Crypto

What is ICO? Initial Coin Offering Explained

ICO

That’s how one can end it. But, there’s a lot more than the name here and ICO is a big deal in the world of Cryptocurrency. If you know what IPO (Initial Public Offering) is how it works in the real world market, you will easily know what ICO is. But even otherwise, you don’t need to put a lot of mind into understanding it.

ICO is a fundraising mechanism where new projects sell their tokens in exchange for a present crypto coin such as Bitcoin or Ether. These are the underlying tokens that will later go live, but while the ICO project is on, people can invest their coins in an exchange with the tokens and hold a stake in the project. The tokens are pre-created and available for a certain amount of time before the project funding actually goes live, and most of the ICOs give the investors with extra tokens for being an early bird in the scheme.

The way ICOs work is very controversial because while some feel that it is an innovative way of funding, taking a step away from venture capital funding. Others argue that there is an unjustified capital built by the founders and there is no certain plan or even security offered as to the future of the project.

If you are investing in Ripple right now, you should be amazed to know that the first probable cryptocurrency that was distributed by an ICO was Ripple itself.

Ethereum is one of the platforms that give smart contracts and tokens are generated with the Ethereum Smart Contract System, and these tokens can then be transacted on the Ethereum Blockchain. This smart contract system is what made Ethereum Blockchain one of the major help for ICOs to launch and flourish in the form of token sales.

One of the other questions for those who already know about ICO is whether ICOs are legal. The answer is still unclear because some authorities have been regularizing it, but in many places, it seems like a source for a scam, and thus the trust level has been low, and there is too little being known legally about ICOs.

Is there a guarantee of profits when investing in ICO?

There is no guarantee as such because it is more about luck just like how you see it in IPOs. Some ICOs go ahead to see the biggest growth, and some just fail, not even reaching the expectations set by the founders, resulting in a loss for the early investors who submitted their coins to get those tokens.

Some of the names like Ethereum, Ripple, and Augur token showed what numbers they could grow to, even though initially introduced as ICOs, and on the other side, names like Lisk and Omni didn’t reach the initial expectation. So, depending on the luck, you could see your money grow by many folds, or the same money to go down to zero.

Research to get the best from ICOs

These initial coin offerings are so attractive that each of them would make you wonder whether you should give them a try, but without proper research, you might be taking the biggest risk of moving your ever-growing Ether or Bitcoin to these unknown projects. You should do it only if you have researched well about that particular ICO you are interested in. Check the purpose, the founders, the team working on it, and the potential of that ICO based on the coverage it gets from trusted publishers and media.

Blindly investing in ICOs without having any prior knowledge about them is going to be as bad a decision as entering the Crypto world itself with zero knowledge. We hope that you now know what is ICO and what it stands for.

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