Initial Coin Offering (ICO)

What Is An ICO?

A cryptocurrency project's initial funding can be raised through an Initial Coin Offering (ICO). Blockchain-based tokens are created in an ICO to be sold to early backers. As a means of raising money for the development of the project, users are given tokens that they can use (either immediately or in the future).

In 2014, when it was used to support the development of Ethereum, the practice became well known. There are now hundreds of businesses using it (especially in 2017), with varied degrees of success. Although the name sounds similar to an IPO, the two are fundamentally completely distinct ways of raising money.

If you want to raise money, you can do an initial public offering (IPO) of your company's stock. ICOs, on the other hand, are utilized as a way to raise money for a company's initiative at an early stage. Tokens purchased by investors in an ICO are not a form of equity in the company.

If you are a tech startup, you should consider an ICO as an alternative to traditional finance. New entrants frequently find it difficult to acquire funding because they lack a working product. White papers are rarely enough to persuade established companies to invest in blockchain ventures. As a result, many people are put off by the lack of cryptocurrency regulation.

However, it isn't just new businesses that employ this strategy. An established company may choose to launch a reverse ICO, which is comparable to a standard ICO in terms of its structure and purpose. Decentralization of an ecosystem is accomplished through the issuance of a token by an existing firm. Instead, they may do an ICO in order to attract a wider audience and generate funds for a new blockchain-based product.