Are ILPs going to replace ICOs?

15 Jul, 2018
by Arthur Sillers
News
Are ILPs going to replace ICOs?

A new debt-based alternative to ICOs is showing promise and early adoption. It offers the tradability of ICO tokens and the ability to fund blockchain technology without government regulation but adds additional security features and interest returns which could make it the future of blockchain investment


ICOs have been a stable underpinning the recent boom in the value of cryptocurrencies. According to Crypto New Media, blockchain based companies have mostly switched from traditional venture capital models of fundraising to ICO, which have surpassed VC funding by 350%.


ICOs have been crucial for the development of many cryptocurrencies and blockchain technology, but they are not without their critics and flaws. In many if not most jurisdictions, ICOs have an unclear future, leaving concern that they could be classified as securities and have tax barriers put in place. Furthermore, ICOs leave very little protection for investors, and in fact almost half of all ICOs have failed. The CEO of Ripple has gone as far as to say that much of the ICO market has been fraudulent, according to statements with CNBC.

 A new investment structure called initial loan procurement could alleviate many of these concerns, and is starting to show adoption. Initial loan procurement, or ILPs are digital loan agreements which are tokenized. They utilize know-your-customer (KYC) smart contract technology and are a way to invest in a company rather than in a specific coin. The loan agreement means that investors can collect interest on the performance of the company, and trade the loans in a similar way to cryptocurrencies. Because ILPs have more security in place, and because they can be sold to other investors like stocks, they offer a more secure way to invest in a nascent cryptocurrency or blockchain company.

 The preeminent adopter of the investment strategy is Blockhive, an Estonian blockchain incubator which has issued ILP agreements rather than a new traditional digital coin. Investors in Blockhive get a token which also acts as a creditor agreement, meaning that they can be traded like other digital assets, but also collectively entitle the investors to a 20% ownership of the companies profits.

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