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Are ICOs the End of the Venture Capital Model?

Venture Capitalists have since the last decade or so been eager to finance all firms and entrepreneurs who have it in them to disrupt their markets. But, it is indeed a pleasant change to see how they react when their own industry is under the threat of being disrupted. ICOs or Initial Coin Offerings have made a bold claim as the perfect replacement for the Venture Capital Model, but what remains to be seen is how successful ICOs are and whether they are able to whither the tide and rise above the challenges to persevered amid the presence of Venture Capitalists.
How Does an ICO Work
To better understand the dynamics behind this comparison and whether ICO does deserve to be the heir to VCs throne; it is best to study how ICOs work. Initial Coin Offerings can be considered as a technique for crowdfunding that emerged and currently operates outside the realms of the traditional financial system. This model has helped numerous firms and organizations for getting the funding they required for their business. ICOs are part of the cryptocurrency world that is here to stay for long.
ICOs have been called as the most easiest and suitable ways for companies to lookout for individual investors that may be interested in investing their sums in their project. Regular users can also think about investing in projects they consider valuable. An ICO is usually applicable for a period comprising of a week or more. In this period, everyone is allowed to look over and purchase tokens that are newly issued, in exchange for established and utility cryptocurrencies like Bitcoins and Ether.
Every token has a pre-designated price that in many cases remains the same throughout the course of the ICO. In short, a new cryptocurrency is created on any protocol and a value is determined through arbitration, by the team behind the ICO. The value is based on what they think the network is based on at its infancy. Once a value is set, the price dynamics of supply and demand come into the perspective. The value for a few ICOs fluctuates based on the network of participants, rather than intervention from the government or any other central authority.
ICOs are referred to as the Wild West of financing. They definitely are in a grey zone, where regulatory authorities from across the globe are contemplating as to how they can impose regulations and manage the flow of finances in this setup. The presence of scams and lack of consumer trust suggest that even though ICOs have created a rave among investors, they have failed to come out as a safe form of investment.
On the contrary, information that a few Venture Capitalists have adapted the ICO mode of investment displays that the future is invariably bright for ICOs. With regulations and fewer scams, maybe we can see a phase where ICOs replace VC model and propose a setup that is increasingly transparent and has lesser costs associated with it. But for now, we have to live with the fact that Virtual Capitalists are a way safer option, within the regulatory realms of the law of the land.

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