ICOs have been booming across the cryptocurrency world, firstly as a way to utilize the revolutionary Blockchain technology, but also as a way for startups to raise capital.
It is the capital raising aspect of ICOs that has got the founder of Wikipedia, Jimmy Wales’ heckles up, as he has labeled them an ‘absolute scam’.
ICOs have made an incredible impact on the world of raising capital for start ups. Many companies have put their eggs into the Blockchain basket, as it allows for startups to enter the business of Blockchain technology, and comes with its own capital raising mechanism through tokenization.
This year, start-ups have raised $2.4 bln from ICOs, according to data website Coindschedule.com. In a similar manner to crowdfunding, ICOs involve many different investors buying into the tokenized digital currency that comes from different Blockchains created by start ups.
It is these types of investors that the Wikipedia founder is warning to be cautious, however.
Blockchain is interesting, ICOs are scams
Wales was clear on his thoughts about ICOs, as well as the technology that underpins them:
“I think Blockchain is a super interesting technology, but there are a lot of fads going on right now … There are a lot of these initial coin offerings which are in my opinion are absolute scams, and people should be very wary of things that are going on in that area,” Wales said.
ICOs are still mostly unregulated and operate without much rule or law. However, that is slowly, but dramatically, changing; China has put the biggest steps in to controlling ICOs, with Korea and the USA joining in with similar hard-nosed approaches.
Blockchain will hang around
It seems that Wales’ take on the burgeoning cryptocurrency ecosystem that is developing is similar to a lot of other big name investors and thinkers; he is a fan of Blockchain technology.
Wales added that he believes that: “Blockchain technology will be with us for some time to come.”
Indeed, there is a lot of promise away from just digital money when it comes to Blockchain technology, however, it is a double-edged sword.
Ripple CEO Brad Garlinghouse recently took a swipe at companies that were jumping on the Blockchain hype, creating pointless solutions to problems that could be solved with databases. Garlington calls them “Blockchain Tourists”, and has a similar issue with them as Wales has with unnecessary ICOs.