The market for Initial Coin Offerings (ICOs) is raging. This year more than USD $13 billion has been raised via ICOs. This is more money than was raised in all of 2017. But the market for ICOs isn’t well organized. This has been troublesome at times. Cobinhood hopes to be a solution for companies that want to raise money with an ICO.
An ICO is roughly analogous to an Initial Public Offering (IPO) in the world of stocks. Unlike an IPO, an ICO doesn’t transfer any ownership in the company to investors. Instead, investors in an ICO gain access to a blockchain-based platform that performs a function. This marks a shift in how companies can raise funding and the kind of control they have to give away to grow.
Cobinhood Acts As Underwriter
In the traditional financial system, an investment bank or broker helps a company to go public with an IPO. The underwriter will help the company with legal and marketing issues, and also help them place their shares on a major exchange. This kind of service is new to the world of cryptos.
So far Cobinhood has helped companies raise nearly ETH 130,000 with their services. They also help the company they are underwriting to access their crypto exchange. In addition to instant access to investors, their marketing services can help develop an interest in worthwhile ICOs beyond their exchange.
Some companies like EOS (Block.one) and Telegram have no trouble connecting with investors. Many smaller projects can use the help of an underwriting service. Having a review process for a new project also helps to protect ICO investors against outright scams, which do happen in the world of ICOs.
ICOs offer a new class of investment that has become popular virtually overnight. Instead of paying for debt from a company, or ownership in it, today investors are willing to pay large amounts of money for access to new platforms.
Paying for access on a tokenized basis is a radically new way to approach monetizing online services. Instead of being able to access a website like Google or Yahoo, and use their services, now a person would need to obtain a token to use a platform. This model doesn’t offer as much profit to investment banks, but it does allow companies to remain in control of how their platform develops.
For now, the market for ICOs is still small when compared to Venture Capital (VC). As more companies realize they can attract investment by selling access, instead of equity, services like Cobinhood are likely to grow in popularity.
Nicholas Say was born in Ann Arbor, Michigan. He has traveled extensively, lived in Uruguay for many years, and currently resides in the Far East. His writing can be found all over the web, with special emphasis placed on realistic development, and the next generation of human technology.