Initial Coin Offering (ICO) is an unregulated and controversial cryptocurrency crowdfunding method that is a source of capitalization for young startups. In the ICO, the percentage of generated cryptocurrency is sold to investors in exchange for a legitimate tender or other cryptocurrency funds. This terminology is similar to “selling tokens,” a methodology for selling in an economy that gives investors access to a project from a later date.
Thanks to the success of Ethereum, ICOs are used to finance the development of a crypto project by issuing a token. Mining ICO cryptocurrencies has also become extremely popular. It has become a tool that could revolutionize not only the currency, but the entire financial system. The ICO mark may become the securities and shares of tomorrow.
The concept
ICOs exercise ownership of the project. A coin in this context is a symbol of a share in the enterprise - a digital share certificate.
Unlike initial public offerings (IPOs), where investors acquire stakes in a company’s ownership, for ICOs, investors buy company coins that can measure profitability if the business is successful.
As of August 2017, at least 400 ICOs have been conducted. Ethereum (as of August 2017) is the leading blockchain platform for ICOs with a market share of over 50%. Ethereum ICOs have led to significant phishing scams, Ponzi schemes, and other fraudulent activities.
History
The answer to the question: “ What is cryptocurrency ICO?” - a historical retrospective may serve. The first token sale (also known as ICO) was held by Mastercoin in July 2013. Ethereum made money from the sale in 2014, raising 3,700 BTC (bitcoins) in the first 12 hours, which is approximately $ 2.3 million. The ICO was conducted by Karmakuin in April 2014 under the project of Karmashares.
One of the first “core” ICOs was launched by the Kik messaging app developer in September 2017.
Cryptocurrency ICO exchanges, as well as token sales, are currently extremely popular. As of May 2017, there are currently around 20 offers per month, and Brave's new ICO web browser has raised about $ 35 million in 30 seconds. There are at least 18 websites that track the initial coin offer, including social networks for cryptocurrency ICO announcements. At the beginning of October 2017, sales of ICO coins amounted to 2.3 billion US dollars.
Mechanism for scammers
The upcoming ICO cryptocurrencies can be used for a wide range of events, from corporate finance to charitable fundraising for direct fraud. The US Securities and Exchange Commission (SEC) warned investors to beware of scammers using ICOs to implement “pumping and dumping” schemes, in which the offender speaks of the value of ICOs in order to arouse interest and increase the value of coins, and then quickly “dumps” them for making a profit.
However, the SEC also recognized that ICOs "can provide fair and legitimate investment opportunities." UK financial behavior experts also warn that ICOs are very high risk and speculative investments. Even in the case of legal procedures, funded projects are usually at an early stage and, by definition, carry a high level of risk.
Definition
ICO is a fundraising tool in which the company attracts investors who are looking for the next big cryptocurrency point by issuing their own digital currency in exchange for bitcoin, as a rule. Initial coin offerings are used by startups to circumvent the rigorous and regulated process of raising capital needed by venture capitalists or banks. In an ICO campaign, the percentage of cryptocurrency is sold to early supporters of the project in exchange for a tender and other cryptocurrencies.
Initial Public Offering of Coins (IPCO)
The answer to the question: “What is cryptocurrency ICO?” - may be the following example. When a developer wants to receive money through an initial coin offer (ICO), it usually creates a plan on a paper document that states what the project is, what needs will be met after completion, how much money needs to be invested in venture financing, how many virtual tokens the authors of the project will demand what kind of money is accepted and how long the event will be held.
During the ICO campaign, enthusiasts and proponents of the firm's initiative buy some common cryptocoins with virtual currency. These coins are called tokens and are similar to company shares sold to investors in an initial public offering (IPO) transaction. If the money collected does not meet the minimum funds required by the company, they are returned to supporters, and the ICO is considered unsuccessful. If the financial requirements are met within a certain period of time, money is used to initiate a new scheme or to complete it.
Controversial Investments
Early investors in operations are usually motivated to buy cryptocoins in the hope that the project will be successful after the start, which can translate into a higher level of cryptocoin value than what they purchased for before the project started. An example of a successful cryptocurrency ICO rating, which has become profitable for investors, is the platform of smart contracts called Ethereum, where there are “ethers” as coin tokens. It was created in 2014, and its record ICO was $ 18 million in bitcoins, or $ 0.40 per coin. The project went into circulation in 2015, and the next year the value of the currency grew to $ 14 with a market capitalization of more than $ 1 billion.
High risks
ICOs are similar to IPOs and crowdfunding. As in the IPO, the company's share is sold to raise money to support the activities of the enterprise. However, while IPOs deal with investors, ICOs deal with supporters who seek to invest in a new project - crowdfunding. But ICOs are distinguished by the fact that the supporters of the former are motivated by the expected return on their investments, and the funds raised in the last campaign are mainly donations.
Despite successful transactions, ICOs can become destructive innovative tools in the digital age. Investors should be careful, as some campaigns are actually fraudulent. Since these fundraising operators are not regulated by financial authorities such as the Securities Commission (SEC), funds that are lost due to fraudulent initiatives can never be returned.
In early September 2017, the People's Bank of China officially banned the ICO, citing the fact that it destroyed the country's economic and financial stability. The central bank said that tokens cannot play the role of currency in the market, and banks cannot offer services related to ICOs. As a result, both Bitcoin and Ethereum collapsed.
What is cryptocurrency ICO
Cryptocurrency is a digital or virtual currency that uses cryptography for security. When the question arises: "How to make cryptocurrency ICOs?", It should be remembered that because of the security function, it is difficult to fake. The defining feature and perhaps the most attractive is the organic nature of such a currency - it is not issued by any central authority, which makes it immune to government intervention or manipulation.
Fast start
The anonymous nature of cryptocurrency transactions makes them very convenient for a number of dishonest actions, such as illegal money laundering and tax evasion.
The first cryptocurrency was Bitcoin, which was launched in 2009 by a person or group known under the pseudonym Satoshi Nakamoto. As of September 2015, more than 14.6 million bitcoins were in circulation with a total market value of 3.4 billion US dollars (201.5 billion rubles). The success of this currency has spawned a number of competing cryptocurrencies such as Litecoin, Namecoin and PPCoin.
ICO cryptocurrencies and blockchain: advantages and disadvantages
Cryptocurrency facilitates the transfer of working capital between process parties in one transaction. These transfers are facilitated by the use of public and private keys for security reasons. Money transfers are carried out with a minimum processing fee, which allows users to avoid the large fees charged by most banks and financial institutions for bank transfers.
Central to Bitcoin is the blockchain that it uses to store an online book of all financial transactions that were carried out using this payment element, providing a data structure for this book, which is subject to limited threat from hackers and can be copied to all computers, on which Bitcoin software is running. Many experts see this blockchain as important in technologies such as online voting and information transfer, and large financial institutions such as JP Morgan Chase see the potential of cryptocurrencies to reduce transaction costs, making payment processing more effective.
Since cryptoconverts are virtual and do not have a central repository, the digital cryptocurrency balance can be destroyed if the computer crashes if the backup does not exist. Due to the fact that prices are based on demand, the speed with which a cryptocurrency can be exchanged for another currency can fluctuate greatly.
Security issue
Cryptocurrency does not have protection against the threat of hacking. In a brief history of bitcoin, the company has suffered more than 40 cases of theft, including several in excess of $ 1 million. Nevertheless, many observers in their comments consider cryptocurrencies as a hope that there can be a currency that preserves value, facilitates exchange, is more mobile than hard metals, and is not affected by central banks, financial institutions and governments.
The schedule of ICO cryptocurrencies has a specific goal for financing the project - this means that each token will have a predetermined price that will not change during the initial coin offering period. This fact also illustrates that the token is static.
ICO List
By analyzing the list of cryptocurrency ICOs, you can combine all the main characteristics or factors of a successful ICO in both fundraising and evaluation. We list the main ones. So we will complement the answer to the question “What is cryptocurrency ICO?”
- Nxt is a complete economic system platform that allows users to launch assets that can be exchanged decentrally through the Nxt exchange. Users note that it also allows you to add plugins and access the Nxt platform through the API. The NXT ICO began on September 28, 2013 and lasted until November 18, 2013, when 21 bitcoins worth about 14 thousand dollars were collected. The ICO was carried out in an “unofficial” way through an anonymous account, while the funds were sent to the personal address of the Bitcoin sponsor with the attached special message.
Ethereum is a smart contract and decentralized application platform that has gained great popularity over time. Ethereum runs through the Proof of Work protocol. Ethereum ICO was conducted from July 20, 2014 to September 2, 2014 (42 days). 31.5 thousand ETH (18.4 million US dollars) were collected during the initial coin offering period, which made it the second most successful ICO and the 6th largest co-financed project. The fact that the development team holds funds in BTC leads to the fact that it loses a significant part of its funding due to volatility. Currency has grown in value.
From the reviews you can understand that several projects have been built and are being created on the Ethereum virtual machine - DigixDAO, Ardor, Singular-DTV and Iconomy.