What is an ICO (Initial Coin Offering)?

Saying that the cryptocurrency market all over the world is simply ‘evolving’ is a dire understatement to make because the potential is captivating nations whole into using these currencies excessively as part of their financial system. Take Zimbabwe for example; the financial collapse of the state held currency has resulted in people entrusting their investment in the hands of Bitcoins instead, because holding this currency is actually more profitable. This brings us to our main point of concern; how did all these currencies after Bitcoin actually come into being? This is where ICO (Initial Coin Offering) played a pivotal role in becoming the main crowd-based fund source for the launch of further digital currencies including Ethereum and Litecoin. Initial Coin Offering This article will take a deep look into what exactly ICO is and what are the reasons behind it being supported or objected to in various parts of the world. The Definition Let us start with a Layman definition of ICO which goes as follow: ‘It is the offering of new currency tokens to interested investors who are willing to buy them in exchange for other crypto or regular currencies with the incentive of the infant currency growing to become very profitable and exchangeable in the future.’ There are several elements of this definition which need to be explained in depth.
  • The Tokens
This is the world used to describe units of the new currency before its actual advent that marks its transition from an idea to an actual digital currency.
  • The Exchange
It is up to the creator of the currency to issue tokens for fiat cash or virtual money, or both.
  • The Profit
The instance where the mean value of the currency after a particular period of its establishment is well above the rate at which its selling started. The currency of the Ethereum Blockchain Ether, for example, started trading for less than a dollar and today it rockets around $400 dollars. Why Should You Be Interested in ICO? Once again viewing the example of Ether, suppose you purchased around $100 worth of Ether back in 2014 when it began. Today, a rough calculation will be able to show you that the value of your investment has approximately risen to somewhere around $40,000. And by no means is this a definite answer; the upcoming days seem to favor this technology a lot. The profitable returns are certainly very appealing, but there are certain other factors which should interest you in buying Initial Offerings, which include:
  • Accessibility to new markets. The country of origin of a currency will start developing online services and goods markets which trade in that very currency if it turns out to be successful, and through your initial purchase you can capitalize on that investment and can make a ton of purchases.
  • In financially difficult times, having such an accessible source to withdraw from can get quite handy, especially because it is not like an insurance which you have been financing ever since you purchased it.
  • Being one of the first investors of what can potentially take over the world of digital currencies by storm will bring you more and more international contact and recognition.
Is It Free of Problems? So far our portrayal of ICO has been a heavenly one, but something so perfect cannot exist without its own set of laggings. The following problems associated with ICO resulted in China and South Korea imposing an indefinite ban on the use of these currencies as legal tenders for any financial transactions which do not belong to the private sector. The problems are as follows.
  1. Unregulated
The most common term succeeding any mention of cryptocurrencies is ‘unregulated’, because indeed these currencies do not have any internationally accepted backing or any specific legislation that backs their creation. This basically means that the ICO for the currency can become a profitable investment for the buyers, but the source of the currency gaining its popularity or the projects the money was used to finance will remain unknown. This is a problem for states because links of these currencies financing acts off insurgency and smuggling have been established.
  1. Fraudulence
Bloomberg reported that around 90% of all the Chinese ICO pooling made in 2016 was full of fraud and that the collector ran away with the investors’ money. Such situations leave the state quite helpless because the currency cannot be traced to any origin (due to its unregulated nature) and because no proper evidence of the payment can be presented to the enforcement agencies. Unless a way to regulate these currencies is found, nations will never devote a section of their financial sector to them.
  1. No Way of Determining Risk
Recently an Ethereum based platform known as ‘Plexcoin’ wanted to launch its own digital currency, and the day of the launch was hyped. The association with Ethereum gave investors the assurance that in any case the financing is legitimate. Their belief turned to misconception when the currency turned out to be yet another case of a fraudulent. You cannot blame the Ethereum ledger or the investors because nobody took guarantee of protecting your funds. Virtually that is a problem with any currency out there, even the big names like Bitcoin; there is no telling when all trading might cease or be sanctioned. Conclusion: What Should You Do? After reaching this point, you might have a fair understanding of what ICO is but not knowing exactly how you want it to influence your life might be bothering you. That is an expected reaction, because one right/wrong step can go very far in determining your financial standing in the coming days. We feel that if you are compelled to try contributing to a currency in its initial stages and have sufficient money to spare, then there is certainly no harm in doing so. But at this point in time it might not be wise to play all hands in supporting an ICO, so make your decision as risk free and well thought out as possible.

26 Comments

  • Hugh Sellers March 2018 - Reply

    It sounds as if ICO do carry risks with them so anyone looking to make a fast buck should avoid thinking a “get rich quick” scheme is going to make them wealthy. That being said, this article mentions the precautions a cryptocurrency investor should take before putting their money into cryptocurrency. You could be surprised by the investment.

  • Teague River March 2018 - Reply

    Should we invest in the future business? Yes, if we speak of Initial Coin Offering. ICO is a crowdfunding method where investors are offered to purchase tokens or a new type of cryptocurrency. Find out here the prep steps of how to make an ICO and gain nice profit.

  • Donald Robinson March 2018 - Reply

    There is no available official or authentic whitepaper yet about many crypto currencies which announced ICO at the beginning of the year. I am desperately waiting for Plexcoin and ICO announcements about the same. I am sure, it is going to be a mega hit in crypto world!

  • Kamil March 2018 - Reply

    One should be really careful when buying into ICO’s these days. A lot of people are using this opportunity to collect funds (to scam) with no intention of providing a good service in return. This gives the rest of those who are actually trying to build a legitimate business a bad name or a slow start!

    Don’t be fooled by statistics and white papers that can be faked or even copied and altered. Remember that the codes are available on GitHub (open source) and any Tom, Dick and Harry who knows this can create a ICO.

    It is very hard to determine which ones are legit and which ones are scams even after extensive research.
    It is a total gamble in my opinion but at the same time a great opportunity to buy into a great idea at the starting point of its inception.

  • Earl Butler March 2018 - Reply

    I would always stay away from Chinese transactions. With their history of copyright violations and similar piracy, the trust factor is zero in my book. I wish I’d known about cryptocurrency earlier as it seems like I may have missed the boat on the big earnings. Or am I wrong about this?

  • Oliver May 2018 - Reply

    I’ve recently started hearing about ICOs and I didn’t really know what they were so thanks for clearing the air about this. I think I will actually try to invest in some, even if I don’t have that big of a budget.

  • Johnny May 2018 - Reply

    Very informative. From my point of view, this seems like a very risky investment. Sometimes it’s best to wait things out and see what course of action it’ll take on its own. Without knowing too much and without extensive research you could be setting yourself up for failure.

  • Sid Reed May 2018 - Reply

    It sounds like ICOs carry considerable risk. I don’t think I’d ever buy cryptocurrency through one. Traditional stock through an IPO? Maybe.

    • Jo Jewell June 2018 - Reply

      Well, you just never know which way that value is going to go right? The gamble is there and if you are on the right side of it you will get to see the money.

  • Christie June 2018 - Reply

    ICOs are becoming more and more present in our society because they offer very quick capital so anything can get off the ground quickly. This wasn’t possible a few years back.

  • Jimmy Hutchcraft June 2018 - Reply

    in a nutshell, it is the one day that you will find out whether or not your brand new coin is going to make it or not on the market. Depending on how the market reacts to it, will decide if you are going to make it or not. So many coins, and other companies have decided it was time to go public only to find that is not always the right thing to do.

  • Ethan Martinez July 2018 - Reply

    This is the first article I have read about ICO that actually was very comprehensive (in my opinion). I agree this is undeniable and rising fast!

  • Oliver Williams July 2018 - Reply

    Excellent article. Although there are still some bugs to work out I am sure this for of currency will be one day soon existing world wide.

  • Ben Amstutz July 2018 - Reply

    I believe the statement that cryptocurrencies aren’t “evolving.” They are truly exploding into modern society! Who knows what they will bring with them at this point.

  • Josh Sprunger July 2018 - Reply

    This is a great read. It really shows just how far BTC and other cryptocurrencies have come and how far they will go in the future.

  • Payton Macdonald August 2018 - Reply

    Where can I find out about the latest ICOs coming up? I want to get in on some initial offerings but would have to find that information to do so. I think the ICO stage is particularly interesting.

  • Jordanna Lawson August 2018 - Reply

    I’d avoid ICOs for right now. The unregulation, fraudulent activity, and uncertainty around risk are enough to scare me away. It’s not a risk I’m willing to take and I’d rather investment my money in something a little safer.

  • Joseph Bierman November 2018 - Reply

    So, just like an IPO. A company wants to go public with all their great ideas and monies and the public gets to buy stock in the company. Hasn’t anyone learned a thing from companies like Twitter, Zynga and whatnot? I am afraid that ICO’s are just going to be the same thing.

  • David Tinsley November 2018 - Reply

    It’s almost like a presale, right? The currency owner wants to know the popularity of the coin before it really is popular? I don’t like it. Unless you get lucky, you are likely to get burned.

  • Sheila Hayes November 2018 - Reply

    Did Bitcoin even have an ICO? Was this something that was dreamed up by the smaller companies as free advertising for their currency or what?

  • Samuel Levasseur December 2018 - Reply

    Just like with a IPO, companies can win, but will most likely lose these days. It seems like these events are something they feel the need to do rather than build something that consumers will just want.

  • Kevin Reynolds December 2018 - Reply

    Very good explanation. Thank you.

  • Robert Stevens December 2018 - Reply

    Some of those cryptocurrencies really took a hit when they offered the coin the first time around. My thoughts are that didn’t any of these coins learn a thing from companies losing during IPO’s?

  • Carly Chapa January 2019 - Reply

    I think getting into an ICO is like a head game for the CEO’s and things like that. Most of the time there is little benefit from getting into the marketplace early.

  • Rebecca Duran January 2019 - Reply

    We have watched coins just tank after they are mismanaged since the time they go to the market. I am sure the excitement is high in the beginning, but it has to fade when things are not managed right and the “roadmap” of the future is not being followed.

  • Antonio Newton January 2019 - Reply

    Thank you for the info. I just wish that I could get enough information before the ICO that makes me feel good about investing. Most of the time, I still have doubts.

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