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What are ICOs, Initial Coin Offering Explained for Dummies?

What are ICOs?

Have you ever heard someone talking about ICOs and wondering what does it mean? ICO is a 21st century buzzword which is well known to millennial investors and is an abbreviation for Initial Coin Offering (ICO). It is an unregulated fundraising tool used by crypto world startups to crowdfund their blockchain ventures by issuing digital currency tokens. Most investors from stock market are already familiar with Initial Public Offering (IPOs). Although similar in concept, ICOs are very different from IPOs. Unlike IPOs, ICOs do not allocate any company stocks but issue tokens to passionate investors depending on their investment amount. Compared to an IPO, an ICO campaign is much more efficient as startup companies do not need to go through rigorous and extensive capital raising process with venture capitalists and banks, which usually involve a lot of bureaucracy and paperwork.

If you are familiar with crowdfunding then ICOs will make much more sense to you. Before launching ICO, startup company usually comes up with a whitepaper where they detail about the company idea, project roadmap and the intent for token distribution. To win the confidence of its investors, white paper also details why token is needed for the project and Token Distribution Plan (TDP). TDP usually details how much token will be allocated to company, founders, developers, investors, marketing or to cover any other costs. TDP also provides good insight whether founders have long term plan for the project or just interested in quick buck.

Some ICO companies also offer presale tokens to institutional and high worth investors at a much discounted price, before ICO is opened for the general public sale. Generally, tokens offered during public sale event are much cheaper and offered at discounted price compared to buying token once its listed on an exchange. Maximum token discounts (as high as 50%) are offered in the beginning of ICO launch, which decreases as time progresses. Passionate supporters and investors buy new ICO tokens in the hope that if company idea is implemented and successful, token value will multiply and provide a handsome return of investment. Finally, when the funding goal for a project is met and the project takes off these tokens become functional units of cryptocurrency.

ICOs Bounty Program

Some ICO companies also offer bounties or rewards to passionate supporters who help in marketing company’s ICO. Bounties usually include receiving tokens for free. ICO marketing usually involves writing reviews, sharing news, updates and articles on social media, mass communication and completing actions as instructed by the company in Bounty Program’s terms and conditions. To check latest Bounty programs click here


Brief History of ICOs

Back in 2013, Mastercoin became the first ICO to be ever held and raised around 5000 Bitcoins, worth $500,000 at the time. When ICOs initially started, the main form of investment fund transfer was fiat money or Bitcoin. For example, Ethereum token was bought by passionate supporters by sending their Bitcoin to Ethereum organisation address. But now days investors have more options to choose as ICO companies are accepting Bitcoin, Ethereum or fiat money in the form of investment money.

Where Does Blockchain Fit In The Whole Puzzle

All digital cryptocurrencies use blockchain technology to function. Some crypto companies implement their own blockchain protocols while most use existing blockchain platforms for the ease and speed of launching their cryptocurrency. For example, 77.74% of ICOs cryptocurrencies are utilizing Ethereum blockchain platform, offering ERC20 based tokens as their cryptocurrencies. Which blockchain platform is best for an ICO project is a million dollar question and usually depends on the use case, business model, network speed, transaction speed and security requirements of the project.

Regulation and Legal Status

ICOs are not regulated by Securities & Exchange Commission (SEC) in US or by any other government organization in other countries. Lately, some countries have shown interest to formulate plans to regulate ICOs. Regulation of ICOs might be bad for startup ventures as it will make crowdfunding difficult, at the same time regulations will also help to prevent ICO scams and in turn save investors from fraud. In 2017, China PBoC bank officially banned ICOs, citing them as a form of unapproved illegal public financing behavior which raises suspicions, financial fraud and other criminal activities.

Investment and Rate of Return (ROI)

Although ICOs are full of risk they have also provided one of the best return of investment by any asset in the recent times. Many of the early investors and supporters who bought ICO tokens during public sale events have made jawdropping gains. Here are the Top 10 ICOs of all time with maximum ROI since there launch.

1. Nxt +1867061%
2. Iota +551029%
3. Neo +426645%
4. Spectrecoin +375341%
5. Ethereum +337797%
6. Stratis +187192%
7. Ark +66009%
8. Lisk +27767%
9. Populous +19414%
10. Storj +14497%


Other Noteworthy ICOs in the Past

Ripple
Raiden Network
Stellar
Qtum
OmiseGo
Waves
Golum

Hot Upcoming ICOs in the Future

Telegram
JioCoin
KodakOne
StreamToken
Winding Tree
Facebook (Its rumored that Facebook is working on its own cryptocurrency but Bloqtimes could not confirm it with an official statement from Facebook)

If you are further interested, click here to check for Live and Upcoming ICOs.

New to cryptos? Bloqtimes recommends all below articles to get upto speed:

Top 10 Cryptocurrencies of 2018 You Cannot Miss
Positive Things Famous People Said About Bitcoin
10 Must Known Facts About Bitcoin

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Disclaimer: Cryptocurrencies investments are full of speculative and market risks. This article is only for information purposes and not an investment advice. Please conduct your own thorough research before investing. For any questions reach us at: contact@bloqtimes.com

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