So as to comprehend the advantages of ICOs, we should have a basic concept of what they mean. Initial Coin Offering or ICO presents the blockchain form of a crowd sale, which is peer-to-peer. Basically, it functions in the following manner:
The team that is creating a project, requests for financing via an ICO. The money is paid through Bitcoin or Etherium in exchange for the money. Investors acquire tokens which can be utilized as native currency or also provide holders with numerous powers in the project.
Actually, in the previous 12 months, an astounding $1 Billion has been raised by ICOs, compared to $140 million that venture capitals raised.
It is very possible that Ethereum ICO is among the hugest ICOs ever. This is in regard to the fund collected and the project’s potential. The Ethereum ICO operated for 42 days, from 20 July 2014 – 2 September 2014. It collected $18.4 million. From that time onwards, Ethereum has turned into a cryptocurrency, which is among the strongest and most innovative.
Understanding ICO (Initial Coin Offering)
When a startup company for cryptocurrency desires to collect funds via an ICO (Initial Coin Offering), it normally forms a strategy on whitepaper. This indicates what the ICO involves what the project requires, what needs will be met by the project after finalization, the quantity of virtual tokens the project pioneers shall retain for themselves, the kind of cash which is accepted and the length of time the ICO campaign shall operate.
In the course of the ICO campaign, supporters and fans of the company’s initiative purchase some of the allocated cryptocoins with virtual or flat currency. These coins are called tokens and are the same as company shares, which are sold to investors in IPO (Initial Public Offering) transaction.
If the cash collected does not adhere to the minimum funds needed by the company, the cash is refunded to the supporters and the ICO is regarded as a failure. In case requirements of the funds are met in the timeframe pointed out, the cash collected is utilized to either launch the latest scheme or finalize it.
Normally, the operation’s early investors are inspired to purchase the cryptocoins hoping that the strategy becomes a success following its launch. This may lead to increased cryptocoin value, compared to what they bought it for, prior to the launch of the project.
Ethereum is a smart contracts platform that presents an illustration of an ICO project that is successful. Ethers presents its coin token. In 2014, the project for Ethereum was declared and $18 million was collected by its ICO in Bitcoins or $0.40 for each Ether. In 2015 and 2016, the project went live and the value of ether increased up to $14 with more than $1 billion market capitalization.
ICOs have some similarities to crowdfunding and IPOs. Similar to IPOs, part of the company or startup is sold to collect funds for the operations of the company, in the course of an ICO operation. But, while IPOs work with investors, ICOs work with supporters who are eager to make investments in another project, very similar to a crowdfunding event.
However, ICOs are different from crowdfunding since backers of ICOs are inspired by a potential return in their investments. Meanwhile, the money collected in crowdfunding is raised through donations. Due to these, ICOs are called crowdsales.
How great are ICOs?
ICOs have greatly helped blockchain technologies as indicated in the following benefits:
Provides Promising projects with opportunities
In the previous year, Ethereum has accomplished a lot. It did not just turn into the second strongest cryptocurrency in the globe, but offered DAPP creators a platform to form their projects. It is really turning into a platform where setting up of the future will take place. This is due to ICO.
It does not need unnecessary paperwork
Majority of projects are not carried out as they become involved in red tape. To collect money via crowdfunding or IPOs, the developers of the project should get involved in lots of paperwork and many times, they fail to acquire the documents needed to collect money for their project. However, to participate in an ICO, you just require forming a ‘white paper.’ After this, any person can study the white paper and opt to invest in this project in case it interests them.
It offers the creators of the project a chance to set up a community based on their projects. When a healthy community is present, this makes a product very credible. In addition, community members can make their contributions in regard to the projects and request for accountability from the creators.
The ICO’s popularity can perform wonders for the project exposure. As exposure increases, more individuals will learn about the project. This raises the number of prospective investors.
Early access to tokens that are potentially valuable
Some tokens can turn into very valuable cryptocurrencies. ICOs offer investors a chance to make investments in tokens with cheap possibilities. For instance, in the course of Ethereum presale, the cost of 1 Ether is 35-40 cents. At the time of this publication, the cost of 1 Ether is $277.
Motivation for Innovation
The great success, which numerous ICOs have experienced in the past 12 months, has offered more motivation to a number of developers, to innovate and create more thrilling projects.
The brains behind the project needs to pay close attention to their personal social activities as it is vital for the society to note their genuine participation in the project life as well as its success at each level.
Make a decision on the length of the ICO as well as discounts or the initial investors. Avoid extending the time; a month is sufficient. In case you require collecting a specific quantity of cash, this can occur a lot more quickly. The ICO shall be finalized after you realize your goal. For some projects, it only took 15 minutes.
Remain positive since you work for individuals and for them. Meet the society’s demands and attempt to consider each of their proposals. Remember that in the event that the ICO is successful, you shall have very many investors who will offer their opinion and pose queries.