I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
Since the inception of Bitcoin in 2008, Blockchain platforms have been evolving in sophistication and brought to daylight the edges and problems one is faced with when trying to design a fair and efficient financial system that would function on a planetary scale. And despite Bitcoin's aversive reactionism to 'regime change' which has hindered it from delivering on its promises, Ethereum has not been afraid of innovation and has, in fact, seen enormous progress regardless of the hiccups along the way.
Blockchain technology, and the Ethereum ecosystem in particular, has become an important engine of innovation in today's industry as seen with the Ethereum Enterprise Alliance and the various networks of cooperativity that form along the way. Ethereum has also managed to cultivate a vibrant community around it and is presently the de facto leader of smart contract platforms and DApps development.
Ethereum, by coupling the basic public ledger with a simple code executing machine and constraining operations in terms of gas expenditure (corresponding to computational cycles), has created the means of not only enabling people across borders to transact in various ways without relying on trust assumptions but also setting the groundwork for developing the Web 3.
What Is an Initial Coin Offering (ICO) and How It’s Different from an Initial Public Offering (IPO)?
One of the main use cases of Ethereum to date is the Initial Coin Offering (ICO) mechanism, which makes it possible to quickly bootstrap a project via a token sale. It does this as a way to directly interact with the intended user base and community, cutting out the cumbersome institutional processes and accredited investor parties. Many previously successful businesses have in the past year taken up on the opportunity to upgrade their operations and leverage their business to the decentralized Web 3.
Unlike IPOs, which must undergo rigorous months-long audits from regulators behind closed doors, ICOs afford the opportunity for the user base to directly participate in the shaping of the product they are both stakeholders in and clients of. Successful ICOs are usually well-planned events and the product of thoughtful and diligent consideration of the economic and game theoretical aspects of how to properly carry them out and are a two-way process between developers and companies, on one hand, and investors and clients, on the other. That way, the relationship between capital and its allocation-to-use value is directly coupled between all those directly involved in the process.
The Current Bearish Crypto Market
Due to the entangled problems Bitcoin has recently been faced with (ongoing audits, the Mt. Gox legacy forcing sale offs, and the mass Tether deposits to Bitfinex), we've seen a massive plunge which, due to the currently tight correlation of all other crypto assets has brought the whole market down. However, as we have seen in the past, a plunge such as this in the crypto economic realm of robust decentralization usually leads to restructuring and quick rebound after the dust begins to settle. In the context of this plunge, Ethereum is currently undergoing a critical migration from miner-based Proof-of-Work system to the first step towards PoS, the FFG (Friendly Finality Gadget) hybrid Proof-of-Stake and the next level of even faster, lighter, and more secure ecosystem. Noteworthy, concurrently with the Bitcoin issues, is EOS – a supposed competitor to Ethereum, which paradoxically launched its ICO as an Ethereum ERC-20 token and accumulated a staggering market capitalization of $4.8 billion (and no hard cap on the ongoing 12-month crowdfunding). It has recently been also selling off copious amounts of Ether, depositing some to Bitfinex, and suspected in manipulating the price of their own token by buying it back. This should raise questions about the ethics and standards in an unregulated environment as this is where community building and community-driven economy are the goal.
Why to Invest When the Crypto Market Is Down?
It is advisable when investing in ICOs to pick ones which are integrating an already successful business to the Blockchain layer (and avoiding those with too much surrounding hype, as the initial, speculatory bubble tends to get calmed afterwards by market forces). ICOs accounted for a combined capital of $6+ billion in 2017, and are expected to become a multi-billion dollar industry in the future.
Usually, the initial price of an ICO token is set by the owners in advance, and most of them tie the price to the dollar – like $0.1 per token, for instance. However, what you really want to look for are ICOs that tie their token price to ETH – like 0.0001 ETH per token, meaning for 1 ETH, you’ll get 10,000 tokens.
In the current bearish market, where ETH now trades around $500, it has never been a better time to change your fiat money into ETH and invest those Ethers in ICOs that are built on the Ethereum ERC-20 Blockchain.
A great example to do that is Dragon, as it combines all the previous mentioned matters. Dragon is a new digital currency, based upon the Ethereum Blockchain system and buttressed by a substantial gaming business in Macau.
Another noteworthy ICO example is GIFcoin. It is integrating an already money-generating business (a betting website), has an ERC-20 token, and its price is tied to Ethereum. In return, investors receive a huge chunk of the betting website’s net profits. Since the ICO shares profits with investors, this means that its token is defined as a security token.
If a token derives its value from an external, tradable asset it is usually classified as a security. Security tokens entitle holders to dividends via an algorithmically Blockchained mechanism, enabling crypto-economic monetization via automatically triggered payments conditioned by the occurrence of particular events.
Whether security, utility, or governance token, the basic notion of tokens within an ecosystem is that as a particular token is increasingly transmitted and passed through the network, it becomes more and more punctualized and reified, strengthening the infrastructure and pulling more attention towards it as emergent properties begin to form in the process.
It's a good time for one to carefully evaluate the landscape and be smart in positioning his investments for the upcoming wave, which will propel forward the projects backed by solid fundamentals.