Initial Coin Offering

ICO - Initial Coin Offering
Credit:iStock.com/IvelinRadkov

Cryptocurrencies are getting popular by the day and no wonder there is increased curiosity about the ways and means of investing in them. Although cryptocurrencies come with their own risks, the growth in their value and the increasing competition are factors which attract investors. Buying and selling of cryptocurrencies is done through Initial Coin Offering (ICOs). So, what is Initial Coin Offering? One can compare Initial Coin Offering (ICO) to Initial Public Offering (IPO), wherein a company opens its shares to be bought and sold by the public. But unlike the capital market, ICO is unregulated, which means it is not controlled and regulated by an authority or a body. Another striking difference is that like you own the shares you buy, ICO does not offer any ownership nor do you get any dividends. ICO is also called crowdsale or Initial Public Coin Offering (IPCO). Here’s more about ICOs in our Initial Coin Offering wiki.

ICO Wiki

ICOs are commonly used for fundraising by startups, and they specify all the project details, the amount of capital they need, the date of completion, and other details. Just like we have venture capitalists, the supporters or interested investors buy the cryptocoins or tokens. If the startup is unable to collect the minimum required amount, they have to return the money to the investors.

There have been some debates on whether this market should be regulated. But there is nothing official about it so far. Since these are unregulated, the risk involved and the possibility of financial scams are concerning factors. These are a couple of reasons why some traditional investors have been skeptical. Perhaps, it is also a factor for the ban of ICOs in South Korea and China. ICOs may likely be banned in Japan as well in the near future. The good part here is that investors can still buy and sell these virtual coins; however, fund raising through ICOs has been banned. In spite of that, all these three countries have a large market for cryptocurrency. Also, some analysts point that Bitcoin seems to have actually benefited from this ban, and it seems to be growing in terms of value and the number of investors.

A number of cryptocurrencies has sprung up. To track the performance and transactions of each cryptocurrency, an initial coin offering list is maintained. One can find this list on a number of websites that is updated every day.

Incidentally, Bitcoin was released in 2009 and not through an ICO. It was simply released as a peer-to-peer electronic cash system. After the release, investors downloaded the open software to get Bitcoins. In fact, now ICOs use Bitcoins for exchange. The first ICO was opened by Mastercoin in July 2013. There have been quite a few successful ICOs so far. Ethereum, when it was launched in 2014, could raise a sum of about $18 million in Bitcoins and it increased further. Its ICO was held for 42 days between July and September 2014. Ethereum ICO stands second in the list of most successful ICOs.

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