What is Initial Coin Offering ? and how does it works

What is Initial Coin Offering ?

 ICOs are used as an alternative to crowd funding to issue a new cryptocurrency.

 Whenever money is raised through crowd funding for any crypto currency, in that process the company provides a token in place of shares or shares in the company to its investors who have helped the company raise money.  The investor can use this token as per his wish.

 The investor can sell this token issued by the company to anyone.  Or you can keep it with you and wait for its price value to increase.  You can use this token to buy bitcoins using bitcoin, Ethereum or any other crypto currency.  These tokens can be used everywhere.

History Of ICO initial coin offering :

 With the first token sale held by Mastercoin in July 2013, Ethereum raised 3,700 BTC in its first 12 hours with a token sale in 2014, equivalent to approximately $2.3 million.

 ICOs and token sales have become extremely popular these days.  ICO has attracted the attention of many people due to the profits made in it.

Why are ICOs used?

 Whenever a company starts, the first thing it has to do is raise money for its product.  He has three main ways of raising money-

 1) First, he gives shares in his company to the investors.

 2) Secondly, he should fund his company by taking interest (loan) from a bank.  In this situation the company will also have to pay interest to the bank.

 3) The third and last method is to take orders before making the product, collect money from it and make and sell the product.

 ICO is one of the best and easiest ways for an individual or company to raise funds for their projects, and not only companies but also people invest in their project.

 Whenever a company has to raise money for its project/start-up, it uses ICO i.e. Initial Coin Offering.  In simple words, the process of raising funds for the company’s product through crowdfunding is done through ICO.

 According to a report, around 50 offerings are being made every month in November 2017.  Which is a very big number.

How does ICO work?

 Whenever a cryptocurrency startup firm wants to raise funds through ICO, the company makes a plan before raising the funds.  The company writes all the information related to the project on a whitepaper.  In which it is told how much money will be spent in the project and how much money does the firm need?

 How much time will it take for the firm to raise funds?  How long will this ICO campaign last and what happens if the amount raised is less than the planned amount.  All this information is written on that whitepaper.  Whitepaper is a very important paper of ICO.

 Since equity is not involved in most of the ICO cases, investors are more interested in purchasing cryptocurrencies at lower rates during ICOs.  Initially ICO is available at low rates but as the company grows its price value and market value also increases.

 Investors invest in ICOs with the idea of buying at lower prices and selling at higher prices.  When ICO comes on the exchanges, investors get huge profits.  Bitcoin has recently crossed 1000 dollars.  Whereas in 2011 it was only one dollar.

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