Initial Coin offerings, or ICO’s for short, are a controversial new mechanism for raising capital, using smart contracts and cryptocurrencies, the potential is for mass access to secure means of (A) securing cash for a business venture and (B) ensuring ownership rights of investors in said business venture. Unfortunately, the crypto-space is filled with crypto-crime, and it has a definite “Wild West” feel about it, mostly people robbing crypto exchanges and bad people lying about what they’ll do with ICO money. Though we get the modern day comforts of the now, the opportunities of the Wild West of old are still available to us by seizing the day, taking risks and responsibly investing in ICO’s.

IPO, or Initial Public Offering, is the “traditional” and LEGAL route companies use to raise capital by selling shares, and generally you know what you are buying when you buy a share, you got dividend rights etc. With cryptocurrencies and ICO’s, this is not so much the case. Each ICO basically makes up the rules about what their coin or token represents or how it is used. Investing in an IPO (if you’re in a privileged enough position to be able to do so) usually means investing in an established company, a company that needs to be evaluated and audited before the IPO etc etc. ICO’s often are based on nothing more than a whitepaper, a pdf describing their intentions, but on the plus side, generally the mechanism of investing is secure, and low fees can sometimes mean you can invest with as little as $1, so no excuse for not diversifying 10% of your savings into something risky for the potential for awesome returns.

Coins promising to issue something similar to dividends have most recently come under fire from the SEC (USA gov financial thing) for being an unregulated Security (share), so they are becoming increasingly rare among new ICO’s, but there is movement to start legally vetting ICO offerings, or specific security token frameworks, like the type that Polymath is trying to introduce are also trying to tackle the issues regarding regulation.

Other tokens describe themselves as a utility token, a coin that can only be spent “in system”, the “system” here being what they are creating, a real world equivalent may be a supermarket that issues it’s own currency and only accepts that as payment. Utility tokens are becoming more popular because they don’t need to be regulated, as they are a novel investment vehicle that doesn’t fall under the duresdiction of any financial regulators at present.

“Buy back and burn” is described as buying back their own token and then sending those tokens to a “NULL” address, effectively removing the coins from the total supply and thus it’s described as “mathematically” equivalent to issuing a dividend. But if we use RKC as an example, no prizes for guessing when the company announced it would be changing from a dividen model to “buy back and burn” model, which they changed in preparation of impending oversight by the SEC.