What are Bounty Programs in ICO campaigns

One of the key goals of any marketing strategy is to ensure as much market penetration as possible for the product/service. By so doing, many people get to know about the company, what they offer and how to interact with their products and services. This helps to increase word-of-mouth advertising which leads to increased sales. Since the dawn of the digital age, there has been a lot of emphasis on social media marketing. The use of internet-based platforms to promote a business. Bounty programs are usually an integral part of any digital marketing and promotional enterprise.

What are Bounty Programs
Bounties in the digital word take their origin from online gaming platforms that offered rewards for participating in their game development. Bounties are essentially incentivized reward mechanisms offered by companies to individuals. What this means is that a company introducing a product or a service offers some rewards to people in exchange for performing certain tasks. It is akin to a barter trade of sorts; the company gives rewards to a person and the person in return does some simple tasks for the company. It is a veritable means of advertising for many companies.

Within the cryptocurrency scene, bounties have become a useful part of any ICO campaign. Many start-ups usually incorporate a bounty program as part of their ICO campaign. During the bounty program, the ICOs provide compensation for a number of tasks spread across marketing, bug reporting or even improving aspects of the cryptocurrency framework. The reward is usually in the form of cryptocurrency tokens or fiat currency (this option is however rare). The cryptocurrency space has proved to be a massively conducive environment for bounty programs. This is because it offers great rewards and incentives for both the cryptocurrency start-up and individuals alike.

The ICO Bounty Framework
It has become something of a tradition for cryptocurrency ICO campaigns that incorporate bounty programs to either do a Pre-ICO bounty or a post-ICO bounty. Bounties are generally not done together with ICOs.

· Pre-ICO Bounty Programs
Like the name implies, these are bounty programs that are carried out before the actual ICO. They are usually done to get the buzz going and to give the cryptocurrency project an improved presence on social media platforms. It is all about creating awareness for the cryptocurrency ICO and to get the word-of-mouth going. The framework is such that informal advertising channels are utilized to increase market penetration. The aim of such bounties is that as participants go about carrying out the various activities, the people in their circle begin to know more about the cryptocurrency. The common Pre-ICO bounty activities include:

1. Social Media Campaign Bounties
This involves activities that promote the ICO on the social media accounts of participants. The rewards earned depend on the engagement levels generated by such posts. This can be in the form of retweets, likes, shares, views, and comments. The popular social media platforms used for ICO bounty programs include Facebook, Twitter, and YouTube.

2. Article Writing Bounties
This is for participants who have blogs with a large number of followers and readers. ICO bounty programs can offer rewards to bloggers to write featured articles about the ICO on their blogs. Just like the social media bounty, the rewards will be dependent on the engagement level of the articles and blog posts.

3. Bitcointalk Signature Bounties
This is a popular bounty for many ICOs. It is open to participants of the Bitcointalk forum. The ICO releases a signature with a code embedded in it. The ranking of the participants who post this signature determines the number of stakes they get. For most bounty programs, only people on Bitcointalk who are Jr. Members and above can participate.

· Post-ICO Bounty Programs
At this point, the ICO has been completed and funds have been raised. Now, it’s all about making improvements to the cryptocurrency projects based on community suggestions. Post-ICO bounty programs are aimed at improving feedback from the project community. Some of the common types of Post-ICO bounty programs are as follows:

1. Translation Campaign Bounties
This involves translating all documents pertaining to the cryptocurrency project as well as moderating different forum groups. It is the perfect bounty program for native speakers of languages like Japanese, French, Spanish, Dutch, and German etc. The common translation activities include cryptocurrency website, white paper and the Bitcointalk ANN thread.

2. Bug Reporting Bounties
Apart from being an effective bounty campaign activity, bug reporting also helps the developers. A good bug report clearly and concisely identifies issues with the cryptocurrency software or platform.

It is important to note that there isn’t a hard and fast rule as concerns the activities for Pre-ICO and Post-ICO campaigns. Cryptocurrency ICOs can decide to use any of the aforementioned activities in either Pre or Post-ICO bounty programs.

It is common for a cryptocurrency start-up to set aside a percentage of the total coin supply for the bounty program. Information regarding this amount can usually be found on their website, white paper or Bitcointalk ANN thread.

How to Get Involved in ICO Bounties
ICO bounty programs are a great way to participate in the market and earn tokens. These tokens can even be exchanged for fiat money. Most of the activities aren’t really technical in nature as they rely on common internet activities and interactions. One of the best ways to get involved in bounty programs is via the Bitcointalk and Cryptocointalk forums. Almost all ICO bounties are listed here.

The Future of Bounty Programs
As ICOs rose in popularity in 2017, so did bounty programs. The allure of getting free tokens for promotional activities was something that appealed to a lot of crypto hobbyists. However, bounty programs have come under scrutiny from some financial regulators like the United States SEC. The reason for this is that bounty programs essentially encourage people to participate in a commodity that has a financial risk.

The main point of the SEC’s scrutiny is based upon the Howey Test and how it applies to bounty programs. The fact that profits come from the efforts of a third-party promoter (in this case, the participant in the bounty), then the bounty campaign constitutes an investment contract transaction. This, therefore, means that almost all bounty-promoted tokens are in fact securities, and are therefore subject to the SEC’s securities regulations.

The SEC isn’t the only one towing this line, with financial regulators in the UK also coming to the same conclusion. With the regulatory framework in the crypto market becoming more clearly defined, the bounty program may become the focus of more government scrutiny.

Crypto-jackers slip Coinhive mining code into YouTube site ads

The hijacking of CPU cycles through crypto-mining JavaScript code has surged over the past few days, according to security biz Trend Micro.

The reason appears to be a distribution campaign that piggybacks on Google’s DoubleClick ads that appear on YouTube among other sites.

“We detected an almost 285 per cent increase in the number of Coinhive miners on January 24,” said Trend Micro researchers Chaoying Liu and Joseph C. Chen on Friday in a blog post, noting that traffic to five malicious domains picked up on January 18. “After closely examining the network traffic, we discovered that the traffic came from DoubleClick advertisements.”

Coinhive is JavaScript code designed to mine Monero, a cryptocurrency favored by online criminals and others because of its privacy features. Its creators position the code as a way for websites to make money without relying on ads.

It’s when the code gets used without consent that there’s a problem. And that’s been happening more frequently because it’s almost a victimless crime. People may complain when their data gets stolen, but few even notice when their computer is asked to do covert calculations.

Liu and Chen say that the scheme relies on two separate web mining scripts, hosted on AWS, called from a web page that presents the DoubleClick ad. When the web page is loaded, a legitimate ad gets presented while a randomly generated number decides which of the two mining scripts gets called.

Ninety per cent of the time, coinhive.min.js runs; the other 10 per cent of the time, it’s a script named mqoj_1.js – configured to contribute to a separate mining pool as a means of avoiding the 30 per cent CoinHive commission.

At least that’s the breakdown seen by Trend Micro. Variant code posted to Pastebin shows the mqoj_1.js file being run only 3 per cent of the time.

Either way, the scripts are set to consume 80 per cent of the CPU resources on the computer in question.

Google says it took action against the ads once it became aware of them.

“Mining cryptocurrency through ads is a relatively new form of abuse that violates our policies and one that we’ve been monitoring actively,” a spokesperson told The Register in an email. “We enforce our policies through a multi-layered detection system across our platforms which we update as new threats emerge. In this case, the ads were blocked in less than two hours and the malicious actors were quickly removed from our platforms.”

The problem Google faces is that those abusing its systems rely on cloaking techniques to conceal the nature of the code and fake accounts that can be abandoned without consequence. As with email spammers, it’s a game of Whac-A-Mole.

Gibraltar To Introduce ‘World’s First’ ICO Regulations

Gibraltar’s government and Gibraltar Financial Services Commission (GFSC) have announced that in the coming weeks they will develop a draft law that will regulate Initial Coin Offerings (ICOs) in the British overseas territory, Reuters reported Feb. 9.

The draft law, aiming to regulate the promotion, sale and distribution of digital tokens on the territory of Gibraltar, will be the first ever set of regulations developed specifically for ICOs, the lawmakers claim.

One of the principal aspects of Gibraltar’s ICO regulations will be the introduction of the concept of “authorized sponsors,” who are supposed to be “responsible for assuring compliance with disclosure and financial crime rules,” said Sian Jones, one of GFSC’s senior advisors.

The draft law will also establish disclosure rules that will require ICO projects to provide “adequate, accurate and balanced information to anyone buying tokens”, the government and Financial Services Commission said to Reuters.

According to Reuters, over $3.7 bln was secured in ICO fundraisers worldwide in 2017, compared to $100 mln in 2016. This rapid expansion of the ICO market is what has reportedly provoked Gibraltarian regulators to take action.

In September 2017, Cointelegraph reported that with fast increasing numbers of ICOs, the GFSC issued an official statement, warning investors of the “highly risky and speculative” nature of ICO fundraising campaigns.

What Is An ICO

If there’s been one word on the lips of everyone in finance this past year, it’s cryptocurrency. If you’ve been kicking yourself for not getting in on the ground floor of blockbuster coins like Bitcoin and Ethereum, you might want to consider looking into investing in an Initial Coin Offering (ICO). Be warned, however: ICOs are highly risky even under the best of circumstances, and have a high potential for scams.

So What Exactly Is An ICO, Anyway?
Imagine this: You’re a Silicon Valley startup with a great idea for a new cryptocurrency system. Perhaps you want to streamline the Parent/Babysitter payment system so that it can be digital and encrypted. What a great idea! Let’s call it BabyCoin. The only problem is you need people to give you money so you can actually make the currency. Now, you could go to a bank or try getting venture capitalist investors, but what if you could raise money without having to give up any of your ownership of the company? Enter ICO.

Here’s how it works, You create a document essentially detailing exactly how the system would work (usually called a white paper), make a pretty website and explain why its a great idea that could be very useful. Then, you ask for people to send you money (usually Bitcoin or Ether, but you can also take fiat) and in return you send them back some BabyCoin. They hope that BabyCoin will get used a lot and be in high circulation, which would raise the value of the currency.

Its important to note that unlike an Initial Public Offering (IPO), investing in an ICO won’t result in you having an ownership stake of the company you’re giving money to. You’re gambling that the currently worthless currency you pay for now will increase in worth later and make you money.

So Who Can Launch an ICO?

Literally anyone! Currently, there’s very little regulation on ICOs in America, meaning as long as you can get the tech set up you’re free to try and get your currency funded. Right now cryptocurrency as a whole is kind of like the wild west; there’s gold in the hills and relatively little law to speak of. This can work in your favor or it can lead to getting swindled. Of all avenues of funding, an ICO is probably one of the easiest to set up as a scam. Since there’s no regulation there’s nothing stopping someone from doing all the work to make you believe they have a great idea, and then absconding with the money.

This means that if you’re really set on getting in on that new ICO that your friend Aiden from work told you about, make sure you do your homework. The first thing to do is make sure that the people putting up the ICO are real and accountable. In the internet age its beyond easy to find a stock photo and put together a convincing website, so going the extra mile is important. Some things to look for: What history do the product’s leads have with crypto or blockchain? If it looks like they don’t have anyone with relevant experience that can be easily verified, that’s a bad sign.

I want to start my own ICO. How do I do that?
The most important thing you want to do is make sure that either you or someone (probably multiple people) involved have worked in and understand cryptocurrency and blockchain. Even if anyone can make an ICO, it doesn’t mean that everyone should. You need to be able to answer questions on the spot about every little detail pertaining to your ICO.

You should also ask yourself if you really think that your business will actively benefit from an ICO. Basically, after reading this article, you should consult someone who can take a look at your specific idea and tell you if its a slam dunk or not. If it’s not, you might be better off going through safer avenues of funding.

If you’re determined to move forward, you need a white paper, which is a document that should identify exactly what your currency can offer that has never been done before, or how you’ll do an established idea better than anyone else has. This document should be engaging, informative, and very, very detailed. You can find the white paper for Ethereum, one of the most successful ICOs yet, here.

Like any business, you need to hook your buyer by the end of the first page. Ethereum’s white paper takes the time to explain what blockchain is, and then goes on to detail how they intend to build on the progress that Satoshi Nakamoto made and create something exciting. They do all of this by the end of the first page. Now, does every single white paper need to include an unabridged history of blockchain including the time that guy paid 10,000 bitcoins for a pizza? Probably not, but it should be understandable to someone without any knowledge of how these systems work.

Now that you’ve got your white paper, you need to advertise. You have two targets that you’ll be trying to reach out to: those with knowledge of how cryptocurrency and ICOs work and people with basically no idea. You’ll want to identify the people that would be most excited by your new venture, since they’ll be more eager to give you money if it means a deal for them. In the case of BabyCoin (again, hypothetical) maybe we’d reach out to some popular mommy bloggers/vloggers and see if they would be interested in producing some content to showcase why BabyCoin is the biggest innovation in babysitting since The Babysitter’s Club. Just make sure they disclose the nature of the deal to advertise for you: The SEC released a warning to investors stating that it is illegal for celebrities to use social media to endorse ICOs without disclosing what compensation they received.

You’re also going to want to make your programmers and leads available to answer questions on social media like Reddit and Twitter. You should also consider submitting your ICO to some listings that run databases of what they perceive to be quality ICOs. This is how you get people involved in the crypto-community excited about your product, which will hopefully trickle through the internet.

Great! So the word is out about BabyCoin and people are psyched, all that’s left to do is determine the token pricing and distribution. You also might want to have a prototype in order just to prove you know what you’re doing. Get your website and exchange set up and good luck!

What’s With All These Celebrity ICOs?
If you’ve seen your favorite actors and entertainers like Jamie Fox and Ghostface Killah encouraging their followers to invest in a hot new ICO, you might want to take a closer look.

Boxing superstar Floyd Mayweather Jr and DJ Khaled promoted Centra, an ICO that raised $30 million at the end of 2017, but multiple reports claim that Centra is currently embroiled in a class action lawsuit for allegedly selling unregistered securities. It remains to be see what will happen with the lawsuit, but its worth noting that some of Khaled’s and Mayweather’s social media posts about the ICO have been deleted.

I Want to Invest in ICOs. How Do I Determine Which Ones Are Good?
Maybe check out this list. Just make sure to do your homework. Because ICOs are barely regulated, you need to be way more careful than you’d be when investing in an IPO. Read the white paper, research the team members and make sure they have a history in cryptocurrency.

You can also use trusted websites like, which only chooses ICOs that they have reviewed and consider to be legit and exciting. While you shouldn’t fully trust any website offering a listing, they can be quite useful.

Is Someone Going To Regulate ICOs?
The SEC classified tokens from ICOs as securities in December of 2017, with SEC Chairman Jay Clayton saying at the time that they had proved that “a token constituted an investment contract and therefore was a security under our federal securities laws. Specifically, we concluded that the token offering represented an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”

This means the SEC is gearing up to crack down on ICOs that they deem to be misleading investors. The first strike came on December 11, 2017 when the SEC halted Munchee, a California company with a food review app. Munchee was attempting to raise money to create a cryptocurrency that would work within the app to order food. This is the first instance of the SEC issuing a cease and desist for an ICO for unregistered securities. Does this mean the hammer is about to drop? We’ll see.

The Bottom Line
In the end, ICOs are an incredibly new way of raising money, and everyone is trying to adapt to the new ways without getting screwed over. If you think you’re able to make a killing on a promising new ICO, just make sure to do your homework beforehand. Cryptocurrency is all about high risk, high reward, and ICOs are no different.

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrency in any quantity.

6 Unique ICOs to Look at Right Now

ICOs, or initial coin offerings, are now old news. Just months ago, the novelty of crowdfunding via the blockchain and a booming cryptocurrency market was enough to attract new investors, but things have changed. Previously, startups with little to offer the marketplace but a decentralized spin on an old concept could generate millions of dollars in minutes, but investors are now intensifying their scrutiny. Their motivation used to be quick profit, though as markets wise up to new trends, they must invest (and not speculate) based on merit.

Anyone can write a white paper, generate a smart contract and publish their wallet address. Would-be investors must now all but ignore the blockchain aspect of a potential investment, and instead look at factors like the team, product, and timeline – like they did before ICOs were even an option. However, there are still great opportunities out there for those willing to do research.

1. Energi Mine
This upcoming ICO is courtesy of a UK-based company called Energi Mine, founded in 2016. That they’ve waited over a year to launch their ICO is encouraging, especially given the complexity and potential of their product. The company employs artificial intelligence and the blockchain to manage the energy usage of large clients, and incentivizes energy conservation through its ETK token.

The global energy market is worth $2 trillion, and capturing a piece of it could be a lucrative opportunity. A decentralized platform for using energy will allow peers to trade energy between themselves, and will reward participants who display energy-efficient behavior.

2. Gladius
A unique offering in the world of blockchain, Gladius aims to help users increase the security and speed of their websites. Participants can “rent” their computers’ spare bandwidth and processing power in exchange for tokens, and then use these tokens to pay for a private, decentralized hosting solution using the network’s collective power. This solution will render DDoS attacks and other threats harmless, and create a fast, safe environment for people to operate online.

Keep an eye out for the public sale, which starts November 1st, 2017. The white paper and team composition are impressive, making this ICO one that the market is likely to jump on.

3. Dether
Dether has an answer to one of cryptocurrency’s biggest questions: how do we get regular people to use it? There are many who understand the importance of finding real world applications for cryptocurrency, but Dether is one of the few to offer a realistic solution. The company makes it possible for people to purchase Ethereum with cash, either online or from anyone on the street who already has it. The application turns Ethereum holders into PTMs (people teller machines), who can transact with others and with retail shops using their smartphones.

The Dether application’s powerful, yet simple functionality make it a likely candidate for those looking to add a new ICO to their portfolio.

4. EOS
While EOS has already raised a significant amount of funding, their ICO doesn’t officially end until June of 2018. The system allows smart contract blockchains to process transactions much more efficiently, through a proprietary process called parallel execution. By separating the authentication from the execution processes, generating role-based permission and more, EOS provides a smart contract infrastructure that can process over 100,000 transactions per second.

This type of solution is largely B2B, which is a good sign for investors. As blockchain moves from the consumer realm to benefit large companies and institutions, investors in ICOs like EOS gain value with increased adoption.

5. CanYa
CanYa uses the power of cryptocurrency to run their platform where people can list services and hire others, all with CanYa Coins. To push wider adoption of crypto, companies must provide pre-built marketplaces and literally deliver a functional use case to the average consumer. This is a notion that CanYa understands well, and it’s evident when reading their blog, whitepaper, and even communicating with them on Slack. It’s also encouraging that the company has such a well-rounded team.

The first stage of the ICO begins in mid-October, and though there will be only 60,000,000 coins released, those who participate during the presale get an extra 400% on their investment. Whether to see the value of the coin increase as its popularity does, or simply to get a discount on the coins you’ll use to hire someone to mow your lawn, smart crypto fans will get in as soon as they can.

6. Privatix

In a world where Russia and China are banning VPNs, a decentralized solution based on blockchain has obvious value. Privatix has built an Ethereum-powered peer-to-peer product that takes spare power from its users and gives them access to powerful, distributed proxy software. Whether to get past China’s “Great Firewall” or simply to watch Netflix in a foreign country, the benefits of such a system are immense.

Users who help run the network for others are paid in tokens, which in turn can be utilized to use the Privatix VPN. If not for return on investment, one should contribute to this October 19th ICO for the product itself.

Finding Blockchain’s Killer App

While blockchain is certainly a revolutionary technology, it can no longer be presented as a standalone feature for a new startup. Companies must make smart use of blockchain as a software-like solution, prove the value of their idea, and speak about their team and timeline rather than the future value of their token. In this way, vetting ICOs for investment becomes much easier, and highly rewards those who can separate the great concepts from the novel.

City of Berkeley Considers ICO to Raise Funds

Elected officials in Berkeley, Calif., are reportedly exploring the launch of an initial coin offering (ICO) to raise funding for community projects. Officials indicate that the cryptocurrency idea came from the city’s desire to create more financial independence from the federal government, as the GOP threatens to cut funding from so-called sanctuary cities, targeting Berkeley in particular in recent tweets over its policies on illegal immigration. (See also: Over 1M Join Waitlist for Robinhood Crypto Trading.)

Under the initiative, the California city known for its liberal agenda would apply blockchain technology to public finance to fund programs such as affordable housing and aid to the growing homeless population in the area.

Berkeley would be the first to go to the $3.8 billion municipal bond market offering investors the option to buy monetized digital “tokens” backed by municipal bonds. Buyers of the tokens may then be able to spend them at various shops and restaurants, or even pay rent at apartments participating in Berkeley’s cryptocurrency ecosystem.

City Seeks Financial Independence from Trump Administration
Berkeley Mayor Jesse Arreguin and City Council Member Ben Barlett have formed a committee with financial technology platform Neighborly to build a strategy for the ICO. The fintech company’s co-founder Kiran Jain suggested that the city could launch what it’s calling an “initial community offering” as soon as mid-May. “Unlike most of the ICOs which deliver coins for a future value or service, these coins will represent a real security issued for a specific purpose,” said Jain.

In general, the university town is looking at the potential creation of its own financial mechanism as a part of its “resistance” to the Trump administration. The city points particularly to the recently passed GOP tax overhaul, which slashed the corporate tax rate from 35% to 21%, as a main driver of discontent. According to public accounting firm Novogradac & Company, the Trump tax plan, which the city suggests undermines incentives that encourage private contractors to build affordable housing, could reduce the future supply of affordable rental housing by about 235,000 homes over the next decade. This is a major issue for a city combating gentrification, rising rents and homelessness up 43% since 2009—the start of the bull market.

Last February, President Trump vowed to pull federal funding from the University of California at Berkeley after violent protests at the university. The city, which has increasingly refused to cooperate with the federal government as it attempts to crack down on illegal immigration, could be the first of many to seek more financial independence from the administration. (See also: Crypto, Cannabis, FOMO Drive New Investor Inflow.)

Initial Coin Offering Market Passes $1 Billion Milestone

Golden coin with the Litecoin symbol in ‘electronic’ cyberspace. 3D rendered graphics.

A recent post by Ethereum World News suggests that the ICO market, the landscape of initial coin offerings that has been steadily growing alongside Ethereum, has surpassed $1 billion. Recent ICOs have driven the totals above that milestone figure, with offerings including those by EOS, Bancor, and Tezos climbing into the range of hundreds of millions of dollars. While this is a monumental achievement for the ICOs themselves, the quick gains have made some analysts fear that a bubble may be forming.

$559 Million in the Past Months
The report indicates that high-profile campaigns by Bancor and Tezos, among others, have collectively raised more than $559 million in funding in a short period of just a few months. These campaigns offer individualized infrastructures that are developed on top of te existing Ethereum protocol, which has been the driving force behind the ICO bust.

That is not to say that these highly successful ICOs have not also occasionally been subject to scrutiny and criticism, though. EOS, another of the largest ICOs in recent memory, became prominent among cryptocurrency investors for its infrastructure and promises of efficient and scalable ecosystems. However, EOS was criticized because of its controversial token purchase agreement, also. The token purchase agreement in this particular ICO read, in part: “The EOS tokens do not have any rights, uses, purpose, attributes, functionalities or features, expressed or implied. Although EOS tokens may be tradable, they are not an investment, currency, security, commodity, a swap on a currency, security, or commodity or any kind of financial instrument.” This bold maneuver essentially admits that the token in question is useless, beyond the value that investors place in it.

Tensions Between Companies and Government Regulators
Companies initiating ICOs are also increasingly coming into conflict with governmental regulators, too, including the Securities and Exchange Commission in the United States. Regulators and many analysts have long been skeptical of the ICO craze, with some going so far as to suggest that ICOs and cryptocurrencies in general are fueling a period of speculation amongst investors akin to a gold rush. If this is the case, then investors may find that the ground falls out from under them at some point, when the boom ends and the bubble bursts. However, for the time being, demand for ICOs is increasing every day. This makes it difficult to conclude the total market value of the entire ICO field. As this happens, Ethereum is experiencing pressure to scale its platform in order to accommodate the influx of new users. Fred Ehrsam, the co-founder of popular exchange Coinbase, recently suggested that the Ethereum network might need to increase its platform capacity by a factor of 100 times in order to meet the new user demands.

Blockchain ICO Offerings Have Outpaced VC Funding This Year

For blockchain entrepreneurs, initial coin offerings (ICOs) are becoming the way to go. According to statistics released by online publication Coindesk, ICOs have surpassed venture capital (VC) funding as a means for raising cash for their startups. Entrepreneurs raised $327 million from ICOs during the first half of this year. In contrast, VC funding accounted for $295 million during the same time period. Based on Coindesk data, ICOs accounted for less than half of the $500 million overall invested in blockchain startups through VC funding last year.

ICOs resemble crowdfunding in that they offer tokens, instead of rewards, to investors in the product or service. These tokens can be redeemed on digital platforms for currency. Blockchain, which is the platform that underlies digital currencies, is gaining traction in established financial services institutions as a means to reduce costs and enable faster processing. This has led to greater interest among investors for blockchain startups. (See also: The Rise of Initial Coin Offerings.)

ICOs are a win-win situation for investors and entrepreneurs. They offer easy access to liquidity through digital exchanges for the former and enable founders to access a much larger global pool of investors. “Obviously investors have also seen some extremely large returns in short time periods,” says Alex Sunnarborg, research analyst at Coindesk.

Another key factor driving investment into ICOs is minimal regulation. According to Sunnarborg, “a very minimal amount of instruction” has been published by government agencies regarding tokens and ICOs. Industry groups have stepped in with broad guidelines, but entrepreneurs often set their own limits. For example, some accept investments from anywhere in the world, while others accept funds only from U.S. investors. (See also: 5 Ways to Invest in the Blockchain Boom.)

The light regulation has resulted in cases of ICO funding where valuations, at first glance, seem unsustainable. As an example, Sunnarborg points to Gnosis, an ethereum-based startup, which tripled in token value from its initial price. “When considering the investment, you’d realize that Gnosis would need a $1.5 billion market cap to net you a return of 5x,” he points out. There was also the case of The DAO, an ethereum app that made investment machines based on votes, which raised over $150 million through an ICO offering last year. A hacker siphoned off $50 million a couple months after the sale, and ethereum ended up compromising its blockchain immutability to avoid similar instances. (See also: Is Ethereum More Important Than Bitcoin?)

Sunnarborg recommends that lay investors conduct due diligence before deciding to invest. In the case of blockchain startups, this means the addition of another layer to the process. While it is necessary to evaluate team expertise, technology and the product (or service), Sunnarborg also recommends analyzing the prospects of the underlying platform, such as ethereum, and the long-term growth potential.

However, even a comprehensive evaluation may not be enough because blockchain is, as of yet, a nascent technology, and there are not enough use cases for investors to evaluate it. “Many ICOs now have raised significant funding within the last year or two and are heads down in building their projects – simply not enough time has passed for us to see if the majority will ‘deliver’ or fail,” says Sunnarborg.

What Is Blockchain and Why Should I Care

Originally, we were going to title this post “Bitcoin: What It Is and Why You Shouldn’t Care.” We thought that as the decentralized crypto-currency has reached all-time highs recently, it would be a good topic to explain. You may wonder if Bitcoin really is gaining popularity as a currency (yes), and what, if anything, you need to do about it (nothing). And after some further research, we maintain our stance. As we’ll explain, Bitcoin is not worth the trouble as a currency or an investment for the average law-abiding citizen. But the technology behind Bitcoin has huge potential to modernize the financial marketplace—and that is certainly worth understanding.

What Is Bitcoin?
Financial services are slow to innovate. It’s 2017, yet you still have to wait three days for a stock or equity ETF trade to settle, two days for a check to clear, and sometimes over 10 days to get the money back for a reversed transaction on a debit card. This might surprise you because when you scan a check on your mobile phone the money is “pending” in your account immediately, and when you buy an ETF, it shows up in your brokerage account with the basis price on the day you bought it. But on the back end, these transactions are not as instantaneous as they appear because they go through many different steps of verification.

Bitcoin is different. It is a completely digital currency that allows users to conduct encrypted transactions instantly, without the use of any third party (i.e. bank). Instead, the transaction is an instant trade, like using cash. Like cash, the transaction is one-to-one. But unlike cash, each Bitcoin transaction (“block”) is recorded on the blockchain. To give a simplified analogy, it is as if every dollar bill in your pocket had a list written on it of all the transactions it was involved in prior to reaching your hands. Each transaction on the blockchain is confirmed by several parties on the network to make sure the correct amount transfers between the correct accounts. This can take anywhere from a few seconds to 90 minutes, but the more confirmations a transaction receives, the more secure it is. Each Bitcoin user holds their funds in a Bitcoin digital wallet, and can transfer them into their home currency from the wallet if desired.

The Future of Bitcoin
It remains to be seen how widespread Bitcoin use will become. The number of Bitcoin wallet users has increased every year since the currency was created in 2009, reaching over 12.2 million this year (but this does not necessarily correlate to the total number of users, since it is possible for one person to have multiple Bitcoin wallets).

But for the average person, the benefit of encrypted, fully anonymous financial transactions does not yet outweigh the risk to use it. As a new currency, Bitcoin’s value is extremely volatile. As of this writing, one Bitcoin is worth $1,196.79, up 175% from this time last year. Even the Bitcoin website advises that, “Bitcoin should be seen like a high risk asset, and you should never store money that you cannot afford to lose with Bitcoin.” (For related reading, see: Why is Bitcoin’s Value So Volatile?)

Buying and accessing Bitcoins has become more user-friendly since the early days, but it is still “buyer beware” since it is not an official currency. It doesn’t help that Bitcoin has gained notoriety as the currency of choice on the black market—an audience who sees huge value in being anonymous.

Why Blockchain Matters
So why should you care about blockchain if Bitcoin is too risky for most people to use? While the Bitcoin currency has earned a somewhat shady reputation, the blockchain ledger infrastructure behind it has huge potential to simplify transactions in a variety of industries. Because each transaction is verified by a network, it takes out the middleman, putting the power back in consumers’ hands. This could not only save you money, but make your personal data more secure. (For related reading, see: Why Are so Many Banks Adopting Blockchain Technology?)

There is a clear application for financial industries. Fewer hands involved in a stock trade, or a money transfer, could mean a faster transaction and lower fees. Mainstream companies like IBM and Goldman Sachs are investing in blockchain research. Nasdaq is already experimenting with a private blockchain-powered stock exchange. And it’s not just limited to finance.

What if you could send your vote on various issues directly to your elected representative in a secure, verifiable way? Or if your team of doctors had a better way to securely share your medical data with each other? What if you had immutable digital property rights for everything from photos of your cat to the deed to your home? (For related reading, see: Blockchain Boom Next Big Thing for Tech Startups.)

Blockchain is a tool that could be used to improve many different industries, but right now it is in its infancy. None of these potential applications in finance or any other industry may actually occur, but some of them likely will. Whatever happens, it’s worth paying attention to new technologies that could have such a major impact on the world of money!

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$232 Million ICO Has Some Worried About an Ethereum Sell-Off

Tezos is one of the most recent of the initial coin offerings (ICOs), funding projects that have become increasingly popular since they were first introduced by the Ethereum network, and it’s also the largest of all time. The ICO brought in $232 million through a 12-day uncapped token sale, which ended yesterday, amid cheers from media and tech analysts alike. Generally, the ICO seems to have generated a fair amount of excitement with regard to the perceived possibilities for the company as well as for the ICO as a funding method. However, it has also sparked some concern among investors as well.

Signs of Value Leaving the Ethereum System
The major concern among skeptical investors is that Tezos (and other companies which have recently enjoyed similarly successful ICOs) will wholesale convert its profits, earned in Ethereum’s currency, Ether, into fiat currency. Should such a large amount of value depart the Ethereum system in a brief window of time, it could drive prices of Ether down considerably. This may be even more of a concern for investors given that Ether has already seen a downturn in price this week.

Tezos is not the only company to dump its Ether in exchange for fiat currency. A similarly popular startup called EOS has already cashed out much of its Ether for fiat currency, according to a report by Coin Telegraph. Moves like this have prompted stern reproaches from Vitalik Buterin, the co-founder of Ethereum who maintains an active social media presence. In a Twitter exchange earlier this week, toward the end of the ICO for Tezos, Buterin indicated that he “disagreed” with the way that the startup had specified it would use its funds once the sale was finished, according to Coin Telegraph.

Too Early to Say?
For now, it appears to be too early to say what Tezos will do with the massive amount of ETH funding it built up across its ICO. The company responded to Buterin’s doubts via Twitter but did not necessarily confirm that it would or would not begin a sell-off of its Ether at some point after the end of the ICO. The tendency for companies to engage in these practices may have put a damper on some of the excitement surrounding the ICO phenomenon, which recently surpassed the $1 billion mark thanks to several major offerings like Tezos’. Beyond that, investor concern about Ethereum and cryptocurrencies in general has been riding high, in spite of major gains across much of the industry since the beginning of the year, because of the extreme volatility of even the most stalwart currencies. Perhaps some investors believe that startups selling off their Ether will only add fuel to the fire.