What is an ICO?

– by Tanish Mittal

Have you ever heard of companies like Zomato or Paytm launching their IPO (Initial Public Offering)? These companies launch/offer their shares to the public in a new stock issuance. It allows that specific company to raise capital from public investors.

ICO or ‘Initial Coin Offering’ is somewhat similar to IPO, but in the cryptocurrency Industry. When new companies are aiming to launch their own Coin/Token/Virtual Currency, Service, or App, they create an ICO as a way to raise money for the project.

Who Can Launch an ICO?

An ICO can be launched by anybody. Because ICOs are currently unregulated in the United States, anybody with access to the necessary technology is allowed to establish a new coin.

However, because there is no regulation, someone might deceive you into believing they are running a genuine ICO before taking your money. An ICO is perhaps one of the easiest ways to put up a scam out of all the possible fundraising options.

If you’re serious about investing in a new ICO you’ve heard about, make sure you complete your research beforehand. The first step is to ensure that the persons behind the ICO are genuine and responsible. The product’s leaders’ history with crypto or blockchain is an important factor to consider. It’s a red signal if the project doesn’t appear to involve anyone with relevant, easily verifiable experience.

How an ICO works?

When a cryptocurrency startup seeks to acquire funds through an initial coin offering (ICO), the first step is to figure out how the project will be structured. ICOs can be set up in a variety of methods, including:

• A firm can specify a specified financial goal or limit, which implies that each token sold in the ICO has a defined price and the overall token supply is fixed.
  • Static supply and dynamic pricing: An ICO can have a fixed supply of tokens and a dynamic funding goal, which implies that the overall price per token is determined by the amount of money raised in the ICO.
  • Dynamic supply and fixed pricing: Some ICOs have a dynamic token supply but a fixed price, implying that the supply is determined by the amount of money raised.

ICO: High Returns or Fraud?

People wait eagerly to invest in new coins that are launched on the Crypto exchange, as some ICOs provided humongous returns to the initial investors of the coin, but most of the other ICOs turned out to be fraudulent or made huge losses to the investors.
Also as ICOs are largely unregulated, investors should proceed with caution and due diligence while studying and investing in them.

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