An Initial Coin Offering (ICO) is like the cryptocurrency space’s equivalent to an IPO in the traditional finance world. ICOs act as fundraisers of sorts; channeling money to founders without any claim to ownership of the company.
Many ICOs are illegal or unregistered security offerings and do not represent prudent investments.
Even mentioning them on this website is sure to bring unwanted attention from Bitcoin Maximalists but I don’t think its fair to ignore the billions of dollars that are gambled on the dream of financial technology innovation.
A company looking to create a new coin, app, or service launches an ICO. Next, interested investors buy in to the offering, either with fiat currency or with preexisting digital tokens like ether.
In exchange for their support, investors receive a new cryptocurrency token specific to the ICO. Investors hope that the token will perform exceptionally well into the future, providing them with a stellar return on investment. The company holding the ICO uses the investor funds as a means of furthering its goals, launching its product, or starting its digital currency.
ICOs are used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks.