Initial Coin Offering
Initial coin offering (ICO) is the process of raising funds for a new cryptocurrency plan. It is different from the common rigorous fundraising process peculiar to many banks and capitalists when they want to launch a new venture. The plan for the coin is rolled out to some potential investors; they, in turn, support the launch financially by buying a fraction of it. They (the investors) get Bitcoin or some other digital currency as a form of a legal token.
Initial Coin Offering is what any startup firm use in order to raise the required capital for the creation of a new cryptocurrency. The initial coin offering participants are invested in the success of the project. They can help get the word out and raise awareness in the broader community. They also provide early liquidity for the cryptocurrency tokens when they start trading. The Initial Coin Offering participants are also usually motivated by a profit potential if the project takes off and the tokens become worth more than the ICO price
But that is just what an ICO is all about on the surface. Let us take a look at what goes on in the background as well.
The Inside Story
When the idea for the coin is ready, it needs to get to the outside world for it to materialize. But that will not even be possible without funds to make the idea turn into a reality. What the creators do is that they try to raise funds by first writing a whitepaper. What exactly is a white paper?
A whitepaper is a document prepared by the startup firm that highlights what needs to be done to get the whole idea running, what the coin can be used for, how beneficial it will be. Other things that will be enumerated in the whitepaper will include what fraction of the coin will be offered to early investor and what fraction the creators intend to keep for themselves. The type of payment methods accepted and how long the ICO campaign will run will also be included.
These investors will see the whitepaper listed and will examine it so as to decide if it is a venture they will like to go into or not. And then the ICO starts. Remember that you will have already mentioned how long the entire campaign will last. During this period, the early investors will buy the fraction you already mentioned is available to them using fiat or virtual. The coins they (early investors) get in return is referred to as “tokens”.
The reason they are making the purchase is with the hope that the whole ICO campaign comes off successful and in due time the coins appreciate in value. They will then be able to sell and make their profits.
But please note that an Initial Coin Offering is considered unsuccessful if the minimum amount of funds required to move the project forward is not met within the timeframe outlined for the ICO campaign to run. On the other hand, if the minimum amount of funds is raised within that same timeframe, the initial coin offering campaign is considered successful.