Have you ever wondered why the crypto industry has gained so much popularity, especially regarding things like Initial Coin Offering? Why have individuals been so interested in ICOs lately? And finally, what does it represent?
There are many questions that people are looking for answers to online worldwide. True, Initial Coin Offering is one of the “most mentioned” topics on various relevant crypto forums, which is why we decided to pay more attention to it.
For all those crypto enthusiasts who have a great desire to learn and improve in the field of cryptography, let’s start with the basic definition and explanation of the ICO, shall we?
Definition of the Initial Coin Offering by professionals
Initial Coin Offering, or just “ICO”, an acronym for this, represents the crypto industry’s equivalent of the Initial Public Offering (IPO). It’s like crowdfunding, and there are two types of ICO – private and public. The private ICO doesn’t seek public investments, unlike the public one.
The ICO calendar represents the inevitable and valuable tool for all crypto enthusiasts eager to increase their everyday profits and stay on top of the newest digital currencies out there. So, long story short, Initial Coin Offerings are another form of cryptocurrency that numerous businesses use to raise their capital.
Investors receive authentic cryptocurrency tokens in exchange for their monetary investment through relevant ICO trading platforms. Cryptocurrencies like Ethereum and Bitcoin are becoming widely accepted.
How do Initial Coin Offerings work exactly?
Through the Initial Coin Offering fundraising model, many startups are allowed to raise their capital by issuing tokens on a blockchain platform. Those who still don’t know what it stands for are a list of records secured using cryptography.
After issuing a token, they start distributing them in exchange for a financial contribution. These particular tokens can serve various functions, from granting the holder access to a specific device to entitling them to numerous company dividends.
Depending on their primary function, tokens can be classified as security tokens or utility tokens.
Understanding better the Initial Coin Offering
It is essential to be aware of the fact that ICOs are a mixture of IPOs and some crowdfunding in crypto. One may contribute the “X” amount of an existing token and then return a new token’s “Y” amount. It will be at a set conversion rate and date set by the token’s issuer.
This particular token is able to be used in two different ways:
- Utility function – Startups use it to gain capital to fund their projects in exchange for future access to the service. Utility tokens are generally unregulated.
- Security function – it is generally treated as stock. It’s like a tradable asset with ownership qualities. It’s regulated by the SEC.
In summary, we’d like to point out that ICOs represent a new concept. Some raise concerns with the tokens’ actual value and how easy it is for issuers to become wealthy. Ultimately, only time can tell whether this becomes the everyday reality of funding businesses or just issuers’ “get rich quick” scheme. It’s yet to be discovered!