For the last two years bitcoins and their ilk have dominated news, in particular financial news around the world.
So now we have a new concept. Initial coin offerings (ICOs). Are these financial innovations or reckless speculation?
An ICO does not get you equity in the firm concerned.
An ICO is essentially a ledger entry. You can buy an entry (not in all countries); in a computer ledger issued by a start up company on the basis of an unregulated prospectus.
An ICO is a way of raising capital without all the hassles of meeting regulatory requirements or the burden of paying interest to a banker.
Businesses are able to raise this way because investors hope that the coins will rise in value just like bitcoins.
But the latter are different.
Bitcoins are a form of digital currency that can be used in a variety of transactions.
The technology that underpins digital currencies is the blockchain technology.
The blockchain is a secure decentralised ledger that everyone can inspect but no single user can control it.
Financial innovation or reckless speculation? Time will tell!
