The tokenization are the new form of investment based on Blockchain technology.
The world of crypto coins is more alive than ever and investing in tokenization is a good example of this. While there is a turbulent period after which Ethereum could surpass Bitcoin to become the virtual currency of choice for users and investors, the tools based on blockchain technology are constantly increasing with a future full of novelties. And if the profitability of crypto currencies can grow while its pioneers rub their hands, it is thanks to one of these novel uses: tokenization.
An Initial Currency Offer (ICO) is a way to finance projects even before they see the light based on blockchain technology. Investors can then invest in tokens, allowing their money to get the product or service up and running.
In exchange, they do not receive equity from the startup that is still developing their product, but, effectively, they are made with the well-known tokens: a kind of virtual actions of the chain of blocks that will allow them to make use of the service once it becomes a reality and is active. Thus, the financing of ICOs could resemble that offered by crowdfunding: an amount of money is invested for a future project, thus offering the possibility of accessing it as soon as possible.
The tokenization: crypto coins a growing sector
However, when it comes to investing in tokens there is an essential difference with any collective financing campaign through a crowdfunding platform. Those tokens that are acquired after participating in an ICO are interchangeable. Thus, it is possible that the project is revalued before launching its product or service and investors can sell their tokens (or part of them) once they have increased their value, providing liquidity to investors who bet on this type of projects. All this without the need for the object of the financing to become a reality.
Investing in tokenization in Spain
Some Spanish companies have also ventured to launch an ICO. The tokenization allows to finance a platform in which they exchange contents directly with their creators, in a decentralized way, and without the need of intermediaries who make the cultural content in question more expensive or limit in excess the benefits achieved by its author.
Those responsible for some of these projects launched an ICO that ended a few months ago and with which they managed to collect more than 200 bitcoins from more than 300 investors. At the time of writing, this investment in tokens is exchanged for almost two million euros (although, given the volatility of Bitcoin and the rest of virtual currencies, this figure may vary in a matter of seconds).
There is a large community of people who support the project and contribute knowledge and developments to improve the product collectively.
In exchange for their investment in tokens, users received the virtual currency with which the platform will work to buy content. These are the tokens that investors use to ensure that they can access the service when it becomes a reality.
Tokens and ICOs
However, if they manage to generate sufficient expectations, the value of the tokens could fluctuate and grow. In this way, they become by themselves an interesting good that can be sold to other investors who are also interested in the project.
It is not the only project related to the brand-new ICO born in Spain. In fact, Aragon broke all records just a few months ago. The company, born to facilitate the creation of decentralized organizations thanks to blockchain technology, launched an ICO in May to finance itself. Those who decided to invest in tokens to support the Aragon project contributed the equivalent of 25 million dollars in just 15 minutes.
However, Aragon’s record investment in tokens was only the tip of the iceberg: the Bancor and Tezos foundations raised more than $150 million and $230 million, respectively, through ICO.
In addition, to make things even easier, the custom smart contracts associated with these projects represent another of those block chain functionalities that make investing in tokens even more attractive. Smart contracts are agreements translated into binary code that, in this case, govern the terms of an ICO. When the corresponding virtual currency is paid in, the smart contract itself sends the tokens to the investor. All through blockchain technology.
Will it succeed?
ICOs have already become one of the main trends (or at least one of the most striking novelties) in the world of investment in 2017. However, not all that glitters is gold and, like any Bitcoin-related investment, it is not without controversy.
Regardless of the legal status that this type of investment has in each country (something that will depend on how each Administration recognizes the investment in tokens, whether as the purchase of a cryptodivisa or an asset), the truth is that some regular users of virtual currencies are suspicious of this type of investment.
The reason is none other than the success that some ICOs have generated (and the consequences thereof). In addition to the most popular cases recently cited, there are many more: the mobile messaging platform Status, for example, managed to raise in just a few hours more than 250 million euros in ether. All this with a product that was not even in its beta version. A round of financing unthinkable in that phase, in short. The aim of this platform is not to be just another chat, but it aspires to be a sort of WeChat based on Ethereum, with e-commerce integrated into the service itself.
However, some voices close to the cryptocurrency that aspires to snatch the throne from Bitcoin wonder why an idea like Status needs so much investment. In fact, the answer to this question is one of the drawbacks of investing in tokens and ICOs: there are already those who resort to tokenization to speculate and simply make quick money based on the expectations generated by a project.
Is it safe?
In principle, investment through an ICO offers all kinds of securities. It is simply as secure as the chain of blocks, a public technology in which it is not exactly easy to access other users’ money. However, an ICO can also go wrong.
One of the most well-known cases (although not the most recent) is that of the ICO launched by TheDAO, a venture capital fund that was looking for money to finance projects based on Ethereum technology. Its tokens were sold by a number of ethers which, at the exchange rate, were equivalent to about 150 million euros.
However, a flaw in the system code created by TheDAO allowed a cybercriminal to block a millionaire number of ethers, ruining the campaign to finance this unique investment fund. Thus, the security problem was not in the ICO nor the tokenization itself, but in the platform used.
Hence the importance of the fact that the platforms through which entrepreneurs can create their own ICO, are secure: a failure in the system could cost millions of euros in virtual currencies invested in a project that, although not yet born, is so promising that their tokens become a good for speculation.
Traditional investment vs. ICO, what advantages does the latter offer?
However, traditional investment continues and ICOs are just a new alternative that opens up a new and interesting panorama in the world of investment in relation to virtual currencies. In fact, one of the advantages of ICOs is that they democratize investment and allow anyone to invest in tokens.