Despite bitcoin crash, initial coin offerings attract Aussies to make money online
Warren Stokes knew nothing about bitcoin until his son began receiving yellow postal bags filled with $50 notes in the mail.
The cash was from cryptocurrency trading when his son was still in high school — about seven years ago.
“He explained to me he was on a group on reddit — 1,000 people were joining their computers together to mine, and again, honestly, I had no idea what he was talking about.”
Mr Stokes, 58, is now a casual “crypto” investor himself. At a recent cryptocurrency meet-up in Sydney, he was there to learn about the latest craze: initial coin offerings (ICOs).
An ICO uses blockchain technology to issue digital “tokens”. Investors buy them using established cryptocurrencies like bitcoin or ethereum to fund companies or to access specific services, such as data storage.
Most investors buy into an ICO on the promise of its whitepaper (a document that describes the project) alone, meaning tokens are sometimes sold without revenue, customers or a functional product.
Importantly, the value of these tokens is rarely pegged to anything in the real world, so prices can fluctuate dramatically.
What is an Initial Coin Offering?
- An ICO use blockchain technology to issue “coins” or “tokens” for a set time period.
- Investors buy them using established cryptocurrency to fund new projects.
- An ICO may also issue “utility tokens”, which are used to access specific online services.
- The “tokens” can then be traded peer-to-peer.
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