An initial coin offering (ICO) is a form of crowdfunding used by new cryptocurrency companies to raise funds. In an initial coin offering (ICO), a part of the newly produced cryptocurrency is sold to people who want to fund the project. They can be purchased with fiat currency or exchanged in exchange for other well-known cryptocurrencies such as Bitcoin.
ICOs are described as a token sale or crowd sale in which investors are asked to invest a certain amount of money in exchange for access to certain features relevant to the project that will be published.
ICOs are useful because they serve as a litmus test for crypto enthusiasts when deciding the tokens to endorse. However, before investing in an ICO, you should conduct some research, especially into the new business and its plans, to ensure that the company and the ICO are legitimate.
A short history of Initial Coin Offerings (ICOs)
Companies like Mastercoin, Ethereum, and Karmacoin were among the first to introduce ICOs. Mastercoin held the first ever token sale in July of 2013. Ethereum held one of the most notable initial coin offerings (ICOs) in 2014, raising $18 million. They set a new record for the fastest-selling ICO at the time, collecting 3,700 Bitcoins (roughly $2.3 million) in the first 12 hours of the project.
There were approximately 20 ICO offerings in May 2017. For example, Brave, a new internet browser, held an initial coin offering (ICO) that raised $35 million in 30 seconds. Since the beginning of the year, 89 ICO coin sales worth $1.1 billion had been completed by the end of August 2017.
In September 2017, Kik released the first mainstream ICO. The project, however, was halted due to suspicious behaviour involving the spread of a false URL on social media. Ripple then demonstrated the value of ICOs by offering $1 billion in XRP tokens to investors in exchange for Bitcoin and fiat currency.
ICO sales have become increasingly common in recent months, with about 50 token sales taking place each month. Since the beginning of 2017, the number of ICOs has increased at an unprecedented pace, with at least $2 billion in token sales completed. This shows that ICOs aren't going to be a one-hit wonder when it comes to raising funds for emerging cryptocurrency businesses. Initial Coin Offerings (ICOs) are here to stay.
ICO token sales are incredibly common these days, with a slew of new ones launching every day. Experts expect that this year's token sales would reach more than $4 billion, according to cryptocurrency experts.
Why is there a need of ICOs?
An Initial Public Offering (IPO), similar to an ICO, is a process in which investors are given shares in a company's ownership. This differs from an initial coin offering (ICO), in which investors buy the company's coins, which will rise in value if the company succeeds.
Backers of initial coin offerings (ICOs) purchase a new cryptocurrency in the hopes of profiting as its value grows. This is analogous to individuals profiting from the increase in the value of a stock they bought on the stock exchange. However, ICOs vary from stock market transactions in that you do not earn a share of the company's ownership when you invest in new tokens.
How Initial Coin Offerings (ICOs) are Executed
A cryptocurrency business that wants to raise money through an ICO must include certain specifics, such as a project overview, the project's intent, investment criteria, the percentage of tokens that will be held by the company, the ICO campaign's timeline, and the types of virtual currencies that the project accepts. Promoters who are interested should send an email to the seller seeking more information about the project before continuing with the transaction. They will carry out the plan to complete the project if they collect the requisite funds. If not, the money will be returned to the promoters.
The bulk of ICO funds have so far been collected in Bitcoin (BTC) or Ether (ETH) (ETH). During an ICO, the organisation offers an Ethereum or Bitcoin address to which the funds will be sent, which is then displayed on the ICO's website. The process is similar to opening a checking account and then promoting it on a specific website so that people can submit money.
