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\nIt wasn\u2019t very long ago that bitcoin felt nascent, laughable and small. In the ensuing years, bitcoin has matured, become far less risible and grown massively.<\/p>\n
Underscoring bitcoin\u2019s maturation, the currency\u00a0set new price records this week<\/a> as the value of a single coin crossed the $2,000 threshold. Since bitcoin was announced in 2009, and certainly since I first wrote about it in 2013<\/a>, the ecosystem of cryptocurrencies has exploded.<\/p>\n Cryptocurrencies have expanded since the days bitcoin shared some of the media\u2019s\u00a0spotlight with litecoin and the silly-by-design dogecoin<\/a>. It was a time when\u00a0Mt. Gox ruled<\/a>,\u00a0cupcake shops could become media darlings<\/a> by accepting the digital currency and pizza was a critical bitcoin-pricing metric<\/a>.<\/p>\n Now, there are dozens of cryptocurrencies worth eight figures<\/a>, and the birth pace of new entrants is\u00a0accelerating.<\/p>\n In that particular milieu of freshly launched coins is a newly famous transaction type we need to understand called the \u201cInitial Coin Offering\u201d or ICO. An ICO is akin to an IPO, but in temporal reverse (sort of). Although confusing, it has recently acquired prominence as a favored way to launch a new cryptocurrency.<\/p>\n But as is typical of nascent cryptoproducts, there are legal questions and unethical players in the mix. So let\u2019s explore what an ICO is in the current cryptocurrency market.<\/p>\n An ICO is a fundraising tool that trades future cryptocoins\u00a0in exchange for cryptocurrencies of immediate, liquid value. You give the ICO bitcoin or ethereum, and you get some of Billy\u2019s New Super Great Coin or the infamous CrunchCoin<\/a>.<\/p>\n The Financial Times<\/em>\u00a0calls ICOs<\/a> \u201cunregulated issuances of cryptocoins where investors can raise money in bitcoin or other [cryptocurrencies],\u201d which is accurate, especially if you underline the word \u201cunregulated.\u201d We\u2019ll get to that in a moment.<\/p>\n Sticking close to the older financial publications, The Economis<\/em>t also took a look at the financing mechanism, describing what you buy in an ICO in the following fashion<\/a>:<\/p>\n ICO \u201ccoins\u201d are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights. [\u2026] Investors hope that successful projects will cause tokens\u2019 value to rise.<\/p>\n<\/blockquote>\n The referenced\u00a0value increase is critical to understanding the appeal of ICOs. These are not transactions of love. They are investments made in hopes of quick, strong returns.<\/p>\nICO basics<\/h2>\n
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