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What is ICO?

An Initial Coin Offering, also commonly referred to as an ICO, is a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for Bitcoin and Ethereum.

There are some acronyms what you can see in publications — TGE (Token Generation Event) and ITO (Initial Token Offering). It is much more appropriate to talk about tokens for all those projects that use the Ethereum blockchain, and create assets that are not actually a new cryptocurrency, but rather a tool that allows different functions, like burning tokens or other kinds of revenue share.

It’s one of the easiest and most efficient methods for companies and individuals to fund their projects and for regular users to invest in projects they see value in. An Initial Coin Offering ICO is an event that usually extends over a period of one week or more and in which everyone is allowed to purchase newly issued tokens in exchange for established cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH)

It’s somewhat similar to an Initial Public Offering (IPO) in which investors purchase shares of a company.

The significant difference between ICOs and IPOs is that, when you invest, you get tokens of that new cryptocurrency which may get listed on the exchanges once the idea has been developed. It means they aren’t granting you any ownership in the company like IPOs.

Maybe the first cryptocurrency distributed by an ICO was Ripple. In early 2013 Ripple Labs started to develop the Ripple called payment system and created around 100 billion XRP token. The company sold these token to fund the development of the Ripple platform. Later in 2013, Mastercoin promised to create a layer on top of Bitcoin to execute smart contracts and tokenize Bitcoin transactions. The developer sold some million Mastercoin token against Bitcoin and received around $1M. Several other cryptocurrencies have been funded with ICO, for example, Lisk, which sold its coins for around $5 in early 2016. Most prominent however is Ethereum. In mid-2014 the Ethereum Foundation sold ETH against 0.0005 Bitcoin each. With this, they receive nearly $20M, which has become one of the largest crowdfunding ever and serves as the capital base for the development of Ethereum.

The legal state of ICO is mostly undefined. Ideally, the token is sold not as a financial asset but as a digital good like many other things. This is why ICO is often called “crowd sale”. In this case, in the most jurisdiction, the funding with an ICO is not regulated, which makes it extremely easy and paperless, given a lawyer experienced with the issue is on board.

There are only two countries with full cryptocurrency regulation for now — Japan and Gibraltar.

Some countries are on the go with cryptocurrency approvement. That’s are USA, Singapore, UK, Switzerland, Australia, Canada, South Korea.

Some countries banned cryptocurrencies in vice versa. This is about Kirgizstan, Bolivia, Nepal, Bangladesh and of course China (Chinese government try to ban cryptocurrency at least twice each year )) )

The 2017 year was ICO year. It looks like 2018 will be the year of regulation in cryptocurrency industry. So stay tuned for our updates.

Category:Cryptocurrency, ICO
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1 Comment

  • March 17, 2018 at 8:12 pm

    I had never heard of ICOs before. Thanks for the information!