The ICO (initial coin offering) is a completely new method of collecting funds. It's unlike anything we've ever seen, and the groundbreaking blockchain technology that's powering this new way of communicating with investors is only going to get bigger. Blockchain is becoming more widely accepted.
The rise of initial coin offerings (ICOs)
In 2017, new blockchain ventures raised nearly $6 billion through an estimated total of 871 initial coin offerings (ICOs). This was an improvement from a total of $295 million between 2014 and 2016. In other words, ICOs earned about 20 times as much money in 2017 as they did in 2014, 2015, and 2016.
When you consider that there were over 13 times as many ICOs held in 2017 as there were in 2016 (64 ICOs in 2016), you can see why this room has such a large growth potential and devoted following.
ICOs have already raised more money in the first three months of 2018 than they did in the whole year of 2017. New investors and entrepreneurs are clearly searching for ways to profit from the growth potential of blockchain technology. Despite the fact that cryptocurrency prices have remained stable in the first half of 2018, the ICO momentum does not appear to be slowing down anytime soon. All in the technical world seems to be rushing in to get a piece of the action.
However, it is important to have a better understanding of what an ICO is on both sides of the fence (producer and investor). It is important to understand how an ICO works and operates in order to fully benefit from this innovative technology and the resulting transition. Here is some basic information on how an ICO works to help you improve your knowledge and plan for what lies ahead.
The Initial Coin Offering.
An initial coin offering's basic operating procedures can be deduced from a simple dissection of the ICO acronym. We'll start with the most important word of the three, "coin," since it makes the most sense.
To begin, what exactly is a coin? A coin, in crypto-speak, is likely to be unlike any other ‘coin' we've ever played with. The digital essence of cryptocurrency is at the core of this distinction.
As a result, our familiarity with physical, fiat coins would undoubtedly do us more harm than good when it comes to understanding cryptocurrencies and the coins sold by blockchain ventures. Cryptocoins are digital assets programmed into the blockchain, rather than physical coins that can be held as a store of value and a means of exchange.
These coins are possibly best thought of as a volatile store of value. You may be able to trade them for goods or services in the future, depending on the project. In an ICO, however, the day may not come for a long time. This is attributable to the other two words in the acronym: original and bid.
As previously mentioned, digitalised coins are provided to investors for purchase in an ICO. Although aggressive marketing pitches could make it seem otherwise, investors are given the opportunity to invest in a new blockchain project through the purchase of coins, rather than being pressured to do so.
However, investors can buy and sell cryptocurrencies on a regular basis through online marketplaces and exchanges, so what makes an ICO stand out? The response can be found in the last word: original. ICOs are the very first opportunities for investors to buy a particular coin.
As part of the introductory level promotion, major discounts are often offered. The aim of an ICO is to get coins into the hands of investors while also raising funds. And, indeed, an ICO is that easy at its root.
Following the deal,
Okay, so what happens once the coins are out in the wild (and in the hands of investors)? After coins have been purchased and launched, there is typically a lock-up period that prohibits early investors from selling their coins until the project has gained traction.
Coin holders, on the other hand, are free to do whatever they want with their tokens after the deadline has passed. As a result, ventures that were formerly classified as initial coin offerings (ICOs) become commonplace cryptocurrencies.
