As more and more business start-ups launch with an ICO, venture capitalists are wondering whether or how it will impact their activities. Are Initial Coin Offerings an economic bubble like the dot-coms, or they something with inherent value that are worth considering for serious investors?

An ICO, aka a token sale/launch, takes place when a company is developing a new product, usually an app of some sort which will perform some designated activity. The new start-up needs to build a solid base of stakeholders up front (often called an ecosystem) who will gain an advantage by purchasing the product before it goes on general release. This sale of tokens allows the company to use some of the funds raised in the ICOfor further development of their product, for which they now already have an established core of users.

Many people are confused about the interchangeability of coins and tokens, but they aren\'t actually the same. A coin issued by a firm is a unit of value which is native to a particular blockchain, such as Ether, Bitcoin, Litecoin, etc. It is a cryptocurrency whose only function is as a means of exchange between blockchain users, acting as an incentive for them to use (and add to) the blockchain.

Tokens can have an additional functionality to value exchange, as they can also represent any other functionality or asset the developer desires. Tokens can be created on top of a blockchain, using smart contract protocols such as those developed by Ethereum. In addition to having its own coin, tokens can be created to govern code for unique contractual activities.