Why do ICO use Ethereum blockchain (or EOS, NEO etc.) on Bitcoin?



By now you've probably heard of ICO and what they are. For those not started, an ICO is an initial offer of coins, or a process in which developers sell their project money to investors. Usually an ICO has a set of hard caps or a maximum amount of currency that the project wants to collect. Tokens purchased during an ICO will be distributed with the help of technology and coding of smart contracts.

Ico or the first offers of tokens were the speeches of the city encrypted in 2017. We had new projects with new ideas on how to "change the world" almost every day, and people who want to get rich with the encryption of throwing money into those projects like confetti. The vast majority of these projects used Ethereum as their preferred currency to collect that money.

What many do not know is that before the existence of Ethereum, Bitcoin was used primarily to finance ICO. The first token sale was held by Mastercoin in July 2013 during which the project raised 5000 BTC (thus $ 500 thousand). The Ethereum itself was made possible thanks to an ICO that collected 3700 BTC, or $ 2.3 million at that time.

But at the moment it's a struggle to remember when the last time we saw a Bitcoin ICO was. Ethereum has almost completely taken control of the ICO landscape, as anyone who wants to take part in one must have ETH to participate. So, why did Ethereum exactly conquer the ICO landscape and why are there so many projects that decide to use it on Bitcoin?

Well, to explain it, we must first examine the characteristics of both cryptocurrencies. Bitcoin is seen as a generation cryptocurrency of generation whose main application was to serve as money . As such, it was a decentralized value transfer solution based on blockchain, peer-to-peer. It had always been thought to serve as a means of transaction and it does so admirably.


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What is missing is the ability to execute smart contracts that distribute ICOs. This feature has never been provided or implemented by Satoshi. To deploy an ICO Bitcoin, developers are forced to use third-party solutions and offchain contracts. Even though projects like Rootstock want to bring smart contracting capabilities to Bitcoin, for now it does not have a standardized solution for this problem.

Ethereum does not have this problem because you can send tokens automatically to whoever sends ETH to an easily created smart sales contract. It is a member of the gen 2 of cryptocurrency which allows to use a programming language to create smart contracts and decentralized applications on them. After self-calculated the amount of funds it has to send, the smart contract is self-executed and sends tokens to investors.

Another problem is the completeness of Turing of both cryptocurrencies. Bitcoin is not complete with Turing, which means it can not calculate the answer to any computable problem, with sufficient time and resources. Bitcoin does not have two key features of a complete Turing system: ability to repeat / skip instructions when certain conditions are met and the ability to store information as variables.

Ethereum has this completeness. It also has gas payments, a protocol that encourages people to provide the resources needed to process the code on the network. Programs that have run out of gas simply stop working, and this security check is an important part of protecting Ethereum's blockchain from DDoS attacks.

Finally, Bitcoin is not a good candidate for an ICO because of its blocking time. It takes 10 minutes for Bitcoin job tests to produce a single block. This is rather slow and in conditions of ICO can cause delays and congestion on the network. Ethereum has a "Greedy Heaviest Observed Subtree" protocol (called GHOST) that allows rapid block creation times with intact blockchain security. In this environment, ICOs can be processed quickly and securely.

CapitanAltcoin writers and authors may or may not have acquired an interest in any of the projects and activities mentioned. None of CaptainAltcoin's content is an investment advice nor a replacement for the recommendations of a certified financial planner.


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