Initial Coin Offerings
Define: 1. Tokenization 2. Cryptocurrency
1. Tokenization: share of ownership that can be sold or transferred, and therefore have a secondary market 2. Cryptocurrency: a token with a digital medium of value exchange based in the distributed ledger technology (DLT). It is an online currency that is transferable and highly liquid
Explain the selection and treatment of ICOs
Because ICOs are decentralized, they enable startups to raise large amounts of funding with minimal effort while avoiding costs of compliance and intermediaries. Characterized by a high degree of information asymmetry: — the average investor in ICOs is a non-professional, novice, and often small scale investor. The average investment decision is less informed. — ICOs typically occur in very early stages of a venture's life cycle and the tokens sold in an ICO do not have counter-value or real world usage at the time of the ICO — the amount of objective information available in ICOs is very low and there is potential for fraud (less precessional entrepreneurs, absence of formal disclosure requirements, few norms of behavior, desire for anonymity)
What is blockchain and which problem does it solve?
Blockchain is the most common type of DLT. It is a revolutionary and disruptive technological innovation. Blockchain technology: pieces of information that are chained together and registers in different services and places. Information can be added, but cannot be changed/edited without corrupting the entire system The internet allows sending information (documents, emails), blockchain technology allows the electronic transmission of value (money, stocks, rights in assets)
What are some other important features of ICOs?
Highly innovative blockchain venture is likely to raise money though an ICO. ICOs enable start ups to raise large amount of funding with minimal efforts, while avoiding the costs of compliance and intermediaries. Although any business which has the basic knowledge to get the technological set up could potentially perform an ICO, there is no current standard cryptocurrency used for the regular exchange value in the daily lives of ordinary people. Existing ICOs still lack the power to attract the mass investor.
What is Bitcoin?
It is a cryptocurrency. No longer used to access blockchain, but is used as potential currency.
What is Initial Coin Offering (ICO)?
Public and disintermediated ICO = crowdsale = token sale When ventures raise capital by issuing and then selling tokens to a crowd of investors. There is no official market or portal like the stock exchange. If a company wants to issue coins, they issue it on their own website.
What are coins or tokens? Explain utility and security tokens.
Tokens (coins) are units of value intended to provide utility or to function as securities. They can be traded between investors. Utility tokens: like reward based crowdfunding — access to protocol — purchasers — unregulated crowd sales Security tokens: like equity crowdfunding where you become co-owners of the firm — ownership of assets — investors exact profit — regulated offerings - KYC Often, tokens are cryptocurrency
Are ICOs regulated? What is "The White Paper"?
Unlike IPOs, ICOs are unregulated. The white paper is a document mean to to explain the business of the company that is raising funds through blockchain. It provides information it deems necessary to the public. Published on the venture's home page Describes the highly complex technological background of the blockchain technology and outlines how the venture is going to build on and extend this technology requires a significant amount of technological knowledge, effort, and time.