I’m boarding a flight yesterday and ‘murfing’ (mobile surfing) – flicking between Facebook apps, Twitter, bank account, BBC news and more. Suddenly I spot a new ICO (initial coin offering) for a new bank. From Wikipedia:
“An initial coin offering (ICO) is a means of crowdfunding the release of a new cryptocurrency. Generally, tokens for the new cryptocurrency are sold to raise money for technical development before the cryptocurrency is released. Unlike an initial public offering (IPO), acquisition of the tokens does not grant ownership in the company developing the new cryptocurrency. And unlike an IPO, there is little or no government regulation of an ICO.
“The first ICO was for Mastercoin in 2013. Ethereum raised money with an ICO in 2014. ICOs are now extremely popular. As of May 2017 there were currently around 20 offerings a month, and a new web browser Brave’s ICO generated about $35 million in under 30 seconds. There are at least 18 websites that track ICOs.”
So I see this ICO for a new bank … sounds interesting. The new bank will be using all the hottest and latest tech, and offers me a guaranteed 50% uplift on my investment at launch. Wow! I want in. I’m busy moving into Kraken to transfer 100 ETH (Ethereum’s cryptocurrency) to seal the deal when, just as I’m about to hit the send button, I stop and pause.
This whole thing started as I saw an ad on Facebook for a new bank ICO. I don’t know anything more than that about this bank. My greed had kicked in, thinking that I’d get 150 ETH back by just transferring 100 over to them today. 50 ETH is worth around $16,000 depending on what day of the week we’re making that valuation, so it’s a healthy profit to be made in a couple of weeks. But wait a minute, I don’t know anything about these guys. Who’s behind this bank? What credibility do they have? Will I really get my money back, because once it’s gone … it’s gone.
There’s a real madness in the crypto-community today, with a wave of ICOs pushing BTC (bitcoin) and ETH prices upwards. Someone at some point is going to say stop the world, I want to get off and the whole thing will come crashing down. In fact, that crash started last week with BTC and ETH losing 25% of their value in just a week.
Equally, many ICO offerings are scams. Not all – for example, Bancor is one I’m personally vested in – but Monaco ICO was one in question. In fact, there are so many out there that it has become a meme on Quora:
Are ICO tokens a scam?
1 Answer from Terrence Yang, ex-Wall St lawyer.
“Most ICOs are scams and most cryptocurrencies (other than bitcoin, “altcoins”) are shit coins. Some ICO tokens are not a scam.
“Tim Draper is one of the sharpest VCs in the entire cryptocurrency space. He bought the entire second auction of bitcoins offered by the US Marshals as part of the Silk Road asset seizure. Tim is participating in the ICO of Tezos. This is merely social proof – do your own diligence. However, it is a sign that at least one savvy VC does not consider all ICOs a scam.
“Some investors may be more book-smart than Tim but what matters in investing is returns and risk. You can’t just guess right. You have to make bets. Tim took a lot of risk but because he “pulled the trigger”. Since then, bitcoin prices have skyrocketed. Tim’s mark to market returns are probably fantastic (I don’t know if or when he sold his bitcoin).”
With ICOs adding to the confusion of what is already a confusing market of crypto and digital currencies – BTC, ETH, XRP and more – the rule here has to be caveat emptor, buyer beware, and for a more detailed look, here’s a great article from Reuters by Henry Engler.
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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by NextNewMedia, Shutterstock.com