There have been several changes taking place in FinTech, making investors excited and equally wary. Several new words coming up almost every day and investors have to stay alert to keep up with the new developments as best as they can.
Bitcoin and blockchain have caused a revolution in financial technology and have a lot of potential for developing a completely decentralized financial system. With a lot of challenges emanating ranging from investor worries about the current state of the ICO model to a regulatory crackdown, several blockchain startups are looking for new ways to raise capital.
Ethereum was the very first smart contracts computing platform and facilitated blockchain based crowdfunding. It has since grown over the past few years culminating into what is currently called an initial coin offering (ICO).
In the initial coin offering (ICO), investors not only buy digital assets, but also the shares represent legal rights and ownership to get dividends from the issuing company.
ICOs have become very popular and have enabled startups to raise millions of dollars in capital. They help get rid of intermediaries and the capital that is raised is only used by the company.
ICOs make it more easily to get the required regulatory approvals and they comply with the law. Additionally, they are preferred by investors because they give them a lot of say and influence in the company they choose to invest in. Because ICOs have regulatory backing, investors are assured that their money will not be misused.
Stocks and bonds are very liquid and can be sold within a very short period of time. This is opposed to other assets like real estate or cars which require a lot of time. One of the main reasons that could motivate real world assets to use blockchain is the need for liquidity.
Liquidity helps to boost the value of assets because it helps mitigates some of the risks that come with the inability to quickly sell an asset. Liquidity allows investors to enter and leave the market easily and efficiently.