security Token Offerings (STOs) and how they can be used by individuals to raise funds in a fully regulatory/ complaint fashion. However, a point of difference between ICOs and STOs is that the latter offers investors with securities as well as voting rights within the company that has been funded.
Another core difference between ICOs and STOs lies in the fact that the tokens bought via an STO are supported by tangible assets, revenues and profits.
ICOs Continue To Evolve
Even though people keep proclaiming that ICOs are dead, there seem to be emerging a number of new projects that are looking to provide fixes to some of the major dysfunctions plaguing the present iteration of ICOs.
One such project is Eqwity, which looks to introduce a new ICO standard called the ICO.E (Initial Coin Offering + Equity Airdropping). This method looks to cut through some of the existing weaknesses prevalent within the world of ICOs at the moment.
The Need For Bilateral Transparency
A majority of the scams associated with ICOs can potentially be avoided through the introduction of something called ‘bilateral transparency’. However, until such a protocol is introduced and adopted en’ masse, projects need to make use of other strict verification processes including:
In addition to all this, to counterbalance the “trust effort” issue, Eqwity makes use of a method called ‘Equity Airdropping’ — a free distribution of company shares initiated by project founders for returning trust to their first backers.
Lastly, another novel framework that Eqwity makes use of is called the ‘Proof of Viability’ process (PoV). PoV is being touted as the new due diligence process that will help individuals determine whether a project is viable enough to raise funds in the first place.