A Short Tour to the Four Kinds of ICOs

What's going on: ICOs are not only a revolutionary new way of raising money, they are also extremely popular at the moment. There are currently (November 2017) around 50 ICOs a month, $2.3 billion had been raised at the beginning of October (more than ten times as much as in all of 2016) and the money raised through them account for roughly 5% of the VC-industry at the moment.

To keep a grip on what's going on in this extremely fast growing space, I recommend you an article I read on hackernoon.com. In it, the author identified the four kinds of ICOs:

“Organic” ICOs

Basically the gold-standard of ICOS: Projects, that would not be possible without blockchain. A good example is Ethereum, that's basically some kind of operating system executing smart contracts on it's own blockchain.

These will probably the most transformative and revolutionary projects in the future, potentially a success story that Ethereum already is. Problem is that these projects are also the most complicated one's, with ideas the world is not ready for yet or ideas, that sound too good to be true (and are therefore scam).

“Artificial” ICOs

These ICOs want to look like Organic ICOs, but are in the end "normal", centralized companies trying to get funding through tokenization. A good example are completely centralized services like LydianCoin (that was backed by Paris Hilton, which should make you sceptical) that use a lot of marketing buzzwords and have founders possibly ending up in jail (this actually happened with with LydianCoin-founders).

You should as yourself: "Could this work without blockchain? Is this just a regular idea?"

“Synthetic” ICOs

Here an established company, with a working non-blockchain-product tries to get in on all the shiny new crypto stuff. This is especially interesting for companies that are not number 1 in their space, for example the messenger KIK, that issued it's KIN-tokens as a virtual currency in it's ecosystem. Brave’s Basic Attention Token is another "synthetic" token.

While these are (in most cases) not a fraud or scam, it is unclear if there are any benefits in the future for the existing product and / or it's ICO investors.

“LOL” ICOs

These don't fit in the first three categories and are basically fun-ICOs (that can end up being pretty useful, like Dogecoin). Another example are beautiful creations like CoinyeWest.

Why should I care: Though regulation differs around the globe and remain unclear in the EU and the US, one can say that ICOs are here to stay and really big ICOs, conducted by established, well known companies are yet to come (with the exception of KIN).

So I think it's important to know what's going on in this really really interesting, but also dangerous space. Dangerous not only because of a potential ICO-bubble, but also because there are loads of fishy people out there, that want your hard earned Bitcoin, Ethereum, etc.

As always: Stay informed and take care.

Source: hackernoon.com
GIF: giphy.com

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