What is an ICO (Initial Coin Offerings) and how does it works ?

What is an ICO (Initial Coin Offerings) and how does it works ? | Coindelite Learn Bitcoin

Basic introduction to Initial Coin Offerings (ICOs)

 

ICO has proven to be a revolutionised way for many companies and projects to raise money. ICO can be said as the blend of conventional methods and advanced techniques. The primary 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.

Initial coin offering (ICO) is basically an illegal way to collect crowdfunding via various cryptocurrencies (fiat currencies in a few cases) and is functioned by cryptocurrency organisations to obtain the capital funds required to execute the project. In an ICO, a particular part of the recently issued cryptocurrency is being sold to investors in exchange for any legalised tender or any other cryptocurrency. It can be said as token sale or crowd sale that involves taking investment amount from investors and providing them with some features associated with the project to be launched.

IPO, i.e. Initial Public offering is a process somehow relatable to ICO in which investors receive shares in the ownership of the company. While in ICO, the investors purchase coins of the company that can increase in value if the business gets amplified.

The first token sale, i.e. an ICO was conducted by Mastercoin in July 2013. Ethereum collected money through an ICO in 2014. ICO has taken an entirely new definition in past years. In May 2017, there were approx. 20 offerings, and also a recent web browser Brave’s ICO generated about $35 million in just 30 seconds. Till the end of August 2017, a total of 89 ICO coin sales worth $1.1 billion had been conducted starting from January 2017.

Investors send Bitcoin, Ethereum or any other cryptocurrency to the given address and then in exchange, they get new tokens that can benefit them greatly if the project gets hit.

 

How does ICO function

 

  • ICO is basically conducted for cryptocurrency based projects which rely on decentralised technique. So naturally such projects would compel only those investors who have a keen interest in the concept of cryptocurrency and are friendly with the technology used.
  • ICO is basically conducted for cryptocurrency based projects which rely on decentralised technique. So naturally such projects would compel only those investors who have a keen interest in the concept of cryptocurrency and are friendly with the technology used.
  • The document that belongs to an investor indeed remains in the form of a webpage, whitepaper or web post. Some of these documents show exact details about the project, whether some other literally fake its features to mislead the interested ones. So before relying on any white paper or e-document, better go through a quality check.

 

  • Though the process involved in ICO is entirely decentralised and it is approx. 100% safe. But there is still need to authenticate the investor as well as his/her address if he/she is getting involved with the project by any means. But these projects don’t prefer identity checks which may promote crime or corruptibility somehow.
  • Though the process involved in ICO is entirely decentralised and it is approx. 100% safe. But there is still need to authenticate the investor as well as his/her address if he/she is getting involved with the project by any means. But these projects don’t prefer identity checks which may promote crime or corruptibility somehow.
  • Most of the time, the ICO provides extra benefits to those investors who participate in crowdfunding on prior basis. It can be termed as Early Investor Advantage. The early offers may be restricted to the certain time limit, i.e. early investor advantage for one month or the first week of the sale.

 

  • 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.

 

  • Some ICOs define minimum as well as the maximum amount to be reached. In case, the minimum specified amount is not collected then the investors are given back the money they have invested, and the project is being stopped. If the maximum amount is attained then the investors who invest after getting the maximum amount, are given back their money and project is being run as planned.
  • Some ICOs define minimum as well as the maximum amount to be reached. In case, the minimum specified amount is not collected then the investors are given back the money they have invested, and the project is being stopped. If the maximum amount is attained then the investors who invest after getting the maximum amount, are given back their money and project is being run as planned.

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 investors or businesses 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.

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 have refunded back their money. In case, the cap is achieved when the project is taken ahead and being launched.

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 have refunded back their money. In case, the cap is achieved when the project is taken ahead and being launched.

The other side of the coin | Coindelite Learn Bitcoin
Bitcoin (BTC)
The other side of the coin

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 …

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