The rocket has been fueled and it seems like we are already somewhere in the middle of the journey from ICOs (Initial Coin Offerings) to IAOs.
So what is an IAO?
We will come back to it later. But first, let us talk about why Enjin – a blockchain game development platform – thinks a shift from ICOs to this new thing that is being called an IAO, is imminent.
The reason is simple: the failure rates for ICOs have gone too damn high, and it is high time we realized we may need an alternate monetization model (until we improve ICOs) if we want long-term sustenance for blockchain technology.
According to Fortune, in 2017, about 46% blockchain-based projects were unable to reach their pre-determined soft cap limit, and eventually died. And to say the least, the most prominent reason behind such high failure rate is that even if the project is promising enough in what it offers, investors and public cannot really see the need for its cryptocurrency. In other words, the monetization model is not very convincing for the masses.
Another reason for the same is that, nowadays, so many cryptocurrencies have flooded the markets, the competition between decentralized companies is much more than what we had when ICOs were a new thing, and unfortunately, the number of investors is not growing with the same pace, which in turn means a lack of investors, unless the project is magnificently promising.
Now let us understand what IAOs are and why we need them.
IAO stands for Initial Asset Offering. In simpler words, an IAO is similar to an ICO, except that, instead of a cryptocurrency, IAOs list assets for initial offerings. The change may look small, but the impact is quite big. IAOs offer an advantage over ICOs as the purpose of any asset is self-explanatory in its physical as well as digital form, and monetizing the same for initial offering doesn’t really need a lot of promising documentation.
The First IAO
The first-ever IAO was launched by Lucille Games in their first blockchain-based game ‘War of Crypto’ that uses ERC-1155 tokens created by Enjin. Something pretty innovative that Enjin brought to the world of blockchain is the idea of offering in-game assets like weapons, collectibles, characters, in-game currencies etc., as blockchain assets. This way, the value of these blockchain-based assets is directly linked to their demand in the gaming market and not to crypto exchanges; thereby creating a unique, self-sufficient blockchain-based ecosystem.
To convert in-game elements to assets of real value, Enjin has created ERC-1155 tokens that businesses can use to create and readily monetize assets. ERC-1155 in elaborated terms stands for Ethereum Request for Comment, which is a technical standard followed by Ethereum smart contracts for exchanging tokens over Ethereum blockchain. Code 1155 has been assigned for the tokens that will represent assets. Technically, as per Witek Radomski – co-founder and CTO of Enjin Coin – ERC-1155 is a one-up version of ERC-721 tokens with a much wider utility. ERC-721 tokens were launched by Enjin exclusively for monetizing gaming collectibles, but couldn’t put up a show as expected because their utility was confined to gaming market.
But with the advent of ERC-1155, a new class of tokens has been released, which gives blockchain startups and enterprises, a better way to collect funds through IAOs. Enjin Coin has made it clear that ERC-1155 tokens are not limited to just the gaming market, and have been instilled with the power to certify all forms of ownership – physical or digital.