It’s no secret that the world of technology is booming with new ideas and innovations. The ability for businesses to launch their product to market at lightning speed has been made possible thanks to the internet.
In addition to this, businesses can now raise money directly from potential customers – something known as an Initial Coin Offering (ICO).
What is an ICO
An ICO is a method used by startups to sell digital tokens or coins to fund their project or venture. It is similar to an Initial Public Offering (IPO) in which an investor will get shares in the company.
In the past few years, cryptocurrencies have grown from a niche idea to a worldwide phenomenon. But while Bitcoin remains the most famous of all digital currencies, new rivals are emerging all the time.
How an ICO work?
Investors are often very optimistic about their projects and expect the tokens’ price to rise. This is because the tokens are often required to operate a project’s ecosystem. The tokens are purchased in the hope that their price will rise as a startup’s project becomes profitable and gains widespread acceptance.
Investors are advised to conduct due diligence. There are several types of ICOs.
Participants in a ‘crowdsale’ make a one-time payment, and tokens are instantly distributed as soon as they’re issued.
In a ‘presale’, tokens are distributed at the beginning of the crowdsale, but ICO participants can only exchange their tokens for the project’s services or goods once the crowdsale ends.
An ‘initial exchange offering’ or ‘IEO’ is the reverse situation, in which tokens are issued at the beginning of the crowdsale, but ICO participants must wait until the exchanges list them.