ICO has proven to be a revolutionized way for many companies and projects to raise money. ICO can be said as the blend of conventional methods and advanced techniques. The major thing to consider here is that investors investing in the ICO will be 100% free of risk due to the technology used.
Till now, most of the ICO funds have been collected via Bitcoins (BTC) or Ether (ETH). While performing the ICO, the project produces a Bitcoin or Ethereum address to receive funds and then, shows it on the respective web page. The procedure is same as opening a bank account, and then showcasing it on a particular web page to people so that they may send money.
Did ICO bring in the IPO technique to investments using technology?
The other form of ICO is Initial Coin Offering; i.e., is similar to IPO (Initial Public Offering) if considered through the world of crypto-currency. ICO is a process in which a company proposes its very own digital tokens that are being used at the time of crypt-currency exchange. Blockchain has already introduced with many techniques, that’s why the cost of ICO process has been fallen by a considerable amount than the cost of traditional IPO process. As the shares are issued to investors at the time of an IPO, Launchers invite investors to invest money and issue the digital tokens from them.
What kind of cryptocurrencies are usually traded?
Bitcoin is more general to be used, and steadily, it will become the fundamental currency to buy into the ICO. Mostly, Bitcoin and Ethereum are used during an ICO process. The price range depends on the demand and supply ratio as well as on the number of buyers and sellers who deal in a particular cryptocurrency. The tokens issued in an ICO are being traded in a similar pattern. The value of the token increases with time when the valuation of the company grows.
How do businesses choose ICO token sales to raise capital?
If we see with a perspective of blockchain technique, then a token sale is basically an event in which a company sells its tokens to other businesses or investors and in return, get any fiat or cryptocurrency. This has turned out to be very popular nowadays, and many potential investors are getting attracted towards this concept.
The token sale follows a simple phenomenon. There is defined a set time-period in which the interested investors or traders have to participate. The company decides maximum (cap) and minimum (floor) for the token sale. If the floor is not attained during the sale, then the project gets closed, and all the investors are refunded back their money. In case, the cap is achieved then the project is taken ahead and being launched.
During the ICO, a part of the tokens is kept safe with the project launching company itself. For example, 50% of tokens are sold to investors, and 50% are secured with the project itself. The main reason to do so is to determine the valuation of the token which can be calculated once the ICO gets over. The company can use these secured tokens in many ways.
Would ICOs be accepted as the new platform for start-up fundraising?
There are surely possibilities for the startups and new businesses, which will be facing difficulty in raising funds via conventional methods, to lead an ICO. They may believe in the fact that there may be many interested investors in the world who will believe in their idea and project. As the ICOs happen at the much earlier stage of the project than compared to the IPO, some of the investors may consider it risky, while others may see it as an opportunity. ICO also reduces a lot of paperwork and complications, thus preferred by many investors over any other fundraising methods.