An ICO known as an Initial Coin Offering is a similar concept to IPO which is known as Initial Public Offering. Both of these includes processes whereby businesses raise capital. However, the ICO is the type of investment that provides investors with crypto coin, which is commonly known as a token or coin in a return on an investment, which is very different in regards to issuances of securities which happens to be the case with the IPO investments.
Before explaining ICOs in detail, here are a few details on crypto currencies, tokens, and block chains:
What Are Cryptocurrencies?
Cryptocurrencies are virtual or digital currency which uses cryptography in regards to security. This currency will not be issued by any type of central authority like central banks. This takes this currency out of the hands of government agencies that are capable of manipulating or interfering with them.
What Are Tokens?
Tokens are a type of coin offered during ICOs and are regarded as equal in regards to the shares typically purchased in IPOs and also go by the name of crypto coins.
Tokens that are issued from ICO will be given a value, with an ICO allocating an equivalent to the equity of the token. This provides an investor-ownership with voting-rights. While tokens are the closest formats of the ICO to the IPOs, most of the ICOs issue tokens which are regarded as assets that give the investors the access to features within specific projects opposed to ownership of a company.
Tokens are ultimately processes of crowd funding new cryptocurrency projects that involve token sales. The cryptocurrency project is what raises the capital in order to fund these operations, and the investors receive allocations of the tokens of the project in return.
An ICO is usually open for a period of weeks to a 1 month. However, some are open for a lot longer with fund-raising for the specific ICO taking place possibly over a number of occasions. This is unlike the IPOs which are just one time events.
Blockchains are described as incorruptible digital ledgers for economic transactions which are usually programmed with the purpose of recording financial transactions or anything that holds a value. These are essentially digital spreadsheets which are then duplicated over networks of computers. These networks are designed in a way that they will update these spreadsheets frequently. As information gets shared and is updated regularly it is regarded as easy to reconcile and truly public.
Key Characteristics Of ICOs
• Participation in projects, DAO (Decentralized Autonomous Organization) or a specific economy.
• The coin ICOs typically sell participation into an economy while the token ICOs sell the rights in regards to royalties or ownership for DAO or a particular project.
• The ownership of tokens will not always provide the investors with the rights to vote in regards to a direction of a DAO or project, with rights of investors embedded in a structure of an ICO. However, in general, investors will have an input throughout the lifespan of the project.
• Most ICOs involve creating a set amount of tokens or coins before the sale.
• The prices of the ICO are typically established and defined by creators of the DAO, project or economy.
• The ICO’s can involve multiple rounds in regards to fund-raising with tokens or coins on offer, which will increase in their value up until the date of release. The earlier investors are more likely to reap greater rewards which are embedded in their tokens.
• ICO’s will conclude once tokens or coins will be tradable with open markets.
Talking to people with experience in the space can be useful. Find yourself a good Bitcoin Cryptocurrency Consultant.