ICO stands for Initial Coin Offering. By launching a new cryptocurrency or encryption token, developers are offering investors a limited number of units in exchange for other major cryptographic coins, such as Bitcoin or Ethereum.
ICOs are amazing tools for fast-growing development funds to support the new cryptocurrency. The tokens offered during the ICO can be sold and traded on cryptocurrency exchanges, provided they are sufficient.
The Ethereum ICO is one of the most notable successes, and the popularity of the original coin donations is growing.
A brief history of the ICO
Ripple is probably the first cryptocurrency distributed through the ICO. 2013 Initially, Ripple Labs began developing the Ripple payment system and generated approximately 100 billion XRP chips. They were sold through the ICO to fund the development of the Ripple platform.
Mastercoin is another cryptocurrency that, through the ICO, also in 2013, sold several million chips for Bitcoin, as well as in 2013. Mastercoin sought to mark Bitcoin transactions and enforce smart contracts by creating a new layer on top of existing Bitcoin code.
Of course, there are other cryptocurrencies that are successfully funded through the ICO. Back in 2016 Lisk raised about $ 5 million. USD during the initial coin donation.
Nevertheless, the Ethereum ICO, which took place in 2014, is probably the most famous to date. Through its ICO, the Ethereum Foundation sold ETH for 0.0005 Bitcoin, raising nearly $ 20 million. By leveraging the power of smart contracts, Ethereum paved the way for a new generation of initial coin offerings.
Ethereum ICO is a recipe for success
Ethereum’s smart contract system has implemented the ERC20 protocol standard, which sets out the basic rules for creating other eligible tokens that can be made in the Ethereum block chain. This allowed others to create their own ERC20-compliant tokens that could be traded ETH directly on the Ethereum network.
The DAO is an excellent example of the successful use of Ethereum contracts. The investment company raised 100 million. USD worth of ETH, and investors received DAO tokens in exchange to allow them to participate in the management of the platform. Unfortunately, the DAO failed after its hacking.
The Ethereum ICO and their ERC20 protocol introduced the latest generation of crowdfunding blockchain projects through Initial Coin Offerings.
It was also very easy to invest in other ERC20 chips. You simply transfer the ETH, paste the contract into your wallet, and the new tokens will appear in your account so you can use them the way you want.
Obviously, not all cryptocurrencies are home to ERC20 chips Ethereum network, but almost any new blockchain-based project can launch an initial coin offering.
Legal status of the ICO
As for the legitimacy of the ICO, it’s a bit of a jungle there. Theoretically, tokens are sold as digital goods, not financial assets. Most jurisdictions do not yet regulate the ICO, so assuming the founders have an experienced lawyer on their team, the whole process should be paper-based.
Nevertheless, some jurisdictions have learned about ICOs and are already trying to regulate them in a similar way to the sale of shares and securities.
Back in 2017 December. The U.S. Securities and Exchange Commission (SEC) has classified ICO tokens as securities. In other words, the SEC was preparing to suspend ICOs, which they consider misleading investors.
There are cases where the passkey is just a utility sign. This means that the owner can simply use it to access a particular network or protocol, in which case they may be vague as a financial guarantee. Nevertheless, stock labels aimed at measuring value are quite close to the concept of security. In fact, most token purchases are made specifically for investment purposes.
Despite the efforts of regulators, the ICO is still ongoing in a gray legal area and until a clearer set of regulations is introduced, entrepreneurs will try to take advantage of the victims of the original coins.
It is also worth mentioning that once the regulations reach their final form, the costs and effort required to comply may make the ICO less attractive compared to conventional funding options.
So far, ICO remains an amazing way to fund new cryptography-related projects and there have been some successes that await even more.
But keep in mind that everyone is starting an ICO today, and many of these projects are scams or lack the solid foundation needed to thrive and be worth the investment. For this reason, you should do a thorough research and examine the team and background of any encryption project you may want to invest in. There are several sites that offer ICO, just do a Google search and you will find several options.