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What Does Crypto Equity Mean?

Crypto equity

January 2, 2021 | 

JOHN K MWANIKI |  0 Comments| 



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Cryptocurrencies have revolutionized several aspects of the world. One of such is how companies raise funds. This article looks at the various aspects of crypto equity and its advantages it offers. 

Before, companies relied on Initial Public Offering (IPO) for fundraising. The process involves providing shares of the company at a given price. 

The owners of the shares would gain control stake and part of the company. They would also be able to sell the shares or transfer at any time. The process, though, is a little cumbersome. It involves several processes with documentation. The company must provide records of financial performance. This sets it up for infiltration by competition. 

Like several other sectors, blockchain technology has revolutionized the fundraising process. It provides for Initial Coin Offering (ICO). This is where companies provide a stake in their project that is yet to start. The investors will then gain from the success of the company.

Most fintech companies are currently using ICOs as the fundraising method. 

While IPOs offer shares for investors, ICOs offer crypto equity. They both represent the value of the company you own through the offerings. While companies deposit shares on a Demat account, ICO puts equity on your wallet. 

It is safe to say equity is the digital version of shares. As the world is becoming digital, they are embracing the equities. 

One of the grand rules in investment is to never invest in something you don't understand. That is why you should learn more about equities. In the end, one can make informed decisions as they invest in it. Follow through for the advantages, concerns, and the future of investments through equity. 

Advantages of Crypto Equity

Cryptocurrency equities have become popular due to the several advantages it offers. It comes with ease of access. One doesn't need to meet any legal requirements to buy crypto equity

Here are the other advantages in details;

  • Decentralization

Cryptocurrencies are decentralized such that they don't have any single control authority. The same applies to crypto equities. 

The fundraising company doesn't need authorization from the regulators. They also don't have to undergo any scrutiny before offering digital assets. One only needs the concept to bring it to reality. 

It is different from the IPOs with documentation and regulatory threshold to meet. 

  • Transparency 

One of the reasons for the less popularity of the IPO is the lack of transparency. It is a reserve for the smaller audience targeted by the banks. In most cases, the projects already have investors in mind. In as much as the project is public, they don't have access. 

The only time the general public gets the shares is when it fails in its targets and needs more buyers. It also comes with limitations on how much one can purchase. For that, traders feel discriminated against. That is different from the open ICOs. 

Shareholders also depend on company financial results to determine performance. They never know if the results are the true ones. There have been cases of companies cooking books. The token holders, though, have access to all transactions on the network. They get to monitor how their equity operates. 

Most of the traditional shares are country-specific. The companies offer the shares in specific fiat currency values. These would be hard to convert to other currencies. The shares also roll, depending on the country's regulations. 

Accessing shares from a foreign country needs a broker. This is costly and reduces the amount one can invest. 

ICO equities yet are not country-specific. They are available for anyone as long as they can access the internet. The only concern is on cases where the country bans crypto activities. Still, investors can use a VPN to navigate the system. 

Crypto Equity Concerns

While crypto equity is gaining popularity, it also comes with several concerns. Top of these issues include;

  • Security issues 

Crypto equity involves online-based assets that are susceptible to hacking. There have been cases of digital asset theft that makes them hard to manage. 

The users might have to incur additional costs for cold storage or insurance. This reduces the profit margins from the investments. 

The other security concerns are from the founders. There have been cases of projects that never took offer after investments. In such cases, the founders run Ponzi schemes and other swindling operations. 

The only way to keep safe is by scrutinizing a project. Look into the problem it tackles and how it offers to do it. Traders must also avoid projects that offer too good returns to be true. Crypto equity is not a get rich quick scheme. 

  • Volatility 

The volatile nature of virtual assets has been an issue for some time. It's one of the reasons why professional and institutional investors have avoided digital currencies. The same applies to crypto equity

The only time one is sure of the value of an investment is at the purchase time. Otherwise, the value could change at any minute. It all depends on the market trends to determine to price. 

Is Crypto Equity the Future of tokens?

IPOs have been running for so long that it seems it cannot be under threat. The reality, though, is that it is starting the declining trend.

Most companies are looking to the ICO way. They prefer the ease of creating the whole project. It does not involve any authorities and control mechanism. The global market also means the possibility of more income.

The only hindrance to the success is on the few concerns. Still, there are ways to manage them. The government must come in to ensure security. It will have to put in place regulations to ensure the legitimacy of the crypto projects. While it makes the crypto equity centralized, it is great for investor security.

The crypto wallets are also becoming more sophisticated to offer additional security. They offer high-end encryptions without the possibility of access by unauthorized parties.

Bottom Line

The success of cryptos like Bitcoin and Ethereum has opened up the digital world. Virtual currencies are opening up the world to more opportunities.

The latest in the crypto trends is the ICO. The ICOs have introduced the age of crypto equity, away from the shares. Crypto equity comes with ease of access and globalization. It currently is the future of fundraising. 

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