Sometime last year and earlier this year, Bitcoin and other crypto-currencies become the talk of the financial world. Many believe it will replace various flat currencies, while others believe its value will sour above $20,000 in the nearest future and so many people dived into buying or storing crypto-currencies. Different Block chain start-ups and firms based on crypto-currencies sprang up and that gave birth to what we call Initial Coin Offering or ICO for short.
In this article, I will explain what ICO are and how they work and other issues surrounding them.
What are ICO?
ICO is an acronym for Initial Coin Offering, ICO is an alternately or surrogate way for fundraising by various block chain related start-ups or firms, where they issue out their own crypto-currencies and sell them in exchange for other crypto currencies such as Bitcoin, Litecoin, Ethereum and sometimes for fiat currencies and those who bought these firms or start-ups currencies can later exchange or sell those crypto currencies at a greater price from the initial price they have earlier bought them.
I know you might be confused, but I will try to further make you understand by giving an example.
Let’s say there is a start-up company called HomeLigo, that’s offer home services such as home clean up and babysitting and you can pay via their own crypto-currencies. We will call this crypto currencies “HomeCoin”. But the founder(s) are facing just one tiny bity problem, how to acquire capital to make their dream a reality, well, they could go to the bank to seek for loan at a ridiculous interest rate or they could seek for investors which can be hectic to find while they figure out how to share part of their ownership of the company with these investors.
There best option is to offer an ICO to the public by selling out their own HomeCoin to potential customers or speculators, who might buy using different payment method at a lower price and still use that coin to pay for their own services from the company or just exchange them later on for a better and greater price.
How Does This Work?
The goal of an ICO is to offer there coins or crypto currencies to the public in exchange for capital to venture or start their own business. In the example above, HomeLigo which offers there services and get paid in HomeCoin needs to first create a document containing all the information the public would need about the company, such as how the company will work, it’s advantages over other competitors and generally how the system will work.
Then create a platform either a website or an app, where people can exchange the own cryptocurrencies or fiat currencies and in return you send then the HomeCoin, while hoping that your company will do so well in the future that many customers will use their services and thus making the circulation of the HomeCoin to be high among users thus increasing the value of the crypto currencies where other speculator who had initially bought the crypto currencies can exchange it back to the there fiat currencies or back to other crypto currencies at a higher rate .
Generally Information about ICO
Initial Coin Offering (ICO) is totally different from Initial Public Offering (IPO) where buyers will have an ownership or stake in the company. ICO is a bit similar to gambling because buyers are all hoping that the “company’s crypto currencies” will increase its worth in the future.
Because of the little to no regulation on ICO, one can literally launch an ICO as far as they have the technical knowledge and platform to carry out the transaction or exchange, it can work in your favour or it can turn out to be a scam.
If you wish to buy an ICO, make sure to do your own homework very well so as to avoid falling a victim of a scam or having the company you bought their ICO go bankrupt. remember there is no much regulation coving the ICO both in Africa or in the United States make such to read about the company history and there mood of operations, you can as well visit coinschedule.com to find out legit and exciting ICO to invest in, but you should not take my words or anybody words for it make sure you do a thorough search before paying any money for any ICO.
In summary, ICO are becoming an incredible way for business to raise money. Crypto currencies is all about taking high risk to get a high reward same goes for ICO.
This article doesn’t recommend anybody to buy any crypto currencies or any ICO, a professional should be consulted before taking any financial decision.