ICO is the hottest new thing. Yesterday a search on “initial coin offering” on Google yielded a little over 500,000 hits. That number was up over 20% overnight. That maths out to about 350% growth a week. Alex Wilhelm wrote a summary of the ICO in this WTF piece.
You have probably heard of Bitcoin, the digital currency. That’s in what is now a category called cryptocurrency which is a combination of blockchain and money.
What that means is that if Blockchain is like the US Dollar, then these cryptocurrencies are like other foreign currencies.
An ICO sounds like an IPO, bit is more like a Kickstarter in that you aren’t getting equity in the company, you are paying in advance for a product they are building – and in this case the product is the money – the cryptocurrency which is presumably currency you can use, that might appreciate in value (like a stock, or a foreign currency). This is a list of current ICOs going on right now. Forbes did a very good piece on this three days ago and that’s here. Reuters has already written about some of the dangers of the ICO and they are on the right track.
The issue is that from a trust and security standpoint, they are more like the $100 bill of 20 years ago, where there was very little built into the currency to have confidence that it was real, not counterfeit, when converting it to another currency.
The blockchain model is fine within its own ecosystem – it’s when you take it out of one blockchain and either cash it out into traditional currency or move it to another cryptocurrency blockchain that you run into issues. This is, yet another, example of where traditional ID/password authentication falls short when it comes to trusting a person and you need facial recognition linked to a government ID to have confidence that the person is who they say they are – and that goes a long way to trusting – and having accountability for the person trying to use the cryptocurrency.
Once that additional element of trust and confidence is there, then I think ICOs and cryptocurrencies can start to fulfill their promise.
Nice post. Another great resource for ICO and crypto currency is Fred Wilson’s AVC.com blog. Fred’s investments consist of CoinBase and CoinList which seem to have the respectable lead in mainstreaming these concepts.