For those who don’t know what Bitcoin is, Bitcoin is a cryptocurrency, or a virtual currency not managed by a central bank or central authority. It was established by a mysterious guy, if that is even his name, Satoshi Nakamoto. What has garnished the attention of the technological community out there, has been how transparent bitcoin is. This cryptocurrency as many others, operate on a platform called blockchain. All cryptocurrencies transactions, operate on this public ledger. What’s cool about this is that we as individuals can see every single transaction occurring on the market and who is receiving and delivering money. Interestingly, we can’t do this in the typical money system, such as for the US dollar and basically all other stated issued currencies. I guess that’s why Fed Chairman is “strongly opposed to audit the fed.”
I guess what’s more interesting about crypto currencies is that being all transparent for the most part, you know how much currency is currently in the market and how much will be out there in the future. That is such great news for countries like Zimbabwe, Venezuela, Germany (during the Weimar Republic), where people can protect themselves from hyperinflation.
Interestingly, the usage of cryptocurrencies has exploded all around the world, even in Santo Domingo, the capital of my country, Dominican Republic. Last time I checked we had only in the capital city around 7 ATMs where anyone can deposit Dominican Pesos for the equivalent of bitcoin.
With so much money in the business, this has attracted lots of tech entrepreneurs into the market. Perhaps the two most known crypto currencies, Bitcoin and Ethereum (Ether), have been for a long time (at least in cryptocurrency terms). However, with the advent of social media and digital businesses, tech entrepreneurs have found an interesting niche in the cryptocurrency.
This new niche market are the ICOs or Initial Coin Offerings. In the ICOs, when a company wants to raise money, rather than going into the venture capital market or private equity or crowdfunding, ICOs are issued in order to raise money to fund a new cryptocurrency.
This market has grown explosively for people trying to become rich fast. As in most growing markets some ICOs have been successful, other have not, and others are just blatantly scams. In a lot of cases, many of these ICOs have turned out to be no more than pump and dump, where investors create a lot of word about the next crypto currency just to pull investors in and before all of them realize it’s a scam these guys take their money out and make a lot of money
This has raised the attention of a lot of people, especially the Chinese government which recently banned ICOs. In essence, ICOs are interesting for early investors because they can be backers of a new currency. As these currency grows, its going to be interesting which one prevails. Just looking at the picture below, there are multiple “coins” coming out soon to the market.
More interestingly, ICOs proliferation has been fueled by Bitcoin millionaires who don’t want to pay takes. In order to make bitcoin into “fiat” or state issued currency such as the US dollar, technically you have to pay takes for it since technically these are capital gains. But many of these entrepreneurs instead of paying taxes, they are fueling the next coin. One example is Filecoin, which lets users buy computer storing on a decentralized server. This currency can be exchanged for bitcoin or any other currency.
According to Fred Wilson, a partner at Union Square Ventures (he’s an investor). “It’s kind of like anybody in the world being able to get a seed investment in a Google or a Facebook or an Amazon or something like that.”
With so much money in bitcoin and ether, this is, I guess the spillover effect, lots of early investors have made lots of money in early cryptocurrencies and are looking for other ways of making money. What is interesting as a digital business opportunity is that these ICOs have the opportunity to fund ventures that would otherwise would not be funded. With the proliferation of these ICOs and new coin offerings the social media and digital business landscape will change forever.