The world has gone crypto mad.
The reason it’s so exciting, is that it gives anyone a chance to invest in something that is truly world changing. And there’s a lot of excitement about initial coin offerings. Also known as ICOs.
Now I should add a big caveat. A lot of new ICOs are worthless.
There some similarities to the dot-com boom. There are ICOs that launch every day, they’re nothing more than a scam. They are a quick way to fleece money out of foolhardy crypto newcomers.
Some of these new ICOs make big claims. They claim to have big name advisors. They say they’ve lined up big partnerships and a huge network of users.
The reality is, some are multi-level-marketing schemes. Pyramid schemes. The advisors they claim to have, really have no association at all. And there are no partnerships, no development, no technical backing. They are nothing more than empty shells with lots of hype. They exist in a world with a new, easy, unregulated way to raise fast money through crypto offerings.
The scary part is there are thousands of people, hundreds of thousands that fall blindly for these scams. This kind of activity is not sustainable. But there’s another important point to make.
You cannot ignore that ICOs are a game changer in global finance. They have real potential to turn the game on its head.
We also have to be careful not to view only the negative side. We must also see the positives. We must understand this is a decentralisation and liberalisation, of fund raising and capital.
What if Amazon did an ICO?
One of the benefits of an ICO is the ability for anyone to participate. You could have $10 to your name, or $10 million. It doesn’t matter. Everyone that comes to a token sale of an ICO, has the same chance to invest in a project.
And there are plenty of excellent projects launching ICOs that have real potential. Some of these new crypto projects are building tech businesses that will become the next generation of hugely valuable companies.
Some people say some of these projects are the next Amazon, or Google, or Apple. To some degree, that’s a fair comparison. But there’s a big difference too. That being the decentralised, distributed nature of these new projects. And the fact they also often enable the monetisation in some way of the network.
For example, imagine if Amazon was still a private company. Instead of issuing stock on the stock market, it raised funds through an ICO. Issuing an AmazonCoin.
These coins would provide equity in the business. If the company made a profit, the tokens would entitle you to a share of that.
Instead, the tokens were essential for the operation of Amazon’s supply chain. When a good moved from warehouse into the supply chain, out to freight and handling and ultimately to a customer, the AmazonCoin network would make it all happen.
To confirm those transactions on an immutable blockchain, miners would confirm blocks and transactions each step. Ultimately, with millions of packages moving around Amazon’s supply chain every second, the network effect would be huge. It would require an immeasurable amount of transactions and confirmations and micro transaction fees and AmazonCoins in circulation.
As the network grows and grows, the value of the network becomes exponentially higher. The value all of a sudden isn’t in Amazon the company, but Amazon the network.
And when you really think about it, that’s exactly the value in the real Amazon today. It’s the supply chain, the network, the connection of people through logistics and commerce.
If it were a crypto, it’d probably be more significant and valuable right now than ethereum and bitcoin. But it’s not. It’s a private company where the only beneficiaries are the company itself and its limited number of shareholders.
You can buy Amazon stock. But to do so from Australia, you’d need to set up an international trading account with a stockbroker. Like some of the online broking systems the banks provide. You’d then need to buy the stock, but there’s typically a minimum buy — sometimes around US$2,000 worth.
Then you have to wait for the trade to take place, when the US markets are open. So in the wee-hours of the morning. And then wait a few more days for the funds to go, the purchase to settle and the stock to actually be issued in your name.
Meanwhile you’re paying stockbroking fees and exchange rate fees, every step of the way. The transaction itself passes through multiple hands and each time a little clip is taken from your investment.
But this whole convoluted system changes when buying crypto or taking part in an ICO.
A revolution in assets and capital
When you take part in an ICO, you can participate instantly, your transaction is settled instantly and clears instantly. For example, you can send in 1 ether (the ethereum token) to an ICO. Let’s say 1ETH is worth US$300. And you get 1000ICO tokens per ETH.
Using ‘smart contracts’, the instant you send the ETH, you instantly get your 1,000 ICO tokens. Settlement and clearing takes place in real-time. Furthermore, you can do it from anywhere in the world, at any time, instantly.
The efficiency of this whole system is on a level the current world isn’t ready for. It cuts out all intermediaries and middlemen. It reduces complexity and cost. And it provides an immutable record of participation and transfer of ownership of those tokens.
This is revolutionary for something like the trading in tokens, and ultimately stocks. And it provides near instant ability to raise money. And just to add in the other key point here — most of the time you can contribute as little or as much, as you like.
The way I see this playing out, is that eventually companies that would otherwise list on a stock market will end up raising capital through an ICO.
They won’t be shady businesses. They will be transparent, money making, profit generating businesses. They will likely register their tokens with the relevant authorities. They might even have their tokens classified as securities. They might even be real equity in the business and carry a utility function as well.
But what it will do, is break the barriers and cut the friction of existing capital raising methods. It will provide an opportunity for the little person to get in on a new opportunity from anywhere in the world, with instant settlement and clearing.
It will open up investment to all and in a fair, distributed and decentralised manner. The ICO market isn’t a bad place. For now, there are plenty of scammers out there. But there are plenty of scammers in the existing system as well.
We’re looking at a whole new method for raising capital. We’re looking at new models of governance and transparency for companies. We’re looking at a revolution in asset ownership, transfer and access. It’s a strange, brave, exciting new world.
You will hear more bad news stories about the dangers of crypto. But the reality is far from the mainstream view. The reality is, something world changing is happening under your nose. You just have to figure out if you want to ignore it or seize the opportunity.
Editor, Secret Crypto Network