• More than 50% of SMEs and even more start-ups globally, lack access to traditional funding sources which hinders their growth and ICOs may help to fuel much desired economic development;
• Continuing economic and national currency instabilities in different parts of the world are already pushing people to convert their fiat currency assets into cryptocurrencies;
• As the token market matures and digital assets provide higher returns and liquidity, ICOs can motivate people to re-define personal financial risks, re-think traditional, low interest investment options (savings accounts, mutual funds, etc.), and motivate them to invest more in ICOs;
• Even if ICO restrictions are set within a specific jurisdiction, no national regulator can prevent citizens from investing elsewhere;
• The success of crowdfunding as an early stage project financing concept for start-ups paved the way for the ICO.
KEY DECENTRALIZATION FACTS ABOUT ICOS:
1. A token is a hard-to-regulate, supranational, digital asset;
2. Instant funding accessible for start-ups right after completion of a token sale and higher liquidity for token holders;
3. More distributed ownership, where traditional investors may not have special privileges;
4. Global fundraising. Most blockchain start-ups are global by definition, and with cryptocurrencies spread around the world, anyone can buy tokens; 5. Emerging and more supportive jurisdictions. Some places around the globe already have more favorable conditions for incorporation of blockchain businesses (Switzerland, Dubai, Singapore, Hong Kong, others), making traditional hubs less attractive or defunct.
POTENTIAL EXPANSION, BEYOND BLOCKCHAIN AND VC
ICOs may serve as a basis for the creation of new funding models, including organizations from private, NGO and public sectors.
ICOs have a potential to spread beyond ongoing replacement of venture capitalists with users in the blockchain Start-up industry and may simplify the whole corporate investment ecosystem by introducing less bureaucratic, more dynamic, goal or performance oriented models, using a static or a dynamic token supply and distribution, and even with open funding stages.
TRADITIONAL (NON-BLOCKCHAIN) START-UPS
ICO’s shouldn’t be limited to the blockchain start-up industry only. With blockchain’s capacity to reshape so many industries, any start-up may consider tokenization as a funding source, whether its business model may or may not benefit from using blockchain as a technology.
With some modifications and integration with public blockchain electronic voting, it may become a powerful solution for approval of nation al, regional and local budgets, including individual projects by relying on a collective wisdom and therefore delivering more rational decisions and preventing wasting of taxpayers’ money by incompetent and corrupted officials.
The UN is exploring opportunities on deploying blockchain and tokens in crowdfunding campaigns to mobilize funds for entrepreneurship development and community projects.
While Australia’s securities watchdog doesn’t support ICO regulation, SEC has already issued a report concluding DAO tokens were securities, and other regulators continue investigating the actual application and use of tokens and ICOs, closely tracking the rapid growth in ICOs and may treat some types of crypto assets as securities, but in general, they may find it tough if not impossible to create the same, well-defined, regulative environment for tokens as for the mainstream investment world. ICOs have an extremely flexible and liquid concept.
To prevent chaos, Ponzi schemes, scams, pump and dumps, it will require regulatory agencies to sync their activities with ICO investment communities to create and maintain a balanced and fair framework of a self-regulated system based on best practices and avoid excessive regulation. However, the success of any national regulation may depend on geographical competition.
The ICO market is currently a wild and mysterious place, where start-ups are funded almost instantly, by attracting millions of dollars in a matter of seconds or hours, bypassing an investment or financial intermediary, and offering more distributed ownership.
The ICO is a radical disruption of a global capital market, and it solves the biggest problem faced by any start-up or innovative organization: where and how to get funding for an innovative idea before it becomes a viable product or service?
ICOs can significantly speed up “idea to product” and later stages, by providing better and timely funding support for the innovation ecosystem in general.
ICOs have even greater potential to revolutionize the way how we accumulate, invest, distribute wealth, and transfer value.