Ico and Its Importance Of Ico

What is ICO? A Detailed Introduction to Initial Coin Offerings

 If you’re reading this article, then chances are that you’ve probably heard of ICOs and know a little bit about Blockchain technology. Blockchain is a revolutionary technology with huge potential in almost every sector.

And ICOs are a great way for startups to take a step into the future and develop new innovative projects.

So, what is ICO? And Why should it be important to you?

Well, let’s find out. Here is everything you need to know about Initial Coin Offerings.

 

What is an ICO and What Do You Do With It?

 

IPO vs ICO

Let’s say that your company is starting a new project. You’ll need to do fundraising for it right?

Usually, companies will sell their shares in the stock market through something called an Initial Public Offering (IPO) or Stock Market Launch. Investors can buy these shares, and they get a portion of the ownership of the company.

Here, the company keeps the majority of the ownership, while giving a portion of it to other investors.

Initial Coin Offering (ICO), on the other hand, is the crypto version of crowdfunding where startups offer ICO tokens in a crowd sale. When a company wants to start a new project such as a decentralized application or cryptocurrency, they can conduct an ICO and offer their coins to the public.

Unlike an Initial Public Offering, buying an ICO token doesn’t give you any ownership of the company. The investors don’t actually invest in the company but rather in a project idea of the company.

So, how do investors make money off of an ICO? We’ll get to that in just a little bit.

 

Is ICO a cryptocurrency?

So, what is ICO? With all these fancy words being thrown around, it can get confusing.

Remember when we said that an Initial Coin Offering is like an Initial Public Offering? Just like an IPO is a process of offering shares to investors, an ICO is a process of offering ICO tokens to possible investors.

Here, you give the tokens to the investors as a digital asset in exchange for Fiat currency (such as the US dollar or the UK pound) or popular cryptocurrency (such as Bitcoin or Ether (ETH)).

The major difference between an ICO token and cryptocurrency is that a cryptocurrency token such as Ether (ETH), of the Ethereum blockchain has value outside if the token’s ecosystem. While ICO tokens only have value inside their native ecosystem.

For example, you can use Ether (ETH) to buy products or services, if the company selling them accepts Ether (ETH) as a payment method. Additionally, you can trade (sell) the cryptocurrency you have in crypto exchange platforms, and get other crypto or fiat currencies in return.

An ICO token, on the other hand, can only be used to make transactions within its native platform. For instance, let’s that say you have a certain number of tokens inside an app that sells a service. You can use these tokens to get the service within the app, but outside of the service, these tokens are useless.

 

Who can take part in an ICO?

The greatest thing about ICO is that anyone can take part in it and buy tokens. Moreover, since the platform is open to a global audience, companies get the opportunity to raise millions of dollars, easily and quickly.

ICOs gained popularity with the public back in July 2014 when Ethereum successfully raised $18.4 million and started a new age for ICOs. After this huge success, ICOs have become the go-to method for funding the development of crypto projects, by releasing a token that is integrated into the project somehow.

So, how do investors make money with the ICO token? Well, here the concept is pretty simple. There has to be a demand for it.

Once the company has raised enough funds to reach the fundraising milestone and the token becomes popular, they can list it on cryptocurrency exchanges. You can then sell and trade these tokens, just like any other cryptocurrency.

What this does is that it increases the liquidity of the tokens. And as liquidity increases, so does the value. However, some ICOs don’t do well. They are called unsuccessful ICOs.

But what happens to the investor’s money when an ICO fails? Don’t worry, your money is not down the drain. If an ICO does fail, your money will reach back to you safely. This is because ICOs function on the decentralized blockchain technology and have smart contracts on them. These self-executing contracts make sure that everyone gets what they are owed. 

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