6 Alternatives to ICO
Last year ICOs were the most popular trend at the financial market. By 2018 however the abbreviation gained poor reputation. A number of creative alternative have come to replace it with each of them aimed at improving the structure of the much mocked-of ICO.
Most of the startups take all effort to shrug off the term of ICO and make up other ones. Some terms are attempts to avoid legal proceedings (“You can’t charge us with running an unregistered ICO if we didn’t call it an ICO!”). More often they are just a way to avoid associations with numerous fraudsters in the industry. There are platforms however with genuine desire to offer alternative way of fund raising. Below there are six alternatives to the incredible, new yet outdated ICO.
Security Token Offering (STO) is completely regulated ICO held with SEC permission. There are various types of it including Reg D (available for institutional investors only) and Reg S held outside the US. The most important one for companies that proceed STO is Reg A+ as it grants the rights for involving retail investors. A number of projects with Gab.ai and Knowbella among them are just waiting for Reg A+ approval.
Interactive Initial Coin Offering (IICO) was first offered in the article y Vitalik Buterin as the fairest ICO model. It is designed to prevent FOMOs and gas wars which may result in situation when whales get all tokens and drive out smaller investors. For example, during the recent Fantom raising an investor spent $24,000 for gas to perform the transaction out of turn.
Decentralized protocol Kleros became the first project to study IICO. Authors may set minimum selling volume, so if total number of gained funds exceeds the figure their Ethereum will be returned. This guarantees each one is given a chance to acquire tokens by the price they believe to be fair enough.
Recent sale of the Metronome project was held under the banner Initial Supply Auction. As the team explains, “the Initial Supply Auction utilizes a descending price auction, where the price starts intentionally high and ticks down incrementally toward its intentionally low price floor as long as the auction is open. The price is not averaged out. Purchasers will receive their Metronome almost immediately after purchase, at the price they purchased. Purchasers should purchase only when they feel the price of MET to be fair.”
Simple Agreement for Future Tokens is the way to handle the risks that sold tokens of a project-in-development can be categorized as securities. To skirt this investors put up funds with clear understanding that they receive their tokens only after the network starts working and tokens be in use. Thus the project wins the capital necessary for development while investors may sell their token in the future when the platform gets useful.
By the way, the buck of the criticism addressed to EOS or TRON is about people investing in projects (up to $4 billion) that have nothing but their idea. If platforms like these opted for SAFT rather than ICO they wouldn’t have that many problems and incredibility in the crypto industry.
Most of ICOs today spend some of its tokens to Airdrop – a giveaway – to the project community hoping for these people become their users. Standard practice is about distributing less than 5% of tokens via Airdrop. But there is a bolder way: giving away the majority of your tokens and keeping some part of them in reserve for the team and hope for the market to price tokens fairly as soon as they come to the market. This is the model tested by Everipedia and the most of other EOS-based projects.
Refuse from ICO
Ultimate alternative to ICO is no ICO at all. This may seem insane in the times of multimillion crypto projects but in fact this by far much better to coordinate all wishes of the participants. Bitcoin, Litecoin and Decred are example for networks that started without fund raising. If your idea is truly revolutionary, you don’t have to resort to ICO: just realize it first and funds will follow.