Initial Public Coin Offering (IPCO), popularly known as Initial Coin Offering (ICO) is a term used to denote fund raising for a new cryptocurrency endeavour. This system is unregulated and as such is used by new or start up cryptocurrency companies to go around the heavily regulated fund raising process that are required by investors (venture capitalists) or banks.
Basically, ICOs use a system in which you trade an upcoming, new cryptocurrency for alreadyexisting ones which have actual value in order to raise funds. Looking at this, you see the idea behind ICOs. The people who give out their already existing crypto are sort of like shareholders in the company and the crypto they receive is equivalent to their shares in such a way that as the new cryptocurrency grows in value, so does their shares and as such, they could sell the new currency and get more value than when they purchased it.
Most of these investors do so with the hope of gaining quick ROI and usually, it does pan out.
Just like business plans, a whitepaper is usually created by the start up firm seeking to raise funds through the use of an ICO. This plan describes the firm’s goals, objectives and agendas. It also states the required capital to kick off and meet these objectives and how much coin the pioneers of said agenda or venture will keep for themselves and also the duration of the ICO fundraising campaign
An ICO campaign is deemed successful when the funds raised within a specified period of time meets the minimum requirements to fund the crypto project and is as such use for that purpose. Take note that the specified time stated by the firm is of prime importance as this establishes a basis for agreement between the investors and the firm. It is however said to have failed if it does the opposite in which case, the cryptocurrency given out by investors is returned to them.
ICOs are essentially the same as crowdfund because they are both used to raise funds. The difference between the two is that, whereas the funds generated in crowdfund are in the form of giveaways and donations(in little amounts from a large number of people), for an ICO, the motivating factor for the investors/supporters is on the basis of an ROI.
The way in which the ICO system is structured leaves a lot to wonder as to which regulations are in place to monitor the firms using them so as to ward off and be able to detect potential scammers and hence secure tokens of investors.
However, one of the reasons for the outstanding popularity of ICOs in the crypto world is their ability to generate funds without the usual regulations involved. That is to say, there are little or no regulations in place and as such being an investor in an ICO campaign could prove to be very rewarding in no time but, it is also risky. So before you embark on something like this, you really should ask yourself this "Is it worth the risk?" if so, by all means, go for it!
Better to be infomed than to follow the crowd. It may work once, or twice or not at all
-@ossyjay
Okay, that’s it for me, I hope you enjoyed reading!
I’ll be sharing detailed info on how to recognize ICO scammers in a future post.
