Whether you want to be an entrepreneur and build a business, a potential investor or just a curious reader, you must know the meaning of one of the most common abbreviation in cryptocurrency world which is: ICO.
ICO (Initial Coin Offering) is a method of crowdfunding with which a company or a startup, offers tokens soon to become cryptocurrencies to investors in the exchange of bitcoin and ethereum.
An ICO is in between an Initial Public Offering (IPO) and Crowdfunding and it is used to avoid the regular fundraising institutions like banks or venture capitalists.
Long Story Short
The first reported ICO was led by Mastercoin in 2013, which raised over $5 million in Bitcoins through the sales of their own Mastercoin tokens. Shortly after, in 2014, Ethereum which has become the number 2 cryptocurrency in the world after bitcoin, raising $18 million during its ICO.
The third successful venture was Wave two years later, in 2016. Waves raised $16 million in no time. Those three big successes had generated continuity, motivating the launch of new cryptocurrency projects. In present, the market holds over 1600 cryptocurrencies.
The way it works… for everyone!
When through an Initial Coin Offering, a startup company wants to raise money, the whole plan of the new project is related to a Whitepaper. There, the potential investors will find details about the project vision and solution. Also how much money is needed to undertake the venture, what type of money is accepted and how long the ICO campaign will run for.
During the ICO campaign, investors enthusiasts and supporters of the company’s initiative buy the distributed tokens with virtual currencies which afterward will be used in the developing stages of the project.
This process resembles a lot with the old barter, or with buying shares at a company. While everything started as a trade between the community and the developers, with the rampant increase in the value of cryptocurrencies, the investors are starting to see ICOs as an opportunity to skyrocket their initial investments. In 2017 almost every cryptocurrency has had a growth of over 1000 percent.
And here are the benefits…
The main benefit of an ICO is that an investor is helping a company launch its product in exchange for the awaited value hoping that it will be worth more in the future.
For example, in 2014, Ethereum sold coins through its ICO at a price ranging from $0.30 to $0.40 per coin and now, in 2018, the price is over $1000 per coin.
Another important benefit of an ICO for investors is the fact that there are not any limitations since the process has yet to be regulated. For organisations that are looking for investments, an ICO is considered a much faster and easier fundraising method to undertake. In the past year, a lot of companies have started to give consultancy on how to create your own ICO. They are offering a wide range of services from drafting whitepapers to marketing campaigns.
Also, before beginning to invest in an ICO, it is necessary to look for professional consultation from an industry expert. An unpredictable and volatile market can be the risks associated with those types of investments. Or the business itself could be a scam.
Initial Coin (is) Offering “Tokens”
All cryptocurrencies are tokens and every cryptocurrency company has its own token. There are several different tokens which may be bought, sold or traded. They are built on a blockchain. Every cryptocurrency has it own unique blockchain.
For example, Bitcoin is cryptocurrency built on its own blockchain but it is not compatible with Ethereum and other cryptocurrencies. You may trade it for other cryptocurrencies but it is unique in its technology. Bitcoin was built as a payment system, so the developers can only build payment systems using the bitcoin blockchain.
We cannot say the same thing about Ethereum because this cryptocurrency is the standing ground for more than 50 percent of the ICOs. This thing was possible because Ethereum is an application in its core which allows everybody to create other applications by using its model.
One of the most significant token standards of all for Ethereum since 2015, is called ERC-20 (Ethereum Request for Comment) and is being used for the Ethereum smart contract. Successful ICOs can have their ERC-20 tokens trading on exchanges without any communication between themselves and the exchange developers.
ICO…an endless success?
There are 1603 ICOs from 163 different countries and in the top of it with the largest number of ICOs are USA (283), Russia (213), UK (132) and Singapore (98). In 2017 there have been 92 ICOs which collectively have raised $1.25 billion.
Experts in this industry predict that 2018 will be the biggest year of ICOs turning to a revolution and will bring a wide range of information through platforms, technologies, and services to this domain. Also, ICO crowdsale investments are estimated to reach $2,3 billion by 2020.
The fast and successful evolution of cryptocurrency is giving us the opportunity to take part soon of a revolutionary change in the virtual market.