What is ICO (Initial Coin Offering)
Creating a new crypt currency, many developers resort to ICO (Initial Coin Offering) - the primary offer of coins. This method of attracting investment at the start of a certain number of tokens, which are then distributed at a predetermined price among those who have decided to support the project - both financially and by distributing information about it on the Internet.
What is ICO
In fact, ICO is a hybrid of crowdfunding (collective voluntary cooperation) and IPO (Initial Public Offering). Funds for the project are raised from those who want to support the idea behind the project, and in return, investors receive new coins that can be used on the platform or sold when the price rises. Contributions may be accepted both in fiat currencies and in various cryptov currencies.
ICO differs from the initial public offering in that developers do not have to go through complicated bureaucratic procedures. In addition, buyers of crypt-currency receive only tokens, which in most cases do not give the right to a share in the project, as shares.
Why did ICO become so popular?
The main reason why ICO is so popular is its high profitability. Many projects implemented under this scheme allowed investors to multiply their investments many times, and this caused a real stir.
Thus, if in 2016 all ICOs in the world were able to raise $101 million, in 2017 according to preliminary estimates this figure exceeded $5.3 billion.
Such a huge demand naturally attracts speculators, who invest in promising tokens only in order to sell them at a higher price soon after the start of the project.
Besides, the big money is always followed by swindlers. To date, many ICOs have turned out to be just criminal schemes, created solely to steal the invested funds. After completion of ICO such dealers dissolve into the unknown, leaving behind a pathetic parody of real crypt currency and many deceived people.
As for honest developers, ICO appears to them as a convenient way to find funding for their project. The classic approach of finding an investor among rich people requires a huge amount of time and effort, which often do not bring results. Bank loans for large sums also do not give everybody, because in order to get them, you need to provide collateral or other guarantees of repayment.
ICO allows the creators of new cryptocurrency to make a public offer, available to all comers and get the necessary capital in return for a certain share of issued tokens.
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Most often, an investor can act even with a small amount of funds in his hands, and only some platforms set a high entrance threshold. In the end, both sides win - the project gets money for development, and people get money for new kryptotokens.
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