The surge in cryptocurrencies is increasing day by day. There are different ways through which the cryptocurrency project collects its funds, and one of their ways is through the Initial Coin Offering (ICO). Investors must purchase these initial coin offerings to get the cryptocurrency token. Then, the ticket can be used for the product or the service offered by the company.
Initial Coin Offerings are something that only a few people know about. Therefore, if you are curious about ICOs, this guide got you covered. This comprehensive guide will cover all the different aspects of ICOs, and you will also be able to learn how to use these coins.
What are Initial Coin Offerings (ICOs)?
Initial Coin Offerings are used as a source of fundraising for cryptocurrency and blockchain projects. These coins are similar to Initial Public Offerings (IPO) and help businesses start new projects and ventures.
Here, the blockchain companies sell the crypto tokens that will be used by the network in the future. As the company grows, the value of the tickets will increase, and the investor will gain a lot of profit. This is a unique way digital companies can gain funds while the investors will also have a lot of profit.
The History of Initial Coin Offerings:
Software engineer J.R. Willet was the first to use ICOs and started collecting funds for the token MasterCoin. He was able to raise about US$600,000. Then, people began understanding this concept. In 2016, different companies were able to make a lot of capital through this same concept.
In 2017, the concept of using Initial Coin Offerings peaked because of new technological advancements and innovations. There were about 342 tokens, and it raised about $5.4 billion. After this, the frenzy of ICOs never stopped, and people are still using this concept to raise money, especially for blockchain and crypto projects.
How Initial Coin Offering Works?
Now, you might be thinking about how this works. When a project wants its funding through ICO, they need to make a proper structure of the coins. Following are some of the different ways through which this can be done.
1.Static Price and Supply:
In this type of ICO, the price of each token is preset, and the number of tickets is also preset. This is because the company wants to complete its funds; therefore, they limit the investors and the amount they should be investing.
2.Dynamic Price Static Supply:
This means that the supply of the tokens is fixed. However, the amount of funds that investors receive determines the price, which is the overall price per token.
3.Static Price and Dynamic Supply:
Here, the amount of funding received through the investors is determined by the supply of the tokens. However, there is a limit to every ticket.
Making of White Paper:
After making the coins, the company also needs to make a white paper, a pitch book, or a proposal for the investors. The promoters need to explain everything about the project, such as what the project is about, the amount of money they need and why they need it, the profit the investors will make, the duration of the project, and other similar things.
The white paper is released so that the investors can learn everything before they can invest. If the investors are happy, they can use the digital currency to buy the tokens and invest in the project.
Benefits of Initial Coin Offerings:
There should be a reason why the ICOs are getting so much fame and why people are using them. Following are some main benefits of using this concept to raise funds.
1.High Liquidity Chances:
One of the main reasons ICOs are getting so much fame is because they allow investors a high chance of liquidity. When you invest in shares or stocks, you are usually not allowed to cash them because the company uses them. However, this is different from the Initial Coin Offerings. They enable the investors to liquidity their investment anytime they want. Furthermore, the value of ICOs also depends on the value of the project at that given time.
2.Cost Variation:
Another great benefit of using ICOs is that their value does not increase according to the stock market. Instead, the weight increases according to the value of the project. This reduces the chances of loss for the investors, allowing them to profit considerably.
3.Open for Everyone:
The best thing about ICOs is that they allow everyone to participate. The only thing the investor should be eligible for is if they can transfer the funds when people need to buy it.
Here, unlike traditional investment, the investors are also allowed to invest whenever they want. With ICOs, you can start investing early and don't have to know the investors. You need to know the different projects and the tokens coming, and then you can invest in them as you like.
4.Competition is Less:
Many projects and ventures need more funding to work out. This can be due to many reasons, such as the company's inability to appeal to investors, the type of projects, and many different reasons. Therefore, the less appealing projects get the funds with the ICO, and the companies can complete the tasks.
5.Using Cryptocurrency:
If you have different digital currencies but need to know where to use them, ICOs can be the perfect outlet. This can be very beneficial for people who cannot use their cryptocurrency, allowing them to invest and make more money.
Final Words:
Initial Coin Offerings have become very popular; however, people need to learn more about them. This is a fantastic way to invest in blockchain projects and other ventures while gaining profit. We hope this article helped you learn about ICOs and how they work.
