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June 19, 2018

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Is an ICO Really the Best Way to Fund Your Startup? [The answer might surprise you]

February 6, 2018

Lantah founder---Daniel Jeffrey explores why an ICO and the minting of cryptocurrency might actually hurt a startup in the long run.

 

In 2008, Satoshi Nakamoto quietly changed the course of human history. With the release of Bitcoin, for the first time ever, real value could be sent near instantaneously to anyone anywhere with no third party to facilitate or ask permission from and nobody could stop it.

 

Interest slowly grew, but many didn’t understand what it truly was or didn’t take it seriously. Bitcoin’s mission continued regardless of the naysayers.

 

A few short years later, growing interest in the platform did not stop, with more and more believers joining every day. As the participants increased, so did the price. As the price increased, so did the participants.

 

The Law of Diffusion of Innovation exhibits this phenomena, as more believers join, trust in the innovation increases and thus even more join until finally the innovation becomes mainstream.

 

Today, we have much more than simply Bitcoin. Ethereum sparked a movement for itself, allowing the same fundamental benefits of Bitcoin to be applied to the code of your choice. Instead of simply a currency, Ethereum developed a platform in which you yourself can build on top of.

 

You can mint your own coin or write your own smart contract which is enforced not by a central party, but by the network as a whole.

 

The abilities granted via the Ethereum network has led to an absolutely massive surge of something called an ICO, or Initial Coin Offer.


 

What is an ICO?

An ICO is very similar to a traditional IPO, where a company sells their stocks for the first time in a public offering. With an ICO, instead of stocks, companies or organizations are selling their newly minted cryptocurrency to buyers.

 

There is no denying that many ICOs result in successful funding, often receiving tens of millions or sometimes in excess of one hundred million dollars, an absolutely massive value. Today, there are over well over 1,000 different cryptocurrencies on the market, however, most of them shouldn’t exist.

Benefits of an ICO can lead to liabilities long term
The craze to find the next hot coin combined with the history of easy, fast cash for startups has led to more and more organizations considering launching their own coin and their own ICO. Many of these organizations truly do have an innovative technology or unique way of solving a real-world problem, but minting a unique currency is rarely the best solution to facilitate the adoption and implementation of a new technology.

Currency is incredibly complex and carries many requirements to be successful.

A true currency should not be directly tied to one specific utility but rather have a broader reaching audience and use. It should be used to buy many goods and services, not restricted to one specific good or service.

Lantah's token is a prime example of a cryptocurrency with broad-reaching abilities and adaptability to an ever changing competitive landscape.


Final Thoughts
The ICO craze has led to some incredibly specific and outrageous currencies and after a while, begins to look like people investing millions into Chuck E. Cheese tokens.

By launching an ICO, you must be certain that your plan truly does gain a long-term advantage with the use of its own currency.

Minting a currency is not something to brush over or take lightly and may result in successful funding with a hard crashing failure when the market realizes the currency serves little true utility and has already been replaced by something reaching a more broad audience with more security, stability, and liquidity. 

This article is aimed to ask the tough questions and encourage critical thinking. Developers who mint cryptocurrencies are responsible for building a well-designed, adaptable system and investors should pay close attention to the technologies they are interested in investing into.

This article is not professional financial, investment , or legal advice.

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