The Other Side of the 'BITCOIN'

ICO is a neAs the world gradually shifts to blockchain – Internet 2.0 that would change the way we share and store information in form of content, businesses fueled by this technology are taking a hard look at raising capital via Initial Coin Offering (ICO) – the next-gen digital fundraising approach. Sathvik Vishwanath, Co-founder and CEO of Unocoin – Bengaluru-based digital currency exchange explains what makes this technology-aided new financial instrument enabler look attractive.

Has ICO brought in the IPO approach to investments using technology?

ICO is a new way of funding a start-up through cyptocurrency as compared to initial public offering (IPO) for any other company. Entrepreneurs invite investors to pool in money and issue them the digital tokens or coins of the cryptocurrency, similar to how shares are issued to investors during an IPO. On one side, entrepreneurs develop the product for which they have raised capital via ICO and the other side, investors start trading those tokens in the free markets.

So what kinds of cryptocurrencies are generally traded?

Bitcoin is more general in nature and eventually will become the underlying currency for buying into the ICO. One bitcoin is about Rs 2.5 lakh whereas another cryptocurrency such as ethereum could be around Rs 30,000. The price range depends on the demand and supply ratio and how many buyers and sellers are dealing for a particular cryptocurrency. The tokens issued in ICO are traded similarly. The value of the token is enhanced over a period of time just like the equity as the company valuation grows.

But why should businesses choose ICO to raise capital?

At this point, ICO is very nascent in nature but it is a much simpler and straight forward way to raise capital from investors compared to the conventional practices like equity round because ICOs allow anyone and everyone to participate in it without any pre-requisites. It is completely a trust-based transaction. Investors must trust the founder first and believe in his/her idea. Usually entrepreneurs who raise funds via ICOs are serial entrepreneurs who understand growing and scaling businesses.w way of funding a start-up through cyptocurrency as compared to initial public offering (IPO) for any other company.