Even as Initial Coin Offerings (ICOs) — an unregulated means of crowdfunding new cryptocurrency ventures — fight a battle of legitimacy, with a report claiming 80% of them are fraud, here is a solution that could redeem the risky fundraising mechanism.
Accubits, a Washington DC-based blockchain and AI solutions provider, has come up with Coin Factory, a unique concept based on a smart contract, which defines milestones for crypto startups looking to raise funds, and allows investors to control the release of funds as each milestone (target) is completed. The entire process is moderated by a champion from the investor community.
“The idea of our solution Coin Factory arose from the need to address the increasing cases of fraud in this area. Fraudsters host an ICO, raise funds from a lot of cryptocurrency investors, and then they disappear,” said Aharsh MS, CMO and co-founder of Accubits.
ICOs have seen a surge in popularity as they can be initiated by anyone and require significantly low marketing and transactional costs compared to other fundraising methods. When a cryptocurrency startup wants to raise money through an ICO, it usually creates a plan on a white paper stating what the project is about and what it needs to complete the project in terms of funds or how many tokens the founders will take and how many tokens the startup will give out. It is a bit like a kickstarter or crowdfunding.
According to CoinSchedule, 539 ICOs have raised $11.93 Bn so far in 2018 as compared to $3.9 Bn in the previous year. The market is growing at a rapid pace as a result of the boom in blockchain and cryptocurrency startups, a trend that is expected to continue.
But amid this optimism, ICOs have also come under scrutiny from regulators since they are are unregulated in India and in many countries around the world. Countries like China have banned ICOs while the US, the UK, Russia, and Switzerland are some of the top countries for ICOs.
The lure of making big money via ICOs and the fact that they’re still unregulated in India has also attracted a large number of fraudsters. Even as regulators consider the if and buts of ICO regulation, it has become imperative for the industry to come up with ways to make sure legitimate ICOs can easily be identified from fake ones.