Beyond a Buzzword: ICO at the Financial Forefront
There is one word on everyone’s mind right now and it’s most certainly crypto. Even John Oliver took the time to make an in-depth expose on the state of cryptocurrencies and investors seem unsure of how to handle the market, as a result of increased attention and volatility which has meant there are winners and losers.
Of course, among all this fear and uncertainty, there are companies that have embraced the future of crowd-funding, and truly believe that the future of raising capital is through Initial Coin Offerings (ICO).
Bitcoin was developed as a decentralized currency, immune from regulation or government meddling. Tokens are produced as a result of complex mathematics and validated results are stored in a ledger, called a ‘blockchain.’ Initially seen as a currency with, well, a cryptic nature and opacity, it took companies a few years to figure out how to correctly monetize this new revenue stream. As investors realize the potential in cryptocurrencies, the demand, and thereby value, skyrocketed earlier this year, for some currencies fluctuating as much as 1,600% over the last 12 months alone.
The recent explosion of ICOs, or Initial Coin Offerings has shown the distributed power of cryptocurrencies. Industries from e-Sports to agriculture to smartphone app makers have all embraced the power of distributed, decentralized fundraising to raise funds for their ventures and profitability for their respective enterprises. By cutting out venture capital firms and pitching directly to their future customers, these corporations plan to leverage the success of crowd-funding for niche investments by tying it to the security of the blockchain.
The benefit of effectively distributed fundraising is hard to ignore for startups – ICOs also allow the companies to sell off tokens to be used towards product, instead of selling stake in the company itself – the investors still profit off the success of the company as they can resell the tokens to potential buyers at a profit, and the company doesn’t need to dilute its stock.
Indeed, three different companies (as examples) have tied their coins to three radically different products, as executives begin to implement crypto-based funding, and implement coin offerings in unique and novel ways.
The gambling industry has existed for, quite literally, thousands of years. In order to survive, the industry has had to constantly evolve and is usually one of the first to embrace advances in technology. Bettors have been investing heavily into the e-Sports market in the last few years and companies like LuckBox have taken notice. LuckBox in particular, is leveraging its ICO to develop a token for use with their service in the future – a token that can be resold and maintain it’s own value tied to the success of the company, and the demand for the coin by bettors. LuckBox says this will enable better access to clients in emerging markets, particularly Asia, where clients currently use third party transfer services, often conversely opening themselves to fraud.
LuckBox points to Africa as a model. “Africa has famously skipped the landline and broadband infrastructure, instead with customers having moved directly to smartphones and mobile payments, a surge growing in many parts of Africa. The alternative payment methods available to Luckbox offer significant synergies in these regions,” their White Paper claims.
Luckbox CEO Lars Lien added “The benefits of crypto generally are also those that make it a great option for gambling operators – not just for esports. Being able to deposit in, for example, Bitcoin and Ethereum removes payment friction for a lot of players. It’s quicker and cheaper for the operator and these savings can be passed on to the consumer. Blockchain tech is secure and transparent, too. A big factor for us is being able to attract players from previously inaccessible markets, where gambling is legal but payment processing is difficult or impossible, for example, some parts of Asia, Africa and Latin America.”
With smartphone penetration rivaling most developed nations, the future minded outlook on technology has allowed African companies like NagriTech to tie cryptocurrencies to land and soil, thereby guaranteeing an inherent base value. After all, as the global population grows, the available arable land remains the same, driving up demand and thereby value.
Finally we have Red Lanterns. Billed as a sexual education app intent on bringing sanity and normalcy to sexual education, and provide those interested in ‘casual hookups’ with a consent contract to guarantee safety and facilitate open discussion of boundaries, Red Lanterns tie their coin to voting rights in the company, as well as making the coin redeemable.
One thing is clear – cryptocurrencies are here to stay. It will be exciting to see how investors, regulators and companies grapple with this new paradigm. Of course, it will take time before cryptocurrencies dethrone fiat as the currency of choice, but a clear trend is emerging: digitalcurrencies are no longer the obsessions of your company’s IT department.