Initial Coin Offering

Become A Smart ICO Investor

What Is An Initial Coin Offering?

An initial coin offering (ICO) may be a sort of capital-raising activity within the cryptocurrency and blockchain environment. An ICO can be viewed as an initial public offering (IPO) that uses cryptocurrencies. However, this is not the most accurate comparison, as there are some important differences between the two fundraising activities. Startups mainly use ICOs to raise capital.

The main advantage of ICOs is that they remove middlemen from the capital raising process and create a direct relationship between the company and the investors. Furthermore, the interests of both sides are aligned.

Types Of Initial Coin Offerings

Private ICO

Public preliminary coin services are a form of crowdfunding that targets the overall public. Generally, only accredited investors (financial institutions and individuals with high net worth) may participate in private ICOs, and a company may choose to set a minimum investment amount.

Public ICO

Public initial coin offerings are a sort of crowdfunding that targets the overall public. The public offering is a democratic form of investment as almost anyone can become an investor. However, due to regulatory concerns, private ICOs are becoming a more viable alternative to public offerings.

The rise of cryptocurrencies and blockchain technology is helping fuel the popularity of ICOs. In 2017, over $7 billion was raised using ICOs. This figure almost doubled in 2018. The largest ICO ever was executed by an instant messaging provider Telegram. During a personal ICO, the UK-registered enterprise raised over $1.7 billion.

How Does ICO Work?

An initial coin offering is a sophisticated process that requires an in-depth knowledge of technology, finance, and law. The main idea of ICO is to leverage the decentralized system of blockchain technology in capital raising activities that will align the interests of various stakeholders. The steps in ICO are listed below:

Identification Of Investment Goals

Every ICO begins with the company's intention to raise capital. The company identifies goals for its fundraising campaign and creates relevant content about the company or project for potential investors.

Creation Of Tokens

Every ICO begins with the company's intention to raise capital. The company identifies goals for its fundraising campaign and creates relevant content about the company or project for potential investors.

Identification Of Investment Goals

Every ICO begins with the company's intention to raise capital. The company identifies goals for its fundraising campaign and creates relevant content about the company or project for potential investors.

Creation Of Tokens

The next step within the initial coin offering is that the creation of tokens. Essentially, tokens represent an asset or utility in the blockchain. Tokens are fungible and tradable. They should not be confused with cryptocurrencies as tokens are just modifications of existing cryptocurrencies. Unlike stocks, tokens typically do not confer an equity stake in a company. Instead, a maximum of the tokens supplies their proprietors with a few stakes in a service or product created through the company.

Promotional Campaigns

At the same time, a company usually runs a promotional campaign to attract potential investors. Note that campaigns are usually executed online in order to gain a wider investor reach. However, currently, many large online platforms such as Facebook and Google ban ICO advertising.

Initial Offering

After tokens are created, they are offered to investors. The offering can be structured into multiple rounds. The company can then use the proceeds from the ICO to launch a new product or service, while investors can expect to use the acquired tokens to profit from this product/service or the token's value will appreciate. can wait.

ICO Regulations

ICO Regulations

Initial coin offerings are an entirely new phenomenon in the world of finance and technology. The introduction of ICOs has had a significant impact on capital raising processes in recent years. However, regulatory authorities around the world were unprepared for the introduction of new fundraising models in finance.

Approaches to the regulation of initial coin offerings vary from country to country. For example, the governments of China and South Korea restrict ICOs. Several European countries, as well as the United States and Canada, are working on developing specific rules to govern the conduct of ICOs.

At the same time, there are already published guidelines governing ICOs in several countries including Australia, New Zealand, Hong Kong, and the United Arab Emirates (UAE).