Initial Coin Offering Phenomenon
by Randall Parker Jr.
Initial Coin Offering Is A Superior Model For New Crypto-Currencies
Initial Coin Offering (ICO) is a new phenomenon that’s sweeping over the cryptocurrency world. In my research for this article, I was trying to determine which were the first coins to be “launched” in this manner but the editorial content in the Bitcoin world is still budding, so to speak. Suffice to say Initial Coin Offering is a relatively new phenomenon in the way new coins are introduced onto the market.
Previously, when a new coin had been released, there would be a BitcoinTalk post (which is still largely the convention today) and then a corresponding website where interested parties could find out about the coin and where to eventually get said coin. Now, I’m going to tell you exactly why this older model of doing things is not as preferable as the new Initial Coin Offering method. It mostly all comes down to access. Through the original model of coin release, the bulk of coins ended up in the hands of those with mining equipment waiting in the wings, ready to turn on and mine the new coin.
The problem with this is two-fold. First, miners will dump the coin they mine and get back into BTC, or at best they would keep a small percentage of the coins they mined. This causes price to drop wildly on markets when large sums of coins have been dropped at once. The way to mitigate this at first was to have coins with short POW (Proof Of Work) stages followed by usually POS (Proof Of Stake) coin minting thereafter. The second problem of coins going through miners is the fact that miners are not every day users of crypto that coin developers are trying to attract. The extent to which a coin can gain adoption from users, investors and merchants usually are the factors that determine the coin value.
xCloudCoin (CLD) Gives Example Of Initial Coin Offering
An Initial Coin Offering is significantly different from this older means of launching a coin in a few ways. So typically there is a pre-mine for the amount of the coin Initial Coin Offering. So, let’s use a recent coin Initial Coin Offering to make this example. A coin called xCloudCoin (CLD) was launched through an Inital Coin Offering Aug 3, 2014 on the Bittrex Exchange. The Inintial Coin Offering price was 10030 satoshi per coin. There was an initial coin offering of XXX BTC and that amount of coin was sold out on Aug. 10, early in the morning.
Immediately after all of the pre-mined Initial Coin Offering coins are sold out, trading markets open up. In the case of xCloudCoin, the coin has remained profitable and for a time was up 4-5x the Initial Coin Offering price. So what I find to be especially nice about this model is that regular Joes like you and I can buy .01 BTC or whatever amount we want worth of a new coin and get in early at the same price as everyone else. There’s no more unfair advantage for miners, but there is still the problem of “whales” manipulating the markets after the coin launches but that’s likely to always be the case so long as we are exchanging on markets, which will likely be forever.
Complications With Initial Coin Offeringings
Also, during the Initial Coin Offering phase, from my experience, the coins don’t sell as fast right when the announcement is made but after a few days when the BitcoinTalk thread is gaining momentum and the developer is explaining the concept and technology of the coin to prospective investors, that’s when the coins start to sell out fast. It can all be quite exciting to be involved with, honestly.
One thing that I think needs to change is the ICO amounts seem to be arbitrary or at best just not varied enough for my tastes. Most of the coins I’ve seen have been valued between 10,000-12,500 satoshi per coin. If there are more coins on the chain, or if the block reward is very high, relative to the number of ICO coins issued, the cost per coin should be less. Without explaining all of the details behind that, some variety or rationality behind the cost of the IPO coins is the only area I’d like to see evolve.
Check out Bittrex and BitcoinTalk Forums to find out about new Initial Coin Offering alt-coins if you would like to take part in one and find out what the benefits are. Feel free to share your experiences with us on the site, in the comments or on our social media accounts.