The startups have always come up with unique ideas to raise funds to give life to their ideas. But one of the most prominent and fancied word in today’s startup us to raise funds through the ICO or the Initial Coin Offerings.
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The age-old system of fundraising includes the selling of stake to a Venture Capitalist in exchange for money. The VC invests in the company believing that the new investments will fetch higher wealth in the future than the cash they are investing right now. However, in recent times, a new craze has overtaken the age old system, wherein, the company can raise funds in a faster, transparent, and beyond demographics in a democratic way by exchanging virtual currency for the real ones.
The digital currency goliath has just woken up, and there are examples where the companies have raised over a million dollars in few seconds compare to the long process of the age-old system. This phenomenon is known as the Initial Coin Offerings. Let’s understand it in a simple way:
The acronym sounds similar to a known capital raising process called IPO. The term ICO refers to the Initial Coin Offerings and it involves selling a brand new cryptocurrency at discount or a token as part of raising capital. If the new currency succeeds in the market often due to speculation – just like the stock markets, the investors have made profits.
However, the major difference between IPO and ICO is that the ICO neither offers rights of ownership to the investors nor entitles the owner to cash flows like dividends. The investors in the cryptocurrency range from a college kid to venture capitalist and from a homemaker to business tycoons.
As indicated, the ICO is crowdfunding tool for startups which accepts the digital currency as against the real currency. These funding events are also known as the token sales. During the token sale period, the investors receive token in exchange for the digital currency. These tokens offer a promise of future profits to the investors. After successful completion of the token sale, the ICO tokens are available for trading on various online platforms or exchanges. Some of them have skyrocketed in last year or so and has made several rags to riches.
In the recent times, the ICOs have raised over a billion dollars and crossed the venture capital or seed funding in the history.
One big pointer is that the digital currency investment is extremely risky compared to the traditional startup investments. The digital currency frenzy is powered by the explosive growth in the Bitcoin value, each of which is worth of $15,000 at the time of writing this article. The unprecedented growth as helped introduce both professionals and fanatics to the world of Initial Coin Offerings. You can check out the current rate of Bitcoins and other cryptocurrencies along with the news doing around in the crypto world at the ICO Token News. It also provides a list of current and upcoming ICOs along with exchange information.
Almost all the token sale follows similar steps:
In 2016 and 2017, the ICOs have grossed over $1.5 billion. Some of the top fundraisers include:
There are basically two ways to take part in the startups. Just like an IPO, you can buy the ICO tokens during the crowd sale on the Ethereum platform or you can also buy it through exchanges once they get listed.
To buy tokens during the crowd sale on the Ethereum platform, you need to have an Ethereum wallet and a balance of ether tokens. The Initial Coin Offerings are linked to a specific Ethereum address and one needs to send their Ether to receive the ICO tokens. You can send your Ether as soon as the crowd sale beings and you will receive the tokens after the end of ICO.
The successful ICO tokens make it to the Cryptocurrency exchanges and become available for trading. If you have missed the ICO during the crowd sale, then you can participate by purchasing the tokens at the market price from such exchanges.
The following text provides step-by-step instruction on how to take part in the Initial Coin Offerings on the Ethereum platform:
Now you have your new ICO tokens in your wallet, you can sell through exchanges or hold it in your wallet for future gains. Congratulations! You have successfully subscribed to the Initial Coin Offerings.
The world wide web has plenty of resources to keep a tab on the current and upcoming ICOs. Following are some of the resourceful website to know about the latest and hottest happenings in the ICO world:
These two websites provide “All you need to know” information about the Initial Coin Offerings and Token Sales.
The Initial Coin Offerings have taken a big leap in recent times and are gaining popularity as we write. The surge in the bitcoin value to over $15,000 per coin is anything to go by then there is still a huge potential. This article has tried to provide a complete answer to what is ICO? How does it Works? How to buy ICO tokens? And Resources to check? We believe the beginners will find the article helpful. Happy Investing!
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