Initial coin offerings (ICOs), also called “token sales”, are considered as a way to raise capital or participate in investment opportunities using digital assets. While ICOs are generally likened to initial public offerings (IPOs), these concepts differ in many aspects.

ICOs offer digital tokens to investors, which do not present an ownership stake on the project but can be used for investment or transactions within the project’s ecosystem. Such tokens need not be listed on a crypto exchange, but it became a factor for a project to raise interest among investors. The main handicap for ICOs is the absence of a comprehensive regulatory oversight leaving room for cases like "pump and dump" schemes.

Unlike IPOs, ICOs can be implemented in a very short time. In addition, like crowdfunding, an ICO is open to everyone – which is praised by many as it paves the way for everyone to provide funds and every project to be funded. As a matter fact, in spite of some big obstacles, ICOs seem to attract many investors to the field. Yet, the question remains: Can ICOs replace the traditional fundraising mechanism one day? 


Source: MVIS 

About the Author:

Alexander Weis is an analyst in MVIS’s operations department. He joined the company in 2017 and is a specialist in the Digital Assets environment. His key focus is maintenance and administration of existing indices, as well as developing new indices. Alexander Weis holds an M.Sc. in Finance from Tilburg University, the Netherlands.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.