ICOs, the next generation of IPOs

Abstract

Purpose The purpose of this paper is to recognize the benefits of the initial coin offering (ICO) as a way of raising funds and to present a detailed comparison between the ICO and the initial public offering to realize the future possibilities that this new funding method holds. Design/methodology/approach It is an exhaustive review of the ICO, the mechanism of crowdfunding, the blockchain technology behind it, benefits and current shortcomings of the ICO, and the potential future development of the ICO as a convenient and efficient way of raising capital. Findings ICOs have brought billions of dollars of funding to startups and projects worldwide in less than two years. Concurrently, many successful ICOs yielded extremely high returns to investors and believers of this new way of funding businesses. Research limitations/implications While the ICO is a revolutionary vehicle for business funding, it has raised concerns among users as well as potential investors about its risk and lack of regulation. The future of this innovative funding method highly depends on further development and placement of appropriate regulatory supervision, better understanding of risk and benefits and attaining the confidence of users. Originality/value This is a review of the advantages and drawbacks of the ICO. If the current fraud, market and cybersecurity risks can be mitigated and standardized regulations are developed, the ICO has a future to become an established way of capital funding or even replace the existing options, regardless of the size and age of companies.

The quest for ICO: Identifying and prioritising the factors influencing initial coin offering selection

“…ICOs are prone to several risks that have been explored extensively by researchers: fraud and thefts (Tiwari et al, 2020;Benedetti and Kostovetsky, 2021), illegal activities and money laundering (Foley et al, 2019;Ivashchenko et al, 2018), cyber risks (An et al, 2021;Hashemi et al, 2020) and data privacy risks (Chen, 2018). Insecurity among investors about their rights and claims in ICO due to ambiguity about the treatment of tokens as securities (Hacker and Thomale, 2018) may cause fiasco in the ICO markets and crypto exchanges.…”

“…Acquiring funds is a major challenge for entrepreneurs globally (Bellavitis et al., 2017; Cochrane, 2005). Though, there are several funding platforms like angel funding, venture capital, private equity and initial public offerings (IPOs); initial coin offerings (ICOs) have emerged as a niche gateway for entrepreneurial financing (Fisch, 2019; Hashemi et al., 2020). ICOs are an innovative platform for start‐ups and tech‐savvy entrepreneurs to raise capital for their projects through the creation and sale of their own tokens in exchange for fiat currencies or cryptos by adopting distributed ledger technologies (DLTs) (Rui Chen and Chen, 2020; Adhami et al., 2018; Bellavitis et al., 2021).…”

“…In short span, ICOs have gained popularity amongst issuers and investors primarily due to technological upgradation (Fisch, 2019), the inexistence of rigid regulatory guidelines (Bellavitis et al, 2020;Huang et al, 2020), raising funds without any territorial restrictions (Varsheny and Shrivastava, 2020) and without any intermediaries, thus eliminating opportunities for manipulation and reducing transaction expenses (Howell et al, 2020). The research outlines various dimensions of ICO like ICO as emerging entrepreneurial funding (Howell et al, 2020;Fisch, 2019); its success factors (Campino et al, 2022;Fisch, 2019;Lee et al, 2021;Huang et al, 2020); inherent risks (Tiwari et al, 2020;Benedetti and Kostovetsky, 2021;An et al, 2021;Hashemi et al, 2020;Ivashchenko et al, 2018;Momtaz, 2019;Ibba et al, 2018;Hacker and Thomale, 2018) and regulatory issues (Barone and Masciandaro, 2019;Barsan, 2017;Rodrigues, 2018;Maume and Fromberger, 2019). However, there are five research gaps that remain.…”

The Monetary Benefit of Tokenizing Renewable Energy

“…Although the blockchain can offer a significant increase in transcperancy, the regulatory framework for issuing tokens is still nascent. Therefore the token issuer has almost no requirements to be fulfilled (Hashemi Joo et al, 2020). Transparency relevant information essential for asset performance monitoring is still centralized managed by the SPV (Walter, 2016).…”

Predicting ICO Prices Using Artificial Neural Network and Ridge Regression Algorithm

“…Once a potential ICO is released, and the token is widely accepted, its price will increase exponentially and generate profits for investors compared to the purchase price at the time of issuance. At this point, investors will sell these tokens to make a profit, which is the gain [5]. Factors affecting the uncertainty of ICO success include the quality of the issuing team, information about the ICO, product ideas, media, social networks, and opinions of experts in the cryptocurrency field.…”