Initial Coin Offering

Cryptocurrencies are getting popular by the day, so no wonder there’s increased curiosity about the ways and means of investing in them. Although cryptocurrencies come with risks, the growth in their value and the increasing competition are factors that attract investors. Buying and selling cryptocurrencies is done through initial coin offerings.

So, what is an initial coin offering (ICO)? One can compare an ICO to an initial public offering (IPO), wherein a company opens its shares to be bought and sold by the public. But unlike the capital market, ICOs are unregulated, which means they’re not controlled or regulated by an official authority or body. Another striking difference is that, unlike a stock IPO, an ICO doesn’t offer any ownership, nor the potential of dividends. An ICO is also called a crowdsale or an initial public coin offering (IPCO).

Here’s more about ICOs in our “Initial Coin Offering Wiki.”

Initial Coin Offering Wiki

ICOs are commonly used for fundraising by startup cryptocurrencies, and they specify all the project details, including the amount of capital they need and the date of completion. 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 the cryptocurrency market should be regulated. Since it’s unregulated, the risk involved and the possibility of financial scams are concerns. These are a couple reasons why some traditional investors have been skeptical about cryptocurrencies. Perhaps it’s also a factor for the ban of ICOs in South Korea and China. ICOs might be banned in Japan as well in the near future. The good part is that, despite fundraising through ICOs being banned, investors can still buy and sell virtual coins. All three of these countries have a large market for cryptocurrencies. Also, some analysts point out that Bitcoin seems to have actually benefited from the bans, and it seems to be growing in terms of value and the number of investors.

Many cryptocurrencies have sprung up. To track the performance and transactions of each cryptocurrency, an ICO list is maintained. One can find this list on a number of web sites that are updated every day.

Incidentally, Bitcoin was released in 2009, 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, ICOs now use bitcoins for exchanges.

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, raised about $18.0 million in bitcoins and it increased that sum further. Ethereum’s ICO was held for 42 days between July and September 2014. The Ethereum ICO stands second in the list of the most successful ICOs.