What is the Initial Coin Offering?
An Initial Coin Offering (ICO), sometimes referred to as a Public Coin Offering, is an unregulated method of crowdfunding. This process is exclusively used within companies whose business model is based on a cryptocurrency.
The use of this method also avoids the strict regulations required for initial capital raising on the financial markets. As part of the Initial Coin Offerings, a portion of a cryptocurrency is sold to investors.
These pay in return with so-called fiat money, or alternatively, with other tokens.
What benefits do investors get by buying tokens?
The concept of an Initial Coin Offering is very much geared to that of an Initial Public Offering (IPO). An IPO is used to place a stock corporation on the stock markets for the first time.
The language usage also refers to a token sale, since tokens are sold to public investors. An important feature of an ICO is the fact that investors only get a chance to use the service in the future.
The actual project is not in the final phase, so developers must gain the investors’ confidence to make a trade. This is especially true of newer cryptocurrencies, where we’re not just buying a medium of exchange, but also a service. Investors, therefore, also have access to this service.
The first official token sale was conducted by Mastercoin in July 2013. The well-known blockchain also carried out a sale of the Ether Token in 2014.
The first Initial Coin Offering was initiated in July 2014 by Karmacoin. Nowadays, ICOs are a popular way of raising funds in the financial markets and driving the development of cryptocurrencies.