The Initial Coin Offering, or ICO, is the world’s most democratic business funding. The ‘Bitcoin’ of IPOs, ICOs come without the barriers of government or regulation (as of this writing). The best way to think of an ICO is an IPO, without rules really. It has created an exciting environment where anyone can raise money from the public as long as they can convince buyers they will get something for their investment. Millions of dollars have been raised by companies from healthcare to technology and everything in-between.
ICOs are similar to IPOs in that they are used to raise money for a company by selling ‘coins’ (think a unique cryptocurrency) instead of selling shares like IPOs. There is a huge difference between shares and coins. Coins do not always represent ownership in the company like an IPO’s shares do. MusicCoin for example, does not plan to give any coins away and did not even hold an ICO. Each ICO determines what buying a ‘coin’ entitles you to. Some ICO’s offer ownership/royalties in a company like a public company, while other require ownership coins to use their service (Cryptonomos) and even others have more vague definitions of capitalism.
But, as many people are finding out the hard way with ICOs, many of the government regulations ICO skirt are regulations that protect their interests. Regardless of what promises were made, after you fork over your investment, the ICO had complete freedom to manage that money however they’d like. After investing in an ICO you cannot take management to court, you cannot sue them or file a complaint. For these reasons, ICO investing should only be considered speculation. Investment of retirement or important savings is ill advised. Take a look at our ICO Investing Strategy article to learn more.