An ICO is a crowdfunding technique employed by new cryptocurrency businesses to raise capital. Understanding an ICO takes a bit of research. In an ICO, some portions of the newly released cryptocurrencies are sold to people who are interested in supporting the project. They are sold to exchange for other established cryptocurrencies such as Bitcoin, Fiat and Ether.
In other words, ICO is essentially a way to gather crowdfunding via various cryptocurrencies (fiat currencies in a few cases) and is operated by cryptocurrency organisations to obtain the capital funds required to carry out the project. In an ICO, a specific part of the recently issued cryptocurrency is being sold to financiers in exchange for any legalised tender or any other cryptocurrency. It can be defined as token sale or crowd sale that involves taking investment amount from investors and providing them with some features related to the project to be released. This is the key to understanding an ICO.
Understanding an ICO – a brief history
In the starting phase, ICO was performed by companies such as Mastercoin, Ethereum and Karmacoin. The first token sale was conducted by Mastercoin in July 2013. Ethereum gathered money through an ICO in 2014. Ethereum conducted one of the most significant ICOs in 2014 by raising a sum total of $18 million in the early phase of 2014. They broke the record by raising 3,700 Bitcoins which is comparable to $2.3 million dollars within the first 12 hours of the project. ICO has actually taken on a completely new meaning in the past few years.
In May 2017, there were approximately 20 offerings. For instance, Brave, a recent internet browser, had its ICO which generated about $35 million in 30 seconds. By the end of August 2017, a total of 89 ICO coin sales worth $1.1 billion had been carried out, starting in January 2017.
Kik carried out the first mainstream ICO in September 2017, however, the project was interrupted due to a suspicious activity passed across via the circulation of a false URL on social media. Ripple also sold $1 billion worth of XRP tokens to investors in exchange for Bitcoins and fiats in 2013.
Today, ICO sales have become progressively popular with around 50 token sales carried out each month. From the beginning of 2017, ICO has been growing at a quick speed with at least $2 billion worth of token sales effectively carried out. This proves that it is not going to be a momentary technique utilised by new cryptocurrency businesses to raise funds. It is here to stay. If you want to take one thing away from our understanding an ICO article its this.
Nowadays, ICO token sales are so popular, you can find a number starting every single day. Projections have been made by cryptocurrency experts that the token sales which will be carried out this year will be over $4 billion. A company based in Russia, going by the name of Genesis Vision, conducted their ICO project which ran from 15th October 2017 to 15th November 2017. They managed to raise a total of $2.3 million in the token presale.
There’s already IPO. So why introducing ICO?
IPO, i.e. Initial Public Offering, is a procedure in some way relatable to ICO in which investors get shares in the ownership of a company. While in ICO, the financiers purchase coins of the business that can increase in value if the business gets enhanced.
Backers buy the new cryptocurrency with an intent to make a profit when it increases in worth. It is comparable to the principle of individuals earning a profit when the share they purchased on the stock exchange goes up. ICO is different than buying shares at a stock market because you do not get a share of the ownership when you invest in the new tokens.
A summary of the working principle behind ICOs
A cryptocurrency company that wishes to raise capitals through ICO needs to provide some information, including project description, project purpose, amount requirement to be raised, portion of tokens that will be kept by the company, the timeframe of the ICO campaign as well as the types of virtual currencies accepted within the project. Promoters who are interested can email the seller and request more information on the project before carrying out a deal. If they raise the amount for the project, they will carry out the plan to complete it. If not, they will return the cash to the promoters.
Until now, the majority of ICO funds have been collected via Bitcoins (BTC) or Ether (ETH). During the ICO, the company provides an Ethereum or a Bitcoin address where the funds will be sent and then shows it on the respective web page. The procedure is the same as opening a checking account, then showcasing it on a particular web page to individuals so that they may send cash.
Our guide to understanding an ICO will help you pick the viable projects with long term prospects from money grabbing scams.