Initial coin offerings or ICOs are a fast-growing trend. ICOs are similar to an initial public offering (IPO), however there are some key differences.
IPOs have been a way for companies and in particular, startups, to raise capital by selling shares in the company.
With an ICO, cryptocurrency startups ask investors to purchase coins at a discount, which are similar to shares but don’t represent ownership in a company. Instead, the idea is that investors are making a gamble the cryptocurrency they’re buying into will increase in value. That increase will mean a return on their investment.
Essentially anyone can launch an ICO, and they are often used as a way to bypass the regulated capital-raising process. Along with being unregulated, as compared to an IPO, investing in ICOs is decentralized with no governing body providing oversight.
Almost anyone can generate tokens, and the token itself doesn’t have any true value. If the business plan becomes a success, then the tokens gain value.
In 2017, there were 435 successful ICOs, each of which raised an average of $12.7 million according to Investopedia. In 2018, some of the top-performing ICOs based on return on investment included Smartlands with a 600 percent return, Dititex with a 530 percent return, and Zilliqa with a 385 percent return.
Despite the possible downsides and the significant risks, many investors aren’t deterred, but what does the average American think about ICOs?
LendEDU did a survey of 1,000 Americans regarding ICOs, Bitcoin and cryptocurrency. The objective of the survey was to determine the knowledge and sentiment of the average American regarding these topics. The research was conducted online by the OnePoll polling company. It looked at American consumers aged 18 and up. Highlights of the survey are detailed below.
Only a Quarter of Americans Have Heard of ICOs
At the time of the survey, only an estimated ¼ of respondents had heard of initial coin offerings (ICOs). 24.90 percent of respondents answered “yes” to the question of whether or not they had heard of them, while just over 75 percent responded no.
It’s likely that as ICOs continue to grow in popularity and become more mainstream, more Americans will gain an understanding, at least broadly, of what they are.
21 Percent of Consumers Think Investing in an ICO is Illegal in the U.S.
When asked the question of whether or not an ICO is illegal in the U.S. as a true-false question, 21 percent of respondents said it was illegal. Only 17.9 percent said it wasn’t illegal and more than 61 percent of respondents said they were unsure.
One of the biggest hurdles facilitators of ICOs will have to overcome is the perception that it’s shady or part of the dark web. One of the primary ways the founders of ICOs can work on this misconception is through education on a more widespread basis, since there is so much misunderstanding.
Even people who are somewhat knowledgeable about the general concept of an ICO may believe it’s illegal simply because of the lack of centralized regulation surrounding these investments. It is true that there are few if any obstacles currently in place to regulate who creates ICOs. This is something that’s potentially going to start to shift as well, as more attention is placed on the investment concept and it becomes more institutionally driven.
15 Percent of Americans Intend to Invest via ICO in the Future
The LendEDU survey results showed that just over 15 percent of respondents reported plans to invest in a new startup or venture via an ICO. However, 57 percent said no, and almost 28 percent of respondents said they were unsure.
Despite the perceptions of ICOs by the average Americans, businesses are starting to see them differently. There seems to be a decline in resistance from established institutions and corporations and more are starting to join the wave of ICOs as a way to raise money for their blockchain ventures. This institutional shift is likely to lend to more legitimization for ICOs, which could improve perceptions and also increase the number of people planning to invest.