What is an ICO and how does it work?

ICOs have proven to be a revolutionary way for many companies and projects to raise money. ICO can be said to be a mixture of conventional methods and advanced techniques. The primary thing to consider here is that investors investing in ICOs will be 100% risk free due to the technology used.

So far, most of the ICO funds have been raised via Bitcoins (BTC) or Ether (ETH). While performing the ICO, the project generates a Bitcoin or Ethereum address to receive the funds and then, shows it on the corresponding web page. The approach is similar to opening a bank account, and then displaying it on a specific web page for people to send money to.

Initial Coin Offering (ICO) is basically an illegal way of collecting crowdfunding through various cryptocurrencies (in some cases fiat currency) and is employed by cryptocurrency companies to obtain the capital funds needed to execute the project. In an ICO, a certain portion of a recently issued cryptocurrency is being sold to investors in exchange for a legal tender or another cryptocurrency. It can be called token sale or crowd sale which involves taking the investment amount from the investors and giving them some features associated with the launched project.

IPO, i.e. initial public offering, is a process related to ICO where investors get shares in company ownership. During an ICO, investors purchase the company’s coins that can increase in value if the business expands.

The first token sale, i.e. an ICO was conducted in July 2013 by Mastercoin. Ethereum raised money in 2014 through an ICO. ICO has taken on a whole new definition in the past years. In May 2017, there were approx. 20 offerings, and a recent web browser Brave’s ICO generated nearly $35 million in just 30 seconds. As of the end of August 2017, a total of 89 ICO coin sales had been conducted since January 2017, valued at $1.1 billion.

Investors send Bitcoin, Ethereum or any other cryptocurrency to a given address and then, they receive new tokens that can benefit them greatly if the project takes a hit.

  • ICOs are mainly conducted for cryptocurrency based projects that rely on decentralized techniques. So naturally such projects will only attract 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 is actually in the form of a webpage, whitepaper or web post. Some of these documents show accurate details about the project, while others literally fake its features to mislead interested parties. So before relying on any white paper or e-document, do a good quality check.