Are you searching for the biggest tech trend or cryptocurrency trend currently? Or maybe you want to expand your knowledge of modern technology?
If yes, then good for you! Because Initial Coin Offering (ICO) is something really worth knowing.
Initial Coin Offering (ICO) is relatively new, but its idea of pre-selling crypto coins/tokens has already shown success in fundraising for new application development.
The success we’re talking about is measured in billions of dollars – In 2017, ICOs raised $5.6 billion and in the first 5 months of 2018, ICOs managed to raise $6.3 billion. Not 6 million but billions.
And all that happened only in the last few years!
Okay, the numbers speak for themselves. But how does it work, and what even is ICO?
If you keep reading this blog post, You’ll find answers to the questions you have about Initial Coin Offering.
What ‘ICO’ Really Is?
Simply put, an initial coin offering (ICO) is a crowdfunding/crowd investing tool that runs on powerful blockchain technology.
In other words, ICO is the cryptocurrency version of crowdfunding.
Like everything, also ICO had an idea for its existence, and it was to fund new blockchain projects by pre-selling tokens to investors who were interested in a certain project.
That wasn’t a bad idea but it didn’t sound too exciting.
Until, 2013, the ICOs became life-givers for the development of new crypto coins.
Now, ICO is used to fund new cryptocurrencies by selling pre-created tokens, that can be sold further or traded on all cryptocurrency exchanges.
The properties of those tokens are dependent on the white paper.
But what does the process of ICO look like?
This Is How It Works
Before the ICO takes action, entrepreneurs have to create a whitepaper that describes everything, starting from the business model and ending with the technical specifications of their project.
Then, the entrepreneurs arrange a timeline for their project and most importantly – set a target budget (the funds they need to raise), they explain how the budget will be spent, for example, marketing.
Also, the entrepreneurs have to describe how many coins they are keeping for themselves and stuff like that, which is called coin distribution.
When the entrepreneurs decide to launch a crowdfunding campaign – investors join the scene.
If the project is interesting, investors will start funding the idea and they will receive coins/tokens for doing that.
People who invest in these startups have a hope the startup will be successful and the value of the token they had purchased will increase.
They purchase tokens, using already popular cryptocurrencies, such as Bitcoin and Ethereum.
As you can see, the process isn’t very complicated and it is easy to start investing in crypto.
Why You Should Choose ICOs Instead Of Traditional Crowdfunding?
There are certain positives that ICO has, but traditional crowdfunding doesn’t have.
With those benefits, the ICOs, have completed a lot of great tasks:
- ICOs created a simple path for funding the projects of DAPP developers.
- They have brought more freedom to invest.
- Now, thanks to ICO, anyone can invest in a blockchain project, by buying tokens of the project they’re interested in, and want to be a part of.
ICOs are definitely something new to us because they aren’t just a donation, investments,s or risk capital. ICOs are a mix of them all – a hybrid.
They aren’t just a donation because ICOs give you, the investor, a possibility of ROI (return of investment) by selling the token you purchased for a higher price when the value of the cryptocurrency has increased.
However, There Is A Downside To It
Well… At least for now!
Throughout the years of its existence, ICO was completely set up by the developers behind the blockchain project.
Since ICOs still don’t have any government regulation or rules, it’s considered to be very risky for investors who don’t research enough.
It also creates risks for the entrepreneurs as well, since almost all countries have no regulations for ICO.
But it’s only a question of time because the situation is already changing, with many governments and countries regulating or making plans to regulate ICOs, so there is hope for ICO to become less hazardous.
Many skeptics say that most ICOs nowadays aren’t based on the decision of investors to support those who understand the system better than they do.
They believe ICOs are laid on the fear of missing out.
ICO Has Already Proven Its Greatness
After noting the negatives, let’s look at some of the current successes ICOs have managed to accomplish.
The first cryptocurrency development funding campaign was the Mastercoin campaign, and investors or people who wanted to support Mastercoin were able to burn Bitcoin to get Mastercoin tokens in exchange.
Mastercoin’s campaign was great in a way, that it inspired other truly successful projects.
I’m talking about cryptocurrency projects like Lisk, which with the help of ICO – sold approximately $5 Million in coins, during the year 2016.
One really successful project is Ethereum.
The Ethereum Foundation raised almost $20 Million, which helped to develop Ethereum and become one of the strongest cryptocurrencies.
From there, ICO became really powerful, and the numbers just kept growing mindlessly.
Three years ago, even crazier numbers were seen as the project named “DAO” raised $150 Million in one year!
Let’s Hope For An Even Brighter Future!
We have to be honest with ourselves and admit that ICOs are still very new, compared to other tools and technologies.
However, we cannot ignore that ICOs during the past few years have been a flaming hot topic and YOU, know something about it as well.
Who knows, maybe that thing will make you rich one day?
Anyways, let’s hope for the best to happen with ICO, so it becomes safer and the risks – disappear, because it truly has a bright future ahead of it.
