ICO or Initial Coin Offering is a way to raise funds for a project via blockchain technology. The company emits its currency — tokens and sells them for bitcoin, ethereum or fiat money. This way the project can gather thousands and millions of US dollars.
Why is the company going ICO
ICO is a crowdfunding system — a way to attract money from different people. The company needs to ensure them in the success of the project. This means the buyout of the tokens or some other interest in future.
The gathered funds are spent to start and develop the project. If the project is successful, the tokens can be used to pay for the products of the company or can be traded on the stock exchange.
What is the difference between ICO and IPO
The ICO is related to IPO. IPO or Initial Public Offering is a way to attract funds through selling the shares of a company. Going IPO takes time, from several months to a year and costs a lot. Due to these factors, it is available only for large companies and institutional investors.
Going ICO is available even for a company with no currently working product. And the tokens can be bought even by people with a little amount of cryptocurrency because the starting price of tokens is about several US dollar cents.
Unlike the shares acquirers, the token buyers don’t get the share in the company and don’t take part in its management.
How ICO is conducted
During the ICO period, the buyers send their funds to the company. If a minimum amount is gathered to get the project running, the tokens are sent out to the buyers. If not, the funds are returned to the investors.
What is Pre-ICO
Pre-ICO — is a pre-sale of tokens, a fundraising campaign, mostly to conduct the ICO itself. The tokens cost less during the Pre-ICO campaign.
The first one to conduct ICO
The pioneer ICO-project was Mastercoin. Back in 2013, it gathered 5 000 BTC; this amount was equal to $500,000 at that time.