We are in the age where dreams can be made real. This is where small startup companies try to launch their projects and sell their products at little or no cost to them aside from their sweat equity. This is all made possible through crowdfunding. Places like Kick Starter, GoFundMe and IndieGoGo are the forerunners of this new phenomena.
These three sites, however, are most used by directors who look for funding for their movies, various small tech companies launching their products or clothing companies looking to get in the retail business. The cryptocurrency industry is not a stranger to these as well. Some offer crowdfunding to get their projects started. But, there is one single thing that is very common in regards to crypto industries, and that is called Initial Coin Offerings (ICO).
Crowdfunding and coin offering is very similar to each other in so many ways. In a way, you become an early adopter or an angel investor when you join in both of these crowd sales. Aside from that, you also get early access to whatever product they launch first such as beta applications, wearables or gadgets if they are in the tech business, early screening for movies if they are in the movies or clothes and other merchandise if they are in the clothing or textile business.
These are the most common industries that usually offer crowdfunding or ICOs when they want to launch a new product. With all these similarities, it is sometimes harder to pinpoint what is a coin offering and what is a plain crowdfunding project. Today, we will be dissecting them and pinpoint out the major differences between the two so that we would be able to tell them apart easily.
This is the first major difference between the two. Most crowdfunding projects are restricted to a certain region or a certain country that is native to the people behind the project. While some of the projects I have seen in KickStarter are global, not all apply to a wider scope, unlike ICOs.
Anyone would be able to participate in coin offerings as the accessibility for it falls on a wider range. There are a lot of these that have gathered investors from all over the world as opening up an ICO is more accessible for people around the globe as they are advertised well in social medias and such.
Besides that, they offer something much more that would attract the eye of the masses. Although some of the newer token sales set restrictions to be able to join, a lot of people still pass those restrictions and are able to participate in the said ICO.
There are a million reasons and a multitude of ways that people request investors during crowdfunding. The products may vary from textile, technology, software, hardware or even food. Sometimes they even span niche markets such as intellectual property and other services that offer similar trades. The main purpose of the crowdfund is to either gather enough investors to make a product launch successful or to gather working capital to produce these things after a product has been launched.
ICO products, while closely similar to their crowdfunded cousins, tend to revolve around the blockchain technology. These tend to be more on the tech side and still offer a lot of options, depending on what the company is trying to create. There have been ICOs for eSports gaming such as Unikorn Gold, banking such as Bancor, BABB and Centra, platforms such as Stratis, social media such as Social and even recently, textiles with Loomia entering the smart wearables market.
Joining a crowdfunding project, most people do not even look at the return on investment. This is due to most crowdfunding projects offer an already working platform or product and you are merely paying for early access to be able to use these products. Either that or you get discounts for your next purchases as they will most likely send you vouchers as a thank you for signing up and contributing.
With ICOs, it is worlds apart. People who invest in ICOs treat it as such, an investment. A lot of investors will participate in an ICO and will always have profit in mind. This is due to the nature of the project itself. ICO participants most likely only get the white paper and a roadmap. People who start ICOs usually sell their vision or dreams, hoping that they gather investors to be able to fund these projects, and in turn, they give out tokens or coins as a form of proof that you have participated in an ICO. These tokens can then be traded for their value or can be kept and as the company becomes more successful, the value of the token rises as well. Treat this as something like a share in a company.
Crowdfunds are most likely legitimate especially if the company trying to raise money would tie their products up to whatever business they are. These may involve patents, intellectual rights and would require forms to be filled out and submitted to the government. Also, these products may undergo testing first to make sure that it is safe for use or consumption for the public. Even then, not everyone would be able to participate in such projects as like with the accessibility issue, these are region restricted.
Coin offerings are also the same way but are more lenient on the processes they do. Since the aim of the company holding an ICO is to gain as many investors as possible, they make sure to require necessary documents for would be investors from countries such as USA, Korea or China. They are required to submit an accreditation from their government that they know the risks of investing.
Failure to produce such documents would resort to them not being able to participate in the event. However, other investors from other parts of the world would not have the same restrictions such as people who reside in the USA.
Both of these have risks involved. As long as there is money exchanged between parties, there always have been risks. The risks in coin offerings, however, are considerably higher as most people who invest here have profit in mind. The losses that might be suffered by an investor for an ICO would be different from someone who participated in a crowdfunding project and are not expecting for a return of investment, but just an early access to a technology or a product.