This is an amazing number given the fact that in 2016 almost no one knew the term ‘initial coin offering,’ and before 2010 ICOs didn’t even exist. But the wild fundraising success they have had starting in 2017 and continuing to this year means that there are a lot of individuals out there who are keenly interested investing in these types of cutting-edge opportunities.
Are you interested in investing in an ICO? Are you interested in trading ICO tokens?
Even asking someone these questions assumes that they know quite a lot about digital currency. In this article, I mean to briefly provide what you need to know to answer these questions and present a new decentralized exchange specifically for these tokens.
What is an ICO Token?
The first truly successful decentralized digital token was Bitcoin. What made Bitcoin successful was that it solved the problem of how to send value over a large decentralized network without having to trust anyone in that network. It did this by making all the key players note down all the transactions and then compare their logs. As long as the majority of the network is honest, then all the transactions are valid. In the ten years of its existence, though many exchanges and businesses have been fraudulent or hacked, Bitcoin itself has never been hacked. It is working as designed.
One limitation of Bitcoin though is that although it is all software, it is difficult to program it to do anything other than send, store, and receive value. This struck some, like 19-year-old Vitalik Buterin, as a lost opportunity, so in 2012 he created an alternate coin called Ethereum specifically designed to allow smart contracts.
Smart contracts are ways of programming money itself to do what we are currently relying on accountants and lawyers to do. Using smart contracts, you can have content creators paid automatically and directly any time someone clicks on and reads an article, you can have doors in hotels unlock when guests pay the bill, you can transfer title of a car and have the car start only for the person holding a digital key, and you can track resources remotely as they make their way through a global supply train – paying middlemen all along the way. The possibilities, frankly, are endless.
In a way, Ethereum is like a computer program that allows for all sorts of different programs to be run on it. And the ICO tokens are the programs.
One more thing to know about these tokens is that they are created using the ERC20 (Ethereum Request Comment #20) protocol. The name is not important. What is important is that this is a standardized method of creating tokens so that developers don’t have to create everything from scratch, and that it is easy for wallets and exchanges to recognize and deal with any token created using these rules.
Now I Know What a Token Is; How do I Get Them?
If you have MyEtherWallet, a Trezor, or MetaMask (all Ether compatible wallets), then you are already set up to receive any ERC20 token. You can buy into an ICO or trade for them the same as any other currency.
How Do I Trade Them?
You can trade many of these tokens on the big cryptocurrency exchanges like Bittrex or Poloniex. There is real value to doing to, but also disadvantages:
- These exchanges by design will not be able to offer any but a select number of tokens
- These exchanges are centralized, meaning you have to trust them
- These exchanges are centralized, meaning that they are open to being hacked of their funds, or to having their operations investigated and seized by governments
The promise of digital currencies is that they are decentralized and only regulated by inviolate code.
ERC20.Exchange is a brand new type of exchange that is meant to address exactly these issues. In simplest terms, it is an order book and a trade matching engine. Unlike regular exchanges, though, it doesn’t ever directly hold your funds. Rather, when you want to trade, you sign in using your MetaMask or Trezor wallet. When you want to buy a token with Ether, you set up the order, and when it’s accepted and the funds are transferred from your wallet. The tokens are delivered right back to your MetaMask or Trezor wallet – no fuss, no muss.
If Many Tokens are on Established Exchanges, Why Use ERC20.Exchange?
There are a number of reasons:
- Centralized exchanges are selective about the coins they add – meaning a token has already probably seen a huge increase in utility and value before it ever gets added. By using ERC20.Exchange, you can select high-potential tokens before they get listed on the ‘big boys’ and be positioned for that huge initial blast-off of value if and when they do.
- Registering tokens to trade on ERC20.Exchange is easy. There are no fees or stringent criteria that must be met. This does put all the responsibility on the investor to do their own due diligence on what projects they invest in and to know how that project will give value back. There are a lot of tokens out there that are going nowhere, but there are a few that will provide real value and will see many thousand percent increases.
- Centralized exchanges collect your data and often share that data with governments. With ERC20.Exchange, since trades are conducted from wallets, they have no record of who the individuals behind those addresses are. That doesn’t mean you could never be tracked, but it does mean that it would take more than, say, an IRS order to an exchange to provide all trade data.
- Central exchanges are regulated and subject to national laws. And if you’re dealing with a centralized exchange, you really want it to be regulated and reputable because your money depends on them being honest and competent. ERC20.Exchange works on the same principle as Bitcoin and Ethereum: governments and agencies aren’t law, code is. All trading happens via auditable code – it can be trusted because there is no need for trust.
ERC20.Exchange is brand new and still building up the number of tokens they have on offer. Their aim is to create a flexible, easy to use, attractive interface that will allow their users to find and profit from the best of the ERC20 tokens being created.
Take a look.