Bitcoin Bulls Will Return As Investors Push The Panic Button By Selling-Off Their Crypto Assets
The introduction of the Ethereum blockchain came with a novel means of raising capital for startups. By creating tokens on the Ethereum network, innovators could easily fundraise without disruption from regulatory authorities.
Within a short time, Initial Coin Offering had gained widespread popularity. Projects that employed this method witnessed unprecedented returns. However, this trend was short-lived, as the popularity of ICOs waned as fast as it had grown. To put this into perspective, there were almost 7,000 ICOs in 2017.
By September this year, the number had reduced to slightly over 4000. The reasons? Stringent regulations, bearish trends on the crypto market, and many others.
The obsession with ICOs certainly benefited the strategic token issuers. For instance, EOS managed to raise a whopping $4 billion before launching their first product. Contrariwise, individuals who saw ICOs as an opening to invest in promising companies have incurred enormous losses.
Currently, ICOs and their accompanying utility tokens seem to be on their sunset days. Even worse, there is little hope for their resurgence. The high prevalence of fraud is affecting the genuine projects on one side and regulatory agencies are also closing in from the other side. Indeed, projects are finding it hard to explain to the SEC that their tokens are not securities.
Despite the dwindling hope in ICO projects, some will see it through. Heck, they might even become the ‘next big thing’. But, it is obvious that a majority will eventually collapse.
Security Token Offerings
At the time when ICOs were the thing, some companies opted for security token offerings (STOs). Purchasing a security token is similar to ownership of a security in digital form.
Among the pioneers in issuing security tokens was SPiCE VC, a tokenized venture capital fund. According to Carlos Domingo, a co-founder of SPiCE VC, the company sought to raise money through the Ethereum blockchain. However, they kept in mind that procuring capital for a business is deemed as issuing a security. The company decided to issue digital securities because they have several benefits as compared to traditional securities.
Notably, digital securities had to be recoded to become compatible with public blockchain networks. It was during this time that companies noted how much potential the digitization of securities had. In this regard, Domingo mentioned that the digital securities market is still emerging. He added that the Wall stet, which is worth $30 trillion, has $7 trillion worth of assets that can be easily be tokenized and sold as digital securities.
Advantages Of Digital Securities
- Digital securities enable individuals to invest in assets that are characterized by insufficient liquidity. Such include the real estate market and private equities.
- Digital securities simplify the formation of capital by regularly updating the blockchain and automating several processes.
- Digital securities make it possible to fractional portions of large assets.
A Promising Future
Though it lasted a short while, the fame of ICOs will forever be remembered by investors and startups alike. Unlike ICOs, blockchain technology is here to stay and has demonstrated promise with regard to revolutionizing the way businesses raise capital.
Digital securities are undoubtedly one of the best real-life applications of blockchain technology. In fact, the increasing adoption of blockchain tech indicates that digital securities will be used to trade assets in the future.