What an ICO (Initial Coin Offering) is
ICO stands for an Initial Coin Offering. It is also regarded as an alternative form of crowdfunding for releasing a new crypto unit.
Startups use ICOs as a means to raise development funds. They have been used to raise millions of dollars for blockchain-related projects.
ICO is one of the easiest and most effective ways to attract investments. For every new cryptocurrency, the company or individual will need to source funds needed for all the technical development, so they usually sell tokens in exchange for major currencies such as Bitcoin (BTC) or Ether (ETH). ICO periods usually last at least a week.
There are different forms of ICOs with specific timeframes and goals. An example of an ICO may include having a pre-designated price for all tokens sent out during the ICO. In such a case, the token supply is static. However, a static token supply may include a dynamic funding goal which determines token distribution based on funds received.
One of the most successful ICO projects is Ethereum, which had ether as their tokens. Only Ethereum ICO was able to garner up to $18 million dollars in BTC during their crowd sale. The project started in 2015 and already had a huge increase in price by 2016 with a market capitalization of more than $1 billion.
A lot of people confuse an ICO with an IPO (Initial Public Offering), but they have a lot of differences. In fact, an ICO doesn’t give you any kind of ownership of the company trying to create its own crypto unit. Tokens distributed from an ICO will gain value, with the ICO allotting equity equivalent to the token, which gives the company or investor ownership with voting rights and qualification for dividends.
In highlighting the top ICOs, there is no sure-fire way of distinguishing good projects from bad ones. At WyreBitcoin, we help our investors assess risk by systematically reviewing the objectives behind different offerings, using structured criteria.
What does an ICO mean?
An Initial Coin Offering or Initial Token Offering (ITO) is a type of project or startup financing that is conducted with the help of issuing coins (or tokens). Tokens are purchased by participants (investors) in return for an eligible payment instrument (e.g. fiat currency) or cryptocurrencies such as Bitcoin or Ethereum. The value of those tokens depends on the project viability and can grow far higher later. In terms of technical framework, ICOs are associated with Blockchain and smart contracts.
What is Blockchain?
Blockchains are decentralized and secure databases. This concept was introduced by mysterious Satoshi Nakamoto in 2008 and put into action as part of the cryptocurrency named Bitcoin. Basically, Blockchain acts as a public account book that keeps all Bitcoin transactions and allows distributing digital data so that not a single entry can be retrospectively modified. This technology can find—and already finds—use in various verticals including finance, real estate, health care, etc.
What is Smart Contract?
A smart contract is a computer protocol intended to ensure transparent performance of a contract, in digital form and with no third party involved. Smart contracts help negotiate, exchange valuable assets, shares, or money in a conflict-free way. The term was coined in 1994 by American cryptographer Nick Szabo. What constitutes the cornerstone principle of a smart contract is complete automation and accuracy of performance of contracts.
What is a White Paper?
A white paper is the main official document of a project participating in an ICO, IDO, IEO, or STO. Being a definitive guide, it may affect investors’ decision-making. The document helps readers tap into a problem and presents an intended solution to the described issue.
What is the difference between ICO and IPO?
An Initial Public Offering (IPO) is a process in which company shares can be openly purchased—this is how a private company can go public. The main difference is that IPOs are carried out for established companies while ICOs, usually, are endeavors of high-risk market newcomers.