Know the meaning of the acronym ICO and understand how it works.
If you are experienced or a layman in the cryptocurrency market, you have probably heard the term ICO. The acronym ICO stands for Initial Coin Offering, in Portuguese, initial coin offering.
It's kind of like an IPO, only in the cryptocurrency world. ICO is an unregulated means by which a new venture, cryptocurrency project or company tries to raise funds through public fundraising, to launch that project.
Points to pay attention to ICOs:
- Whitepaper: A kind of scope of the project, an explanation of how that technology will work and how it will work in practice, because that project makes sense and the logic of it exists. It can be accompanied by a spending plan with the amounts that will be collected.
- Team: People behind the project can give credibility to the business.
- Liquidity: It is important that from the moment the ICO is finalized, you have the means to redeem what was invested and a way to use those tokens, because without using it you do not have it.
How it works?
When an ICO is launched, it has a fundraising period for the project, and upon fundraising, future investors who are sending funds in return win the tokens or coins for that project, proportional to what they contributed, for having made this “bet” financial.
That way, when the project ends and an exchange lists the new cryptocurrency or token on her platform, the investor can exchange it for another one or even fiat money (currencies such as real, dollar, euro), if desired.
What is the purpose of an ICO?
Allow fundraising in a simple, inexpensive and innovative way, giving rise to the growth of start-ups and new projects and of the entire innovative business ecosystem, the good thing is that the steps can be carried out online and globally, which makes it much easier in the process.
History of a successful ICO
An example of a successful ICO was Ether (ETH), a digital currency used within the Ethereum platform to run smart contracts.
Steps of an ICO
After the launch of the Whitepaper, the following steps are:
Opening of the initial offer: a proposal is made by a company, and anyone interested in this proposal can reserve or buy their token or cryptocurrency and the payment method can be in cryptocurrencies or even in fiat currencies.
Closing of the initial offer: the capital obtained is evaluated and the company makes the announcement if the amount that it intended has been reached. If not, whoever invested receives the amount back.
Distribution of tokens or cryptocurrencies: if the expected value is reached, the initial offer ends and investors have access to their tokens or cryptos, which can be stored in some preferred wallet, as a form of value reserve, exchanged for another asset or fiat coins on a platform.
What are the differences between ICO and IPO?
IPO(Initial Public Offering) is a type of public offering in which a company's shares are sold openly on a stock exchange for the first time. It is the process by which a company becomes a publicly traded company, is centralized in brokers or distributors. WhileICO(Initial Coin Offering) is an unregulated means by which a new cryptocurrency venture or project does to raise funds through public fundraising and launch that project. ICO is global, this means that anyone from anywhere in the world can invest in the project.