How Cryptocurrency is Changing the Start-up World

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Bitcoin and other cryptocurrencies have gone mainstream over the course of the past year or so, and only now are startups being able to utilize the new technology. The newest piece of funding tech is known as an initial coin offering. An initial coin offering or ICO is where startups use the sale of their own tokens instead of the traditional method of using equity to raise money.

ICOs began as a child of the new technology known as blockchain. The phenomenon with ICOs began to reach the mainstream world by June of this year, where early adopters took advantage of being the first in the industry. 93% of the projects that were created during this time were funded, raising tens of millions based only on a basic business plan.

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The past few months have seen the number of successfully funded ICOs drop by a substantial amount. Many investors have stayed away at this time from ICOs and have begun to invest only in the main cryptocurrencies like Bitcoin and Ethereum.

Companies that use ICOs such as ZenCash, which is based on a private and distributed blockchain platform, have been able to utilize the new form of fundraising. Jane Lippencott, the cofounder of ZenCash, recently stated that using ICOs in an early stage of business funding should not occur because “doing so exposes careless or uneducated investors to high risk, and burdens teams with unnecessary pressure to demonstrate price returns on an abbreviated and unrealistic timeline.”

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Using this form of fundraising, companies have found money that they never would have been able to attain without the help of ICOs. With many companies now using this form of fundraising to fraudulently obtain money from investors, it has become a sort of wild west in the current state of cryptocurrency. Hopefully this can slow down, and the market can stabilize.


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