The idea of virtual money is no new thing. In the early days of barter, two parties would exchange mutually agreed-upon items or possessions to formalize a transaction. There was no thought of a token that could be traded in exchange for goods or services. The virtual transaction tool being used was trust.
If you were trading a dairy cow for a horse, you had to trust that your partner in the transaction was honest about the health and well-being of the horse in question.
The same is true for the horse owner having to trust you. Currency was developed almost 3,000 years ago to stabilize supply and demand, and as a way for governments to create a revenue stream by acting as a currency regulator. Fast-forward to the 21st century, and virtual money is alive and well around the world.
Most governments do not ensure the validity of their currency by anchoring it to some precious metal or other valuable product. They simply tell you that a dollar, yen or pound note is worth a certain value. A governing banking system or regulatory body is at the basis of the system. Since no physical form of wealth backs up the currency, failure of an entire system is a common occurrence.
Why ICOs Are Preferred Over Venture Capital (VC) Angels to Fund a Product Launch
In the past, the traditional method of raising capital to finance the release of a new product usually took one of two forms:
• Venture Capital Funding
• Stock Release
In the first method, VC "angels" give a business owner the required capital to successfully launch and market a new product or service. In many cases, this is just one or a small number of investors. This can be scary to a business owner, as a limited number of people can have a large amount of influence and control over the product launch.
In a stock release, often through an initial public offering (IPO), a company offers shares in their business. With this method, hundreds, thousands or even millions of people each contribute a small amount of money, and the business owner retains most of the control over the product or service being developed and marketed.
In the 21st century, there is a third way to raise capital which is extremely attractive to business owners both small and large.
This is the creation of a virtual cryptocurrency which is sold to a marketplace to get the capital needed for a product launch. These virtual currencies can be created literally in just a few minutes, more and more individuals in our computer age are beginning to view cryptocurrencies as valid money, and in some cases, a great deal of money can be raised in an extremely short period.
As opposed to a venture-capital scenario, this is preferred for a few reasons.
When money is raised through one or more VC angels, that money is regulated by some central authority. This means that all the money in the world could be worthless to a business owner if that currency is destabilized. The issuance of stock shares through an IPO or penny stock exchange can be expensive. Not only that, but the business owner attempting to raise capital in this way is competing with literally thousands of other offerings.
In the case of cryptocurrency capital procurement, the cost is extremely low. If a business owner is a talented computer code writer, he can handle the creation and release of an entirely brand-new cryptocurrency in less than an hour, with little to no funding.
However, VCs will often spend substantial money marketing the product launch. In the case of a virtual cryptocurrency used to fund a product launch, all the marketing and development of trust and belief in the marketplace falls on the shoulders of the product launcher.