To begin with, ICO( Initial Coin Offering) is a similar concept to IPO(Initial Public Offering). Both the processes involve companies raising capital for their businesses. The difference between the two is that, in the case of an IPO, the investor receives a share of stock of the company, in return for the investment. But an ICO, there is no such share, instead companies raising funds using the blockchain-based platform are considered equal to the shares. Also, IPO is mostly for well-established companies, while ICOs are mainly used for start-ups.
Here, let’s focus on ICO and how it works before you get started, to help you gain a clear understanding for turning around huge profit numbers.
- Firstly, the company that is looking to raise funds with ICO, will establish a whitepaper, which specifies every detail about the project, its goals, legal framework, benefits, and every other necessary information to help the investors decide whether to invest or not.
- For the investors who invest in the ICO, the project’s crypto tokens are offered in return.
- The tokens may be obtained in exchange for other cryptocurrencies or fiat money based upon the project and requirements.
- The ICOs are issued on the platform for sale, the most popular ICO issuance platform is Ethereum.
- The ICO tokens which are transferred across the network and traded via cryptocurrency exchanges serve various functionalities such as granting access to shareholders for a specific service to making them entitled to the company’s dividend shares.
- Based on their functionality, the tokens are divided into two types i.e. Utility tokens and security tokens.
These are the basics of an ICO, and how an ICO works. ICOs have been gaining tremendous popularity over recent years, and have become one of the most preferable fundraising mechanisms in the cryptosphere. Industry experts believe that ICOs have all the potential to become the mainstream crowdfunding medium for companies and might become the future of crowdfunding business. So, if you want to become a part of this revolution, and create your own ICO, for raising enormous funds for your business, conduct deep research and choose the right ICO development company and turn around million dollar profits for your venture.