Initial Coin Offering ICO
Initial coin offering is a term, to some extent, relevant to what is commonly known as sharing tokens or coins among users of the app or equivalent to IPO (initial public offering) and crowd funding. It is essentially an offering made by the startup projects and businesses in order to generate a cash flow. However, we saw legacy businesses to do reverse ICO, we will write more about reverse ICO in separate article. To create an initial coin offering, the company creates a plan of its working regarding the project and presents it in the form of a document called White Paper. The white paper defines in-depth details of the initial coin offering. It answers the following questions:
? Who?
? What?
? Why?
? When?
? How?
Startup businesses sell their stakes to raise money, most commonly in the form of bitcoins, for the new crypto currency venture’s operations. ICOs deal with supporters who are keen to invest in new projects and seek revenues on their investments. These supporters or investors buy tokens circulated by the company who needs to fund its projects. These tokens are bought in exchange of virtual money. Tokens act or function in a way similar to a company’s shares. If the money raised by selling the tokens is less than the required amount for the project, then the initial coin offering is deemed to be unsuccessful. In such a case the money is returned to its original owners. While if the initial coin offering is successful and the amounts of finances generated are equal to the project’s requirement, only then the project is initiated.cThe benefit to the investors comes if the project is successful. Once a project is deemed to be successful the value of its tokens surge. Now the investors can generate more money out of the tokens then what they financed. Initial coin offerings can sometimes be fraudulent, which is an inordinate concern for the investors. The company needs to illustrate transparency in its procedures in order to gain confidence of their stakeholders.
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