Ever since the appearance of the first cryptocurrency on the market in 2009, the famous Bitcoin, which is still inviolable, more and more people want to invest in crypto and deal with it every day. There are thousands and thousands of cryptocurrencies on the market discovered and invested in every day.
What has attracted significant attention from many crypto enthusiasts lately is the famous abbreviation ICO, which can be heard more and more by experienced traders and investors. However, what does ICO actually mean? Why is it so popular? Let’s find out all the crucial details!
Definition and explanation of ICO
As you may have guessed, ICO is an acronym for the Initial Coin Offering. It refers to a specific type of capital-raising activity in the Blockchain and Cryptocurrency environment.
There are two types of ICOs:
Private ICO
Only a limited number of investors are able to participate in the process in Private Initial Coin Offerings. Usually, only financial institutions or high net-worth individuals, which are considered accredited investors, can participate in private ICOs. Thus, a company can choose to set a minimum investment amount.
Public ICO
On the other hand, we have a Public Initial Coin Offering, or Public ICOs, representing a type of crowdfunding targeting the public in general. It’s a democratized form of investing since almost any individual is able to become an investor. Nonetheless, private ICOs are considered a more viable option relative to public offerings due to regulatory business.
ICO vs IPO – what is the difference?
When it comes to the ICO vs. IPO comparison, the main difference is that investing in ICO doesn’t guarantee an ownership stake in the crypto company or a specific project. Participants of ICO are, actually, gambling that a currency that’s worthless at that moment will later significantly increase in value above its original purchase price.
An initial coin offering occurs at an early stage in the crypto project or a company, way earlier it has any services or products working. It requires working capital in order to provide their unproven idea or concept to life. Mainly for that reason, ICOs are riskier, but it’s expected for them to demand a greater return on investment than Initial Public Offerings.
How does the Initial Coin Offering work?
There are four crucial steps on how does the ICOs work:
- Investigation of investment targets of a company to raise their capital.
- Token creation is the second step.
- A promotion campaign is mandatory for attracting new investors
- The initial offering comes after tokens are created and offered to investors.
The rising popularity of ICOs
There’s been a significant rise in blockchain technology and cryptocurrencies. According to that rise in popularity, we’re witnessing boosting the popularity of Initial Coin Offerings (ICOs). In 2017, with ICOs using, more than $7 billion was raised.
A year later, in 2018, that figure almost doubled. To this date, the largest Initial Coin Offering was executed by Telegram, which is worldwide known as an instant messaging service provider. During a private Initial Coin Offering, the company, registered in the United Kingdom, raised over $1.7 billion!
