A Simple Introduction to ICO

What is an ICO?

  • Initial coin offering (ICO) or initial currency offering is a type of crowdfunding using cryptocurrencies
  • A company looking to raise money to create a new coin, app, or service launches an ICO as a way to raise funds
  • Interested investors can buy into the offering and receive a new cryptocurrency token issued by the company
  • This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project

Advantages to ICOs

  • Extremely easy to launch an ICO to create tokens
  • There are online services or tutorials that allow for the generation of cryptocurrency tokens in a few minutes
  • Low legal and regulation requirements as to traditional methods via IPOs
  • Offers investors liquidity because they can invest into the company with a few clicks but also sell off the coins just as easy

Risks to Investing in ICOs

  • Early investors in an ICO operation are usually motivated to buy tokens in the hope that the plan will succeed after it launches
  • Investors should keep this in mind when considering the differences between shares and tokens—a token does not have any intrinsic value or legal guarantees
  • The potential for high returns always come with the risk of very high likelihoods of losing everything
  • Because they are largely unregulated, ICOs are rife with fraud and scam artists looking to prey on overzealous and poorly informed investors.
  • And since they are not regulated by financial authorities like the SEC, funds that are lost due to fraud or incompetence may never be recovered

ICO vs IPOs?

  • An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance.
  • Companies must meet requirements by exchanges and the Securities and Exchange Commission (SEC) to hold an IPO.
  • Companies hire investment banks to market, gauge demand, set the IPO price and date, and more.
  • IPOs are out of reach for small businesses looking to raise money in the public market. Examples of NYSE listing standards.
  • IPO’s are a lot safer since it is regulated and a purchase in a share represents ownership in the company vs. there’s no guarantees to what is offered through the coins created from an ICO

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Hi! I'm

Ricky Young

My belief is that financial freedom cannot be obtained by just a 9-to-5, but a combination of smart investing and passive income. This is my journey to achieve financial freedom.

Disclaimer: The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. To learn more, read our Terms of Use.