According to Сoinschedule.com, September 2017 became the hottest month by the amount of funds raised during ICOs: 37 projects have raised almost $850 mln. In October, against the background of the news from China and South Korea, the indicator felt down to $150 mln.
According to the resource, a total of 201 projects have arranged ICOs. Their efforts resulted in raising $3,031,120,416 in investments.
It is easy to explain why the new model of financing is so popular. On the one hand, ICOs provide startups with the opportunity to raise the funds required to develop a project within a rather short period of time. On the other hand, it provides participants with new investment opportunities that were not available for individuals before. Besides, for example, unlike venture investments, the investor can quit a project rather quickly by selling the acquired tokens on the secondary market.
The token is a digital asset the investor obtains in exchange for the invested fiat money or cryptocurrency. It can be sold or used by exchanging for a certain service or a product of the company that issued it, applying it as a payment unit, or obtaining the right for some profit of the company.
Depending on the purpose, there are 4 types of tokens:
- Utility token,
- Cryptocurrency,
- Securities dividend-bearing stock, and
- Securities bonds — a loan for some time.
The utility token is a permit to use services provided by the service. As a rule, it is possible to obtain them by buying them from other members or helping the project, e.g., mining cryptocurrencies that provide the compute capacity or space on a hard disk drive or a server.
For example, this is Golem — a decentralized P2P network that organizes the sale of computing capacity of computers and computer networks. Customers will make their payments for using the suppliers’ resources only in GNT — Golem tokens.
The Anryze project offers to use tokens for decoding audio files. The digital token allows using the service and is applied to make payments to suppliers of computing capacities of their computers for performing work. The token is issued on the Waves platform.
Cryptocurrency tokens are used for settlements both within and beyond services, e.g. WAVES, Ethereum. They are freely converted into the fiat currency or any other cryptocurrency, and can be used as an individual means of payment (including offline), and a means of investing.
Stock tokens. It is possible to acquire dividend-bearing tokens during ICOs or at an exchange.
For example, the ARN token of the Aeron project offers a profit in accordance with the company growth. Aeron specializes in the security of air transport by aggregating information about pilots, air companies, and schools for pilots. The service automatically shows discrepancies in pilots’ documents and warns companies about possible fraud. The token functions on the Ethereum platform.
The Taas project — a cryptocurrency fund — guarantees TAAS tokens holders a quarterly profit of 50% of the total profit of the company.
Bonds tokens. This is a service that makes an ICO. It considers members’ investments in the long-term perspective that usually does not exceed 2 years. In the future the company is able to buy out the tokens. This is the main difference from stock tokens.
The ZrCoin project offers to bind tokens to the material product — a synthetic concentrate of zirconium dioxide the company will produce from industrial wastes. It will be possible to sell the digital token on the basis of Waves at the exchange, but the project organizers are offering to wait until it is bought out by the ZRCoin founders.
The Steem Dollar (SD) offers investors a fixed profit for two years. Steem Dollar is peculiar by its impossibility for mining. They can be obtained only from making investments. It is possible to acquire them for the Steem cryptocurrency, and the profit itself is accrued in SD. At the same time, the credit token of the Steem network can be sold at an exchange and the new owner will also obtain 10% of the profit. The transactions with the digital token are made on the Graphene platform.
Tokens can also combine several functions. For example, the Aeron project offers not only to earn profit from making investments in the company but also to pay for air tickets by using the ARN token.
The implementation of tokens as securities is complicated by the need to comply with the standards of regulators all over the world, e.g., SEC. That is why the projects that make ICOs try to find an easier way. They use them as internal means of settlements.
The legislative regulation and the use of digital assets of the project by ICO members depends on the selected model of the token. That is why it is important to choose the model at the early stage of preparation for the crowdsale.
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