Initial Coin Offerings: Economic Reality or Virtual Economics?

Abstract

Since the birth of Bitcoin in 2009, digital currencies have grown exponentially, spurring debate over their legitimacy. Despite their controversy, they are now impacting the way start-up companies raise capital to finance their initial operations. Called Initial Coin Offerings (ICOs), these funding vehicles raised over $4 billion in 2017. In this article, the author explores the economics of ICOs, and consider their risks and regulatory implications, and their placement within the capital structure of start-up companies.