What Are ICOs and How Do They Work?
Have you heard of the Initial Public Offerings in the world of cryptocurrencies? The ICO is reminiscent of that.
ICO stands for Initial Coin Offering, and it typically involves the selling of the digital currencies, but at a discount in the form of the token, or even as a part of the company to raise money. Often based on speculation, this cryptocurrency appreciates and profits the investor in the public market. Unlike the stock market, this does not infer any ownership to the users, not entitle them to cashflow like the dividends.
For instance, if a company or businesses is looking forwards to raise money to create a new coin, app, product or service, then it launches the ICOs mainly to raise funds. The interested candidates or the investors, buy this offering to receive a crypto token in return. This crypto token generally comprises of the utilities that the products of the company are offering.
Working of ICOs
Like noted earlier, this is mainly based on the realm and the sector of cryptocurrencies. When a company that works on crypto or a crypto startup wants to raise funds through the ICO, they usually whitepaper and jot down all the outlines and the deliverables of the project, which includes:
- Everything about the project
- The funds required
- Virtual tokens that are dedicated to the founders and investors
- The type of money that will be accepted
- The duration for running the ICO campaign
Once the white paper guidelines are set, and they’ve put out in the market, the interested candidates or investors buy some of the project tokens with a digital currency or fiat. They’re reminiscent to the shares of a company. However, in most cases, the fund raised will not be sufficient for the minimum investment in the project. In such cases, the money can be returned to the investors, and the ICO will be deemed unsuccessful. If the money raised reaches the minimum requirements of the project, then the company or the startup will move ahead to complete and fulfil the goals of the business.
Considerations
Not everyone in the field of investment is allowed to utilize the ICOs. The candidates ought to have minimum knowledge in the crypto world also must have experience in the field. This means that these ICO investors ought to possess crypto wallets in prior, for currencies like Ethereum and Bitcoin.
One of the best ways the investors can land on the ICO projects is by updating themselves about the projects available online. Since they generate a substantial amount of hype in the field, they are prone to catch the eyes of the investors and also provide opportunities for discussion in the business fields. In addition to this, there also exists a dedicated site that discovers new ICOS and provides different offerings against one or the other projects.