as long as people understand what they are buying.
Raising money using cryptocurrency issuance has become the new gold rush. Tezos has raised $200M+ and Bancor $100M+. There are hundreds of other completed raises and even more on the horizon.
The most important thing to realize is that these are startups. And most startups fail. ICOs may be even riskier than your typical startup because they often can’t clear the conventional financing bar with angels and VCs.
But even if I give ICOs the benefit of the doubt and call them conventional startup investments, most conventional startups fail. Angels and VCs know that most (say 90%) of early stage startups return nothing at all or nothing meaningful. And that’s not a problem as long as 10% of their investments are high flyers (the Amazons, Facebooks, and Googles of the world).
The conventional startup market operates efficiently because investors understand the risk profile of their investments. Bad companies fail without affecting the rest so the winners can shine.
The danger with ICOs is that most buyers don’t realize what they are buying and as soon as 90% of investments fail, they will panic which may wipe out the 10% of potential successes as lawsuits and regulators join the party.
Companies raising money using ICOs should go above and beyond explaining to buyers the expected risk / reward profile of these investments.