The ICO is a means of raising funds for various cryptocurrency projects in unregulated ways. Startups are using it to bypass the regulated and rigorous capital raising process required by banks and venture capitalists. In such a campaign, a certain percentage of the cryptocurrencies are sold to project sponsors at a very early stage in other cryptocurrencies or legal tender.
How is it done
When a company wants to raise money using the original coin offer, there must be a plan on white paper outlining the details of the project. It should outline what the project is about, what the project needs, what it aims to complete. It should also indicate the money needed to complete the entire project and how much the pioneers are allowed to keep.
The plan must also state what currency will be accepted and how long the campaign will run. During the campaign, supporters and enthusiasts of the initiative will buy cryptocurrencies in virtual currency or Fiat. Coins are called coins and are very similar to shares of a company that are sold to investors in a public offering. If the required minimum is not reached, the money will be refunded and the entire ICO will be deemed to have failed. When the requirements are met within a certain time, cash can be used to start the system or even complete it if it was still in progress.
Investors participating in the project early are mainly motivated to buy cryptocurrencies in the hope that the plan will be successful and that they will get more added value after its release. Such projects have been very successful in different economies and that is one of the main things that motivates investors.
ICOs can be compared to crowdfunding and listings. Just like in a IPO, a startup must sell shares to find funds to help such a company operate. The only difference is that IPOs deal with investors, while ICOs work closely with supporters who are very interested in new projects, such as a crowdfunding event.
However, ICOs differ from a private equity fund in the sense that ICO supporters are generally motivated to get a high return on their investment. Funds raised through crowdfunding are basically donations. For this reason, ICOS is called mass selling.
So far, a lot of successful deals have been made. ICOs are an innovative tool in our digital age. However, it is important for investors to be careful because some campaigns can become fraudulent. This is because they are highly unregulated. Financial authorities are not involved in this, and if you lose funds as a result of such initiatives, it will be difficult to track compensation.
For this reason, some regions do not allow the use of ICOs at all. For security reasons, it is important to buy such currency only from reliable sources.