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WTF is an ICO, TechCrunch

WTF is an ICO?

It wasn’t very long ago that bitcoin felt nascent, laughable and petite. In the ensuing years, bitcoin has matured, become far less risible and grown massively.

Underscoring bitcoin’s maturation, the currency set fresh price records this week as the value of a single coin crossed the $Two,000 threshold. Since bitcoin was announced in 2009, and certainly since I very first wrote about it in 2013, the ecosystem of cryptocurrencies has exploded.

Cryptocurrencies have expanded since the days bitcoin collective some of the media’s spotlight with litecoin and the silly-by-design dogecoin. It was a time when Mt. Gox ruled, cupcake shops could become media darlings by accepting the digital currency and pizza was a critical bitcoin-pricing metric.

Now, there are dozens of cryptocurrencies worth eight figures, and the birth rhythm of fresh entrants is accelerating.

Alex Wilhelm is the editor-in-chief of Crunchbase News and co-host of Equity, TechCrunch’s venture capital-focused podcast.

In that particular milieu of freshly launched coins is a freshly famous transaction type we need to understand called the “Initial Coin Offering” or ICO. An ICO is akin to an IPO, but in temporal switch roles (sort of). Albeit confusing, it has recently acquired prominence as a favored way to launch a fresh cryptocurrency.

But as is typical of nascent cryptoproducts, there are legal questions and unethical players in the mix. So let’s explore what an ICO is in the current cryptocurrency market.

ICO basics

An ICO is a fundraising instrument that trades future cryptocoins in exchange for cryptocurrencies of instant, liquid value. You give the ICO bitcoin or ethereum, and you get some of Billy’s Fresh Super Excellent Coin or the infamous CrunchCoin.

The Financial Times calls ICOs “unregulated issuances of cryptocoins where investors can raise money in bitcoin or other [cryptocurrencies],” which is accurate, especially if you underline the word “unregulated.” We’ll get to that in a moment.

Sticking close to the older financial publications, The Economist also took a look at the financing mechanism, describing what you buy in an ICO in the following style:

ICO “coins” are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can lightly be traded, albeit unlike shares they do not confer ownership rights. […] Investors hope that successful projects will cause tokens’ value to rise.

The referenced value increase is critical to understanding the appeal of ICOs. These are not transactions of love. They are investments made in hopes of quick, strong comes back.

Latest Crunch Report

Apple And Amazon Want Bond | Crunch Report

Notably, not all ICOs are for cryptos that will maintain their own blockchain. According to the crypto-focused Smith + Crown research group, some ICOs are actually “launching ‘meta-tokens’ built on Ethereum, Bitcoin, NXT or others.”

After all, why not.

So ICOs can be coins on top of coins funded by the transfer of other cryptos to accounts in the hunt for what’s next. That might sound crazy, but it’s hot times in the crypto world.

And that warmth is keeping ICOs bubbling. The same Economist chunk, published in April of 2017, notes: “[n]early $250m has already been invested in [ICOs], of which $107m alone has flowed in this year,” a metric that it attributes to the aforementioned Smith + Crown.

That is a lot of money, making ICOs large in terms of their sheer dollar-scale. It’s therefore not hard to understand why more traditional business publications are paying attention. Following the money is their jam.

In brief: ICOs are the fresh funding slingshot by which nascent cryptos are flung into the world.

Thieves, lies and laws

As with any boom, there are bad actors to be found in the land of ICOs. Given bitcoin and the larger cryptocurrency world’s deep tradition of bearing bad behavior, it is not a surprise that ICOs are attracting humans of base intent.

In the world of ICOs, fraud is never hard to find. Add in regular sums of incompetence that any fresh venture could fall prey to, and ICOs feel a bit Old West.

But what about regulation, you reasonably protest. Surely that must exist to protect consumers?

Returning to Smith + Crown, skirting usual rules concerning fundraising is almost normal in the area of ICOs — at least partially explaining why guard rails in crypto offerings may remain a homegrown affair:

Most ICOs today are marketed as ‘software presale tokens’ akin to providing early access to an online game to early supporters. In order to attempt to avoid legal requirements that come with any form of a security sale, many ICOs today use language such as ‘crowdsale’ or ‘donation’ instead of ICOs.

So regulation is out of the mix for now.

There is an argument to be made that a dearth of regulatory oversight is actually good, as it permits the ICO market to iterate and innovate quickly. It is a reasonable(ish) argument and likely technically correct, but that doesn’t mitigate the potential for unsophisticated investors to be preyed upon.

Caveat emptor and moral hazard are fine arguments in favor of no rules regarding ICOs and cryptos, but if the market wants to keep growing, it will need to do more to attract consistently larger pools of capital.

Bubble me this

Is there a chance that ICOs will slow? Of course, but the coerces behind them run a bit deeper than we might have very first guessed.

CryptoHustle makes the related point in a latest article that “ICO mania is likely due to early Ethereum adopters making serious comes back after the last bull run.” Etherum’s run has certainly been staggering. If it is fueling the ICO craze, we could be in for a long cycle.

Regardless, the point doesn’t mean that cryptomarkets are as they should be. That ICOs would eventually get ahead of themselves and bubble like so many youthfull technology niches was predicted at least since last October. How long the good times will last isn’t visible. But the correction will come, as always, and when it does, we’ll see which cryptos have a real shot.

Take this away

The cryptocurrency market is hot once again. And while it proceeds to set fresh records, a host of altcoins will request its slice of the market.

Should you buy into an ICO? Only if you have a massive appetite for risk, zero fear of losing your capital and are willing to take a flying chance on an idea that could flop.

Then again, crowdfunding has similar risks and seems flawlessly healthy. Your call.

WTF is an ICO, TechCrunch

WTF is an ICO?

It wasn’t very long ago that bitcoin felt nascent, laughable and petite. In the ensuing years, bitcoin has matured, become far less risible and grown massively.

Underscoring bitcoin’s maturation, the currency set fresh price records this week as the value of a single coin crossed the $Two,000 threshold. Since bitcoin was announced in 2009, and certainly since I very first wrote about it in 2013, the ecosystem of cryptocurrencies has exploded.

Cryptocurrencies have expanded since the days bitcoin collective some of the media’s spotlight with litecoin and the silly-by-design dogecoin. It was a time when Mt. Gox ruled, cupcake shops could become media darlings by accepting the digital currency and pizza was a critical bitcoin-pricing metric.

Now, there are dozens of cryptocurrencies worth eight figures, and the birth rhythm of fresh entrants is accelerating.

Alex Wilhelm is the editor-in-chief of Crunchbase News and co-host of Equity, TechCrunch’s venture capital-focused podcast.

In that particular milieu of freshly launched coins is a freshly famous transaction type we need to understand called the “Initial Coin Offering” or ICO. An ICO is akin to an IPO, but in temporal switch sides (sort of). Albeit confusing, it has recently acquired prominence as a favored way to launch a fresh cryptocurrency.

But as is typical of nascent cryptoproducts, there are legal questions and unethical players in the mix. So let’s explore what an ICO is in the current cryptocurrency market.

ICO basics

An ICO is a fundraising implement that trades future cryptocoins in exchange for cryptocurrencies of instantaneous, liquid value. You give the ICO bitcoin or ethereum, and you get some of Billy’s Fresh Super Excellent Coin or the infamous CrunchCoin.

The Financial Times calls ICOs “unregulated issuances of cryptocoins where investors can raise money in bitcoin or other [cryptocurrencies],” which is accurate, especially if you underline the word “unregulated.” We’ll get to that in a moment.

Sticking close to the older financial publications, The Economist also took a look at the financing mechanism, describing what you buy in an ICO in the following style:

ICO “coins” are essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can lightly be traded, albeit unlike shares they do not confer ownership rights. […] Investors hope that successful projects will cause tokens’ value to rise.

The referenced value increase is critical to understanding the appeal of ICOs. These are not transactions of love. They are investments made in hopes of quick, strong comes back.

Latest Crunch Report

Apple And Amazon Want Bond | Crunch Report

Notably, not all ICOs are for cryptos that will maintain their own blockchain. According to the crypto-focused Smith + Crown research group, some ICOs are actually “launching ‘meta-tokens’ built on Ethereum, Bitcoin, NXT or others.”

After all, why not.

So ICOs can be coins on top of coins funded by the transfer of other cryptos to accounts in the hunt for what’s next. That might sound crazy, but it’s hot times in the crypto world.

And that fever is keeping ICOs bubbling. The same Economist chunk, published in April of 2017, notes: “[n]early $250m has already been invested in [ICOs], of which $107m alone has flowed in this year,” a metric that it attributes to the aforementioned Smith + Crown.

That is a lot of money, making ICOs large in terms of their sheer dollar-scale. It’s therefore not hard to understand why more traditional business publications are paying attention. Following the money is their jam.

In brief: ICOs are the fresh funding slingshot by which nascent cryptos are flung into the world.

Thieves, lies and laws

As with any boom, there are bad actors to be found in the land of ICOs. Given bitcoin and the larger cryptocurrency world’s deep tradition of bearing bad behavior, it is not a surprise that ICOs are attracting humans of base intent.

In the world of ICOs, fraud is never hard to find. Add in regular sums of incompetence that any fresh venture could fall prey to, and ICOs feel a bit Old West.

But what about regulation, you reasonably protest. Surely that must exist to protect consumers?

Returning to Smith + Crown, skirting usual rules concerning fundraising is almost normal in the area of ICOs — at least partially explaining why guard rails in crypto offerings may remain a homegrown affair:

Most ICOs today are marketed as ‘software presale tokens’ akin to providing early access to an online game to early supporters. In order to attempt to avoid legal requirements that come with any form of a security sale, many ICOs today use language such as ‘crowdsale’ or ‘donation’ instead of ICOs.

So regulation is out of the mix for now.

There is an argument to be made that a dearth of regulatory oversight is actually good, as it permits the ICO market to iterate and innovate quickly. It is a reasonable(ish) argument and likely technically correct, but that doesn’t mitigate the potential for unsophisticated investors to be preyed upon.

Caveat emptor and moral hazard are fine arguments in favor of no rules regarding ICOs and cryptos, but if the market wants to keep growing, it will need to do more to attract consistently larger pools of capital.

Bubble me this

Is there a chance that ICOs will slow? Of course, but the coerces behind them run a bit deeper than we might have very first guessed.

CryptoHustle makes the related point in a latest article that “ICO mania is likely due to early Ethereum adopters making serious comebacks after the last bull run.” Etherum’s run has certainly been staggering. If it is fueling the ICO craze, we could be in for a long cycle.

Regardless, the point doesn’t mean that cryptomarkets are as they should be. That ICOs would eventually get ahead of themselves and bubble like so many youthfull technology niches was predicted at least since last October. How long the good times will last isn’t evident. But the correction will come, as always, and when it does, we’ll see which cryptos have a real shot.

Take this away

The cryptocurrency market is hot once again. And while it proceeds to set fresh records, a host of altcoins will request its slice of the market.

Should you buy into an ICO? Only if you have a massive appetite for risk, zero fear of losing your capital and are willing to take a flying chance on an idea that could flop.

Then again, crowdfunding has similar risks and seems ideally healthy. Your call.

Related video:

From paper to blockchain – Microsoft Enterprise

From paper to blockchain

By The Record on March Ten, two thousand seventeen

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Microsoft and Bank of America Merrill Lynch’s blockchain project is taking the complexity, cost and error out of labour-intensive trade finance processes. We find out more about the work they’re doing together.

Microsoft and Bank of America Merrill Lynch (BAML) recently went public about the work they’re doing around blockchain. The two are building and testing blockchain-powered financial exchanges on Microsoft Azure – Microsoft serving as the technology provider and test client, through Microsoft Treasury, and BAML providing the necessary trade matter subject expertise. Their aim is to develop applications that optimize trade finance processes, which tend to be very manual, time consuming and costly.

“Blockchain can convert our business,” says Chris Bozek, who leads the Global Trade and Supply Chain product team at BAML. “Specific to trade, there is significant potential because it is inherently a document strenuous business. It relies on bilateral exchanges of documents that need to be reviewed, agreed upon and then complied with to sate the financial side of the transaction. It’s an arousing time as we learn how to take advantage of technology to not only accelerate transactions, but reduce risk and cost, and improve transparency for all parties.”

Marley Gray is a leader on the Microsoft Azure Engineering team, which has been tasked to help identify where and how Microsoft Treasury can use this distributed ledger technology to improve its operations. “Microsoft Treasury is a ideal use case for blockchain,” says the principal program manager. “The unit manages over US$150 billion in assets and, as our company has moved from a products to a services selling strategy, its processes have become far more complicated.”

To commence with, Microsoft and BAML have been focusing on standby letters of credit – documents issued by a bank, providing payment assurance on behalf of a client should the counterparty not perform as intended. “The application process has traditionally been a long, painful one,” says Gray. “It was manual, took too long and also had a very high error rate, because of the number of steps and parties involved.”

“The challenge was to understand how blockchain can reduce cycle time and also provide Microsoft with a better risk view – not only from a portfolio but from a client perspective,” explains Bozek.

“Our paper-based process took five days,” says Gray. “With blockchain, the cycle time was diminished by more than half, regardless of how many parties were involved. And the error rate went down from 50% to zero.”

Microsoft and BAML are now refining the technology and exploring how they can apply blockchain to other trade financing products. “We can now tackle extra transaction types using our standby letters of credit solution as a basis,” says Bozek. “It’s a superb solid foundational product for us to build upon.”

Over time, they also expect to add fresh features from Project Bletchley – Microsoft’s open, modular blockchain fabric powered by Azure – and bring more parties into the mix.

“It’s been a very good learning process to see first-hand how a treasurer is evaluating the benefits of blockchain specific to trade transacting,” says Bozek. “As we work through the adoption challenges of this fresh technology, we’re gaining some valuable insights into blockchain as a service and transacting in the cloud.”

Related video: