ICO basically stands for “Initial Coin Offering”. Initial Coin Offering is a method to start a new crypto-business or cryptocurrency system. The person with the startup idea gives the investors a crypto-token and in turn they provide him with real cryptocurrency (like bitcoin or ether) to start building on that idea.
How does it work?
Let’s say for instance, you are in crypto business. You come up with an idea of a new cryptocurrency system. For sure, you need some money to make that new cryptocurrency. Now, there are two ways you could get that money. You can go to the bank for investing. But in that case you will be going to capital investors and will be losing the ownership of the company. Instead, you go for the second way. Which is “Initial Coin Offering”. The person with the idea has to list down all the things like how the system works on a piece of paper (often called as white paper) and show it to people and ask them to send you cryptocurrency like bitcoin or ether. The willing people send you the money and in turn you make your “new cryptocurrency” with that currency and send it back to them.
One thing that must be kept in mind is that through this method a person doesn’t lose the ownership. It is not investment, it is just gambling and hoping that the new currency for which they are paying for will be successful in the near future.
Eligibility and cautions
So basically who can launch an “Initial Coin Offering”? The answer is “anyone”. As long as you can set the whole system up, you can try to get funding and run your currency. But one must be cautious in case of funding. In this new world of technology, ICO is a very easy method to set up a scam. While playing tricks with people, anyone can make you believe that they have a very good idea even if the idea doesn’t exist. So basically take a run through all the possibilities and facts before making any funding. Make sure that the people who are setting up the ICO and reliable and accountable. Do these people have any previous experience in block chain or something like this?
ICO is a very easy and efficient way to raise your money. But be sure to do research before funding anything as cryptocurrency is all about high risks and high earnings.