ICO is a means of collecting funds in an unregulated way for different cryptocurrency projects. This is something startups are using to circumvent the rigorous and regulated fundraising process required by banks and venture capitalists. In such a campaign, a given percentage of the cryptocurrency is sold very early to the project sponsors for other crypto-currencies or legal tender.
How is it done?
When a company wants to raise funds using the original parts offer, a white paper plan containing the details of the project must be established. It should describe what the project is, what it needs and what it aims to achieve. It should also indicate the money that will be needed to undertake the entire business and how many pioneers will have to keep it.
The plan must also state the type of currency accepted and how long it plans to run the campaign. During such a campaign, supporters and enthusiasts of the initiative will buy cryptocoins in virtual currency or in fiat. The coins are called tokens and are very similar to the shares of the company that are sold to investors during IPOs. If the minimum funds required are not achieved, the money is repaid and the whole of the ICO is considered unsuccessful. When the conditions are met within a specified time period, the money can be used to launch the program or even complete it if it is still going on.
Investors who participate in the project at an early stage are primarily motivated by the purchase of cryptographic coins in the hope that the plan will be successful and that they will gain more value after the launch. Projects of this type have been successful in different economies, which motivates investors.
ICOs can be compared to crowdfunding and IPOs. Like IPOs, a start-up company must sell a stake in order to release funds that will facilitate the operations of such a company. The only difference lies in the fact that the IPOs deal with investors while the ICOs work closely with supporters very interested in new projects, just like the crowdfunding event.
However, ICOs are different from crowdfunds in that ICO sponsors are generally motivated by the fact that they can get a significant return on their investment. Funds raised through crowdfunding are essentially donations. That's why ICOS is referred to as crowd crowding.
There have been a lot of successful deals so far. ICOs are an innovative tool in our digital age. However, it is important that investors take precautions, as some campaigns may be fraudulent. This is due to the fact that they are highly unregulated. Financial authorities do not participate in this and if you lose money through such initiatives, it is difficult to follow up for compensation.
For this purpose, some regions do not allow the use of country offices at all. It is important to buy these currencies only from reliable sources in order to be safe.