I’ve had my tiny little world blown apart twice in as many weeks now. Last week’s revelation was that bees, not modern medicine, are being used to fight the MRSA superbug, this week it’s that crowdfunding is going to be used to finance space exploration.
I’m not talking a Kickstarter campaign either, whereby you get a sticker in exchange for a £5 investment, although plenty do exist. No, I’m referring to an ICO, an Initial Coin Offering. So far, in 2017 alone, ICOs have raised over $1bn from investors. Investors who get little more than a coin, a symbol of ownership interest in the enterprise (a digital stock certificate) and the whiff of a promise of involvement in a potentially lucrative new business. Essentially equity crowdfunding, version #2 – but a decentralised crowdfunding.
Let me back it up a little. So the first notable instance of a crowd-funded large project was in 1997, when fans of a British rock band essentially clubbed together to raise US$60k to underwrite a US tour. Fast forward a few years and we see the emergence of reward-based crowdfunding sites like Indiegogo and Kickstarter in 2008 and 2009 respectively. These platforms being designed to help projects and businesses raise funds through charitable donations, in exchange for small rewards.
But there was a limit on the size of the project, because unless you were a complete philanthropist, why would you invest heavily in something where all you get back is kudos and a maybe a t shirt? Then came equity crowdfunding and with it the potential for investors to get an actual return on their investment, not just a month’s worth of chocolate.
And now we have entered the age of ICOs, an unregulated means of crowdfunding via cryptocurrency and blockchain technology. The need for a moderator, a third party to handle escrow, has been made redundant, hence decentralised crowdfunding. A public ledger, the blockchain, records all bitcoin transactions and like Google docs, all parties have access to it. The latest version is always ‘the’ version as it is continuously updated whilst simultaneously being shared. Genius.
The evolution of ICOs
Initially ICOs were focussed primarily on raising money for blockchain tech startups, but not any more. Now you, me and anyone who has access to a computer and cryptocurrency can invest in enormous ventures that were once a preserve of the rich: projects such as TrueFlip (who are looking to start the world’s most lucrative lottery), Paquarium (wanting to create the world’s largest aquarium), or SpaceBit, (the foundation who are quite literally reaching for the stars with the dream of space exploration).
I may as well count myself out of this round, I’ve spent all my savings on a shoebox of a flat in Kilburn, an underused LK Bennett shoe collection and a cantankerous long-haired dachshund called Bertie. Regardless, this is the future of investing and money. No longer will we be mystified by headlines about the Winklevoss twins using their bitcoins to pay for a flight in space with Virgin, because now us regular people can just use Barclays, the first high street bank to accept bitcoins.
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