An initial coin offering (ICO) is the digital currency comparable to a stock marketplace known as an initial public offering (IPO). While ICOs have the potential to generate significant gains, they are exceedingly dangerous and risky due to a lack of legal agreement. The risk factors correspond to the elimination of central authority. This article will throw light on all there is to know about initial coin offerings (ICOs), including how they operate and some other prominent instances. Click this image below to start your bitcoin journey.
What do Initial Coin Offerings mean?
Initial coin offering (ICO) refers to a fundraising occasion where a firm offers a new digital currency to elevate cash. Investors get digital money as a reward traded on various platforms (such as Bitcoin Trading Software) in exchange for their monetary contributions.
Examples of ICOs
Some of the famous companies that started with ICOs are listed below:
Ethereum raised around $20 million.
Cardano raised around $62 million.
Tezos raised $25 million in 2017.
How does it work?
A specific crypto company announces the inauguration day of ICOs. With the announcement of commencement, they also brief the customers about purchasing policies, such as rules and purchasing procedures. The ICOs are offered to be bought against cryptocurrencies (most commonly BTC and ETH). Apart from it, some companies also provide against fiat currency.
How to purchase it?
It can be purchased online via crypto wallets. The buyer and seller both provide their public keys to each other. The buyer sends digital money and, in return, gets ICOs. Their prices vary from one another, depending on the number of tokens and the number of funds raised by the digital firm.
Are ICOs legally authorized?
ICOs are illegal and risky to invest in. They are not regulated by any governmental authority, making them highly insecure. Most countries, particularly in Asia, have banned it altogether.
ICO vs. IPO. What is the difference?
IPOs and ICOs are both used to raise funds. IPO uses the funds for a public company, whereas ICO is sold based on digital coins and tokens. Another significant difference between them is that the security exchange and commission department authorize IPO registered companies. At the same time, it is not necessary to have a legal permit before beginning with ICOs. Therefore, IPOs are relatively safer than ICIOs.
What are the advantages of ICOs?
Below mentioned are the benefits that ICOs provide to the users.
- Since they are at the beginner level, they are available at cheaper rates.
- High volatility can help you gain potential benefits, but you have to choose the right company.
- They are easily accessible, as they have no security restrictions.
- It is an excellent way to raise funds for startup companies.
What are the disadvantages of ICOs?
Following are the disadvantages of ICOs:
- Because of high volatility, the coin value can fall down or fail entirely in extreme cases.
- The lack of regulation can lead to more frauds and swindles.
- Finding a legitimate project in ICOs is like searching for a needle in a haystack.
- It is hazardous for the ones who are new to the crypto industry.
Should I invest in ICOs?
It is always risky for investors to put their money in the digital market. The same is the case with ICOs. One must carefully search for the best company providing relatively stable coins. A reliable company can help to gain skyrocketing profits. So, deep knowledge regarding risks and volatility is a must-have before putting significant capital in ICOs.
Wrapping it up
To close the discussion concisely, initial coin offerings or ICOs are similar to the IPO stock market. They can be used to raise the funds of a company. However, ICOs are not regulated and are extremely risky. On the other hand, IPOs are relatively safer. Therefore, investors should consider an IPO as an alternative to ICOs. But, if ICOs are the only choice, then a reliable company should be selected to invest in.
