In the last 18 months, software companies in the form of cryptocurrency startups have raked in billions of dollars. These startups all have one thing in common—their use of cryptocurrency as a money exchange. What these startups do varies—there are companies for stock trading, lotteries, voting, and everything in between.
Cryptocurrency Startup Trends
Unfortuantely, even advocates for the new interest in cryptocurrency do not necessarily believe in the startups they build. The CEO of the social trading platform eToro, Yoni Assia, said that 95% of these projects are going to end in failure—the industry standard when it comes to startup funding.
The Dotcom Bust and How it Relates to Cryptocurrency
Assia is not the only one in the industry saying this either. Cofounder of the Ethereum cryptocurrency, Joseph Lubin, compared the big boom in the industry to the dotcom bubble that flourished late in the 90s, only to bust a few years later.
He credits evidence of the bust to similar trends experienced when Internet startups were popular investments. Some of the ideas were worth billions of dollars—but the majority collected money for their revolutionary ideas and eventually went bankrupt.
Investing in ICO
The genius behind cryptocurrency is ICOs, or initial coin offerings. Companies convince people to ‘buy-in’, usually giving them dividends or stakes like you would earn when buying stock. These have an advantage over the dotcom bubble, since the Internet is a much more popular place now. People with genius ideas can share them across the Internet.
Even if only 1,000 people put in $10,000 for the company—this amounts to a whopping $10 million.
The kind of people who invest in ICOs, however, are not those that typically worry about risk. There is a possibility of a large return on the investment, but ICOs are high risk. It is common for them to fail over time and fraudulent activities have to be monitored.
The Untapped Potential of Blockchain: What is to Come in the Future?
Beneath ICO is blockchain technologies, which is a public ledger that can be edited by parties that have permission. These technologies underlie ICO startups—but the have potential to be so much more than that. In the years to come, blockchain may let you transfer your doctor’s records as easily as you can leave the country with a passport or help eradicate voter fraud by syncing these technologies with your ID. Even skeptic Lubin says that blockchain technology has the potential to make drastic changes in political, social, and economic systems around the world.
For people looking to get a piece of the cryptocurrency action, it seems that the question is not if they should invest—but what to invest in. Yes, many startups have the potential of bursting as quickly as the dotcom bubble. However, as it is reported that blockchain technology is constantly and rapidly expanding, investing money in the right ICOs can give you the opportunity to invest in the technology of the future.