What Is ICO and How It Works?

Written By Alla Levin
July 01, 2019

Here Is What Is ICO and How It Works?

ICO is an abbreviation of an initial coin offering. It is defined as the token sale which is conducted to crowdfund a new blockchain project. When the ICO rating is improving, it can be a good sign that the blockchain project is successful.

Through the upcoming ICO, the companies can introduce themselves to potential clients and/or investors. They will raise funds for their new projects by offering the users token or cryptocurrencies.

The ICO participants could attain the project token or cryptocurrency using fiat funds or other cryptocurrencies like Bitcoin, Ether, Litecoin, etc. The project creators or managers will add their ICO to the trustworthy list site to reach their audiences.

They will offer the tokens to the investors. When the ICO rating is successful, the next thing to do is list the coin or token to wider marketplaces. It is also possible to put the new coin or token on the cryptocurrency exchange sites.

The crowdfunding method is similar to the conventional methods of crowdfunding like IPO – Initial Public Offering. ICO is an effective method of raising funds for new businesses or startups. To acquire the funds needed to start your business, you could also conduct an ICO. But it is not only limited to blockchain companies or startups. Companies that do not use blockchain can also make generate funds for their new projects.

Although ICO rating is prevalent for new businesses or startups, many established companies adopted crowdfund method.What Is ICO

So, how can a business or startup start an Initial Coin Offering? Normally, the project creators will create a whitepaper plan that informs the audience about the project definition.

Inside the whitepaper, the project managers will also add the terms of the project completion, the amount of money needed to be raised, the number of virtual tokens distributed, the type of payments that the project accepts, and the duration of the ICO.

During the ICO campaign, the project will be on the list so that new users can join the project easily. The participants or investors will buy some of the tokens or crypto coins with fiat or cryptocurrency joining the campaign.

The tokens are similar to shares of the project developer sold to the investors. If the fund raised does not meet the minimum amount required for the project, the money will be refunded. If that’s the case, the ICO won’t be going on.

Meanwhile, when the project participants manage to fulfill the fund’s requirements, the raised money will be used to complete the project.

So, what’s the benefit for the participants of ICO? Assuming that it is successful, the value of the tokens will be rising. That means the investors can profit by exchanging these tokens with fiat currency or other cryptocurrencies.

The potential of big returns is one reason why many people are fond of the rating list. With the increasing popularity of ICO, you could also use this method to fund your new project.

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