What is an ICO and how does it work?

ICO has turned out to be a revolutionized way for many companies and projects to raise money. ICO can be said as a mixture of conventional methods and advanced techniques. The main thing to keep in mind here is that investors investing in an ICO will be 100% risk-free due to the technology used.

So far, the majority of ICO funds have been raised via Bitcoin (BTC) or Ether (ETH). While conducting an ICO, the project creates a Bitcoin or Ethereum address to receive funds and then displays it on the relevant web page. The procedure is the same as opening a bank account and then showing it on a certain web page to people so they can send money.

An initial coin offering (ICO) is basically an illegal way to raise crowdfunding through various cryptocurrencies (fiat currencies in a few cases) and is managed by cryptocurrency organizations to obtain the capital funds needed to run the project. In an ICO, a portion of the newly issued cryptocurrency is sold to investors in exchange for any legalized auction or other cryptocurrency. It can be said as token sale or crowd sale which involves taking investment amount from the investors and providing some features related to the project to be launched.

IPO, that is initial public offering, is a process somehow related to ICO, where investors receive shares of ownership of the company. While in an ICO, investors buy the company’s coins, which can increase in value if the business expands.

The first token sale, ie. ICO, was done by Mastercoin in July 2013. Ethereum raised money through ICO in 2014. ICO has taken on a whole new definition in recent years. In May 2017, there were approx. 20 offerings as well as a recent Brave web browser ICO generated around $35 million in just 30 seconds. By the end of August 2017, there had been a total of 89 ICO coin sales worth $1.1 billion starting in January 2017.

Investors send Bitcoin, Ethereum or any other cryptocurrency to the given address and then in return receive new tokens that can be of great use to them if the project is hit.

  • ICO is mainly conducted for cryptocurrency based projects that rely on decentralized technique. So naturally, such projects would compel only those investors who have a keen interest in the concept of cryptocurrency and are friendly to the technology used.
  • The document that belongs to an investor really remains in the form of a web page, white paper or web publication. Some of these documents show accurate details about the project, while others literally falsify its features to mislead stakeholders. So before you rely on a white paper or electronic document, you better go through a quality check.