What is an Initial Coin Offering – ICO :
This process of capital raising, which lies somewhere between a traditional initial public stock offering and a crowd funding, has exploded this year. It is a process where tech startups, mainly from inside the digital-currency sector, create a new virtual coin or token and offer it for public sale. It lies somewhere between a traditional initial public stock offering and a crowdfunding.
ICO involves selling a new, future cryptocurrency to investors, in exchange for a current, already established cryptocurrency, such as Bitcoins or Ethers. In general, Initial Coin Offering is a straightforward, and rather effective way, for individuals and new companies to raise money for their projects, and for investors to invest in projects they consider promising.
How does it work initial coin offering?
The developers of the crypto coin/equity create an Ethereum smart contract. People register on the platform and get special Ethereum wallet addresses. Upon sending ETH to this address, registered users who have subscribed to an ICO will get crypto tokens, the equivalent of crypto equity.
How successful can Initial Coin Offering be ?
Despite some claiming ICO may be just a passing fad, various success stories show its power and potential in the world of finance; the past year alone has seen $2 billion garnered in cryptocurrency sales in about 140 ICO campaigns.
All in all, Initial Coin Offering can prove to be quite beneficial; as initiators sell a future cryptocurrency for a current cryptocurrency to raise funds for a project, investors can gain a sizable profit if the future cryptocurrency starts rising in value. In conclusion, ICO can be quite a valuable tool, if the necessary precautions are made by the investors, as well as the initiators.