What is ICO? Initial Offering Simply Explained

ICO for short is a practice of crowdfunding for blockchain projects. ICO can be compared to Initial Public Offering (IPO). You get the idea now!

Before a cryptocurrency is listed on marketplace and exchanges, it is offered to investors.

Depending on the startup, the offering can either be open to the public or private investors.

And the cryptocurrency startup employ this fundraising mechanism to sell their tokens or coin in exchange for more stable or established cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Binance coin (BNB) or any other.

In some cases, you can use participate with your legal tender or fiat currency such as United States Dollar (USD).

The first ICO project was held by Mastercoin (now Omni) in July 2013.

Ethereum’s ICO in 2014 raised 3,700 BTC, approximately $2.3million at that time, in the first 12 hours of its token sales.

According to Statistia, the ICOs raised up to $14.8 billion as of November 2019.

Generally, cryptocurrency is risky but ICOs are proven high-risk investments, so caution is advised when investing.

And yes, you need to do your own extensive research (DYOR) on the project if you will participate in any ICO.

One of the most fundamental research process is reading the white paper.

Every good and successful coin offering requires a white paper.

The white paper will expose you to:

1. the problem that project is looking to solve,

2. the solution to the issues,

3. detailed description of the product,

4. its architecture and its interaction with users.

And investigating the project team and business partnership in detail is very important.

To participate in an ICO you need to:

1. Own the relevant cryptocurrency that the crypto startup company is accepting.

2. Make sure that the cryptocurrency wallet that you are sending the funds from is compatible with the ICO token.

3. Triple check the deposit address from official sources.

Any error will result in a loss of investment, i.e. your hard-earned money in plain terms.

Every ICO has a minimal amount required for the project to move forward. This is known as the soft cap.

An ICO has achieved its goal once its soft cap is reached.

Peradventure the ICO fails to reach the soft cap, most ICO will return funds back to the investors.

Most ICOs have hard cap too — the maximum amount that they will accept in investments.

During token sales, some company will like to know the identity of the investor, especially if it's open to the public. Thereby requesting for KYC (know your customers).

ICOs allow the funding of some of the most innovative blockchain projects in the world. And it is always essential to do as much research as possible before committing to hard-earned money and only investing what you are willing to lose.