ZoneBitcoin EditorialWhat is an ICO? It's what? Now that you generally know how does bitcoin work, go further. There are indeed many terms related to the world of blockchain. Here is a term that has been talked about a lot lately. Yes, we are talking about ICOs, or Initial Coin Offerings.
Definition of an ICO:
An ICO in the blockchain field is quite simply a fundraising method. This involves issuing (selling) cryptocurrencies at the start of a project. Thus, during the start-up phase of a project, the founders decide to first sell the cryptocurrency of their projects.
These cryptocurrencies which are digital assets are called tokens. We also say in French, tokens. You will understand why we often say "token sales" to talk about an ICO. In other words, an ICO is the sale of tokens/tokens of a company in its early days.
Unlike an IPO (initial public offering), the token buyer is not a shareholder in the literal sense. It only buys the currency that will be used by the service.
If, for example, you buy a token from a project from a company working in medical control, you will then have the token to use this service.
Why do an ICO?
Most projects, especially at the beginning, find little or no funding. Besides, in general terms, that's the difficulty with startups. Generally, founders do not have the money to make their projects a reality. It's difficult to get a loan from a bank when you have no assets. It's difficult to convince a business angel that you haven't yet proven yourself. In short, it's well known that raising funds when you start a business is hard work.
Thus, ICOs prove to be the ideal solution. It is even the logical continuation of equity crowdfunding where it involves selling shares (equity) for money. There, for blockchain projects, we sell the tokens of a project. This is the whole value of blockchain projects, their cryptocurrencies.
So, there is something for everyone:
- Founders raise money without giving any equity in exchange.
- Investors participate in projects and can make a great return on investment.
Urban artist it's quick and very easy to establish. No need for paper or registration or anything. Everything is done online very quickly.
For example, we can cite the masterful ICO of Brave, the blockchain-based browser. The founders of Brave have therefore released their token called "BAT", the acronym for "Basic Attention Token". Indeed, Brave wants to reward people when they watch ads. This is the complete opposite of Google and that is also why it is so successful. Indeed, Brave to raise 35 million dollars in….30 seconds only! It must be said that one of the founders of Google is the co-founder of Mozilla. But, all the same! You see the power of an ICO here, right?
Remember that the first buyers of BAT made a lot of money because today, the BAT has gained a lot of value!
What are the tokens/tokens offered for sale?
You may at first be surprised by how this works. It doesn't seem logical to sell assets when the company hasn't even been created yet. Worse, she hasn't even proven anything yet, and she's already selling tokens? Strange right?
Well, actually, it's all there. The entire ICO is based on one premise. It's a kind of investment. Indeed, the more the company sells its tokens, the more it will be able to realize its project. When users buy this cryptocurrency, they are doing nothing other than investing in the project.
An ICO is therefore a kind of liberalized and decentralized investment. By participating in an ICO, you are a business angel. An investor at or almost the idea stage.
This is also why ICOs are good investments in theory. Indeed, the tokens made available during the ICO are limited and rare. As they are sold at the beginning, they are sold at a ridiculous price.
Thus, the more the company advances in its timeline, the more tokens it sells, the more its project comes to fruition. Thus, with the law of supply and demand, tokens increase in value.
Why buy the tokens offered for sale in an ICO?
The whole point is there. In the same way as when you invest in a classic business in its early stages, your future profitability is higher. Indeed, the risk is also greater for you. A greater risk because the company is still new and has not yet proven itself. You're making a sort of bet.
For an ICO it’s the same thing. You are one of the first investors and if you have spotted the right nugget, then it's the jackpot.
It is therefore with great interest that participants in ICOs buy the tokens.
The goal is threefold:
- Make a profit on the future resale of tokens that have increased in value.
- Participate in a project that interests you and help the founders make it a reality.
- Own a token and use it as you do with bitcoin or other cryptocurrencies.
What to do with tokens purchased during an ICO?
What you need to remember is that tokens are not just worthless assets. A token, by definition, is created on a blockchain. These are cryptocurrencies that are exchangeable for bitcoins or ethereum in general.
You can imagine that otherwise the ICOs would not have had the success that we saw with millions of dollars raised.
Moreover, tokens purchased during an ICO can be sold and exchanged for other cryptocurrencies.
What are the disadvantages of an ICO?
So far, we have only seen the positive sides of ICOs. It's quick and easy to set up. And, everyone wins. But, is it all rosy? No! Of course not!
As always there are risks scams. When the media talked about these incredible fundraising with millions in just a few moments! And above all free of charge! This attracted the desire of many sharks.
It would have been great if ICOs only remained with great projects and companies that hold up.
A lot of rotten scammers have infiltrated the game, unfortunately. And, moreover, today we are experiencing a fall in ICOs because of these guys who managed to destroy and dirty a wonderful method of fundraising.
Now, many great projects are not even visible because they are like crushed by scam ICOs. These are called "exit scams" that sell " shitcoins". For example, in April 2018, a Vietnamese company Modern Tech who ran away with the money collected during the ICO. They ran away with 660 million from around 32000 people.
So, to summarize, we will say that an ICO is great in operation. This finally makes it possible to raise funds without having to do a whole bunch of paperwork with venture capitalists or banks. This allows everyone to become an investor and contribute to the success of a project.
Plus, there are huge opportunities to make money while continuing with a project. So, the key is to do it well.
Take a good look at the project and the founders behind a blockchain project. Analyze as much as you can about the militons, the team, the foundations and the token.
Indeed, you can certainly gain a lot but you can also lose if you do not do the right research.
We are preparing a next article for you to help you choose the best ICOs!
Where to find a list of all ICOs?
IcoBench is also a great site that describes and lists all ICOs. The advantage of this site is that you can see projects by area of expertise. Thus, we can find ICOs in the field of media, art, sport, medicine, etc.
