With ICOs at the forefront of cryptoculture worldwide, blockchain technology is predominantly being driven by digital currencies and their markets, but why? Below Finance Monthly hears from Drew Bell, Chief Developer at Ethercoin, who explains why.

2018 is set to be an even bigger year for Initial Coin Offerings (ICO) than 2017, with more startup’s turning to the fundraising method to remain in control and transparent in the process. According to a report by CNBC[1], around $100million a month is raised via ICO’s, showing the demand is increasingly prominent between investors and individuals.

However, as with many emerging trends, ICOs have been met with some scepticism and criticism. Before new businesses start jumping on this trend to become the next blockchain success, it is important to understand the challenges it might face and why trust should be built into the core of its offering.

Whilst there can be fraudulent ICOs, businesses and mainstream audiences need educating and to be made aware that ICOs are a viable fundraising mechanism.

The fastest growing form of investment

There’s no denying the fact that ICOs, “the fastest growing form of investment” carries numerous benefits for businesses looking to generate significant ROI without having to seek out venture capitalists. An Initial Coin Offering can be created by just about anyone, and offers businesses an efficient and streamlined fundraising opportunity.

Aside from the obvious benefits like being able to streamline a fundraising campaign for a startup business, by conducting a decentralised application, users will be offered a much better experience.

There is also the added benefits of online marketing, where an ICO can be marketed to a large, global targeted audience with little effort and cost. Potential investors can therefore research about a particular ICO via online ads, social media and websites no matter where in the world they might of originated from. The ICO investment model is open to everyone and free from the geographical restraints associated with IPOs.

An unpredictable market

It’s widely known that the blockchain and cryptocurrency market is an unpredictable place, where the majority of business see it as a sure fire way to attract investors who are looking for the next big blockchain score. Yes, an ICO looks to be an easier and more cost-effective way to raise funds for your business, but it can be just as challenging as as securing a venture capital; but you do have more control.

One of the biggest challenges a new business can face when journeying down the ICO route is the sheer amount of competition. In an interview with Business Insider, the founder of Evercoin announced there were around 30 new ICOs launching everyday, and raising as much as $200million per ICO[2]. Businesses need to make sure they are distinguishing themselves from such a saturated market with a strong unique selling point that will not only put them ahead of the game, but generate interest and a buzz amongst investors. With so many ICO projects not having an effective marketing plan and channels to promote themselves, they can get lost in the sea of ICO scams that take centre stage.

Essential to make a difference

ICO’s are essential for businesses wanting to enter the market, and to be able to thrive, ICOs need regulatory safeguards to be implemented and investors need to be educated. Trust should be at the forefront of any businesses fundraising project, and one of the first steps to building trust is for businesses to create an extensive whitepaper and detailed roadmap.

Due to the volatile nature of the blockchain technology, it can be hard to understand the true nature of the transaction during an ICO sale. Businesses should ensure they offer a safe and secure platform to boast legitimacy can help to instill trust amongst investors.

Communication is the key to success with generating trust amongst the blockchain market. By using social media to engage and update its audiences, investors will start to feel empowered and as if they are a part of the process. This will promote a higher level of transparency and result in more investment.

In today’s unstable and saturated blockchain market, it is essential that businesses looking to start on their fundraising journey are putting security, transparency and trust at the forefront of raising capital to maintain solid investment and build credibility amongst investors.

[1] https://www.cnbc.com/2017/08/09/initial-coin-offerings-surpass-early-stage-venture-capital-funding.html
[2] http://uk.businessinsider.com/ico-initial-coin-offering-explained-bitcoin-ethereum-2017-11?r=US&IR=T