{"id":6037,"date":"2021-10-27T19:58:04","date_gmt":"2021-10-27T16:58:04","guid":{"rendered":"https:\/\/godex.io\/blog\/?p=6037"},"modified":"2021-10-27T19:58:04","modified_gmt":"2021-10-27T16:58:04","slug":"initial-coin-offering-what-is-that","status":"publish","type":"post","link":"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that","title":{"rendered":"Initial Coin Offering: what is it?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_25_1 counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" style=\"display: none;\"><label for=\"item\" aria-label=\"Table of Content\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/label><input type=\"checkbox\" id=\"item\"><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list ez-toc-list-level-1\"><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#how_is_ico_working\" title=\"How is ICO working?\">How is ICO working?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#5_types_of_initial_coin_offering\" title=\"5 types of Initial Coin Offering\">5 types of Initial Coin Offering<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#alternatives_to_ico\" title=\"Alternatives to ICO\">Alternatives to ICO<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#ico_vs_ipo\" title=\"ICO vs IPO\">ICO vs IPO<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#example_of_initial_coin_offering\" title=\"Example of Initial Coin Offering\">Example of Initial Coin Offering<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#pros_and_cons_of_the_event\" title=\"Pros and cons of the event\">Pros and cons of the event<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#how_to_receive_ico\" title=\"How to receive ICO?\">How to receive ICO?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#do_i_need_an_initial_coin_offering\" title=\"Do I need an Initial coin offering?\">Do I need an Initial coin offering?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/godex.io\/blog\/initial-coin-offering-what-is-that\/#conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<p><span style=\"font-weight: 400;\">Do you remember movies about eighteenth-century balls? Mamas were taking their daughters out in those tight corsets to spot decent marriageable young men to marry them? The very next day mamas were expecting a guy to show off at the doorway and declare his intentions. Of course, moms had previously reflected on who\u2019d be a great match for their charming daughters.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Well, <\/span><a target=\"_blank\" rel=\u201dnofollow,noopener\u201d href=\"https:\/\/www.investopedia.com\/terms\/i\/initial-coin-offering-ico.asp\"><span style=\"font-weight: 400;\">ICO<\/span><\/a><span style=\"font-weight: 400;\"> works the same way: it\u2019s like a ball, where a company explains what the coins are going to be. Investors are like potential grooms. After considering whether it\u2019s going to be a good match for their portfolio, they decide to put in funds.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Obviously, this kind of offering is way more complicated. So, let\u2019s figure out what it is in detail.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"how_is_ico_working\"><\/span><span style=\"font-weight: 400;\">How is ICO working?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">What is an ICO<\/span><span style=\"font-weight: 400;\">? The ICO meaning comes down to an event that the business holds to raise money to produce a new coin, software, or service. It&#8217;s kind of a way to get funds for that. If you&#8217;re familiar with the stock market, you can compare ICO with IPO (Initial public offering).\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Investors participate in the offer and acquire a novel crypto token once the organization rolls it out on the market. Its owner can use the company\u2019s product or service and exploit the token as a utility coin used within the unit functionality or service, or simply possess a stake in the organization or its business.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now, how does it all work? When about to get money via this event, digital assets startups introduce a whitepaper that tells what the venture is about. <\/span><span style=\"font-weight: 400;\">This guide reports on the following:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the needs the venture will meet<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the quantity of virtual coins the dealers will store<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the money type that is convenient for funding the token<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">finally, how much time it will take for the ICO campaign to get needed funding requirements.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">As the campaign is unfolding, all the involved are able to purchase the initiative\u2019s tokens with digital assets or fiat money. It works by the same principle as the stock market does: investors become the shares\u2019 owners during an IPO.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company when about to generate the token sets a funds standard required. If during an <\/span><span style=\"font-weight: 400;\">ICO<\/span><span style=\"font-weight: 400;\">, the team does not manage to collect a critical amount of finance, an ICO is considered a flop. In this case, backers get their inputs back. If the capital is collected in time and it is enough for the venture\u2019s goals, the offering is deemed successful.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"5_types_of_initial_coin_offering\"><\/span><span style=\"font-weight: 400;\">5 types of Initial Coin Offering<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Traditionally, ICOs are divided into two main events &#8211; private or public ones. The first type is traditionally limited to a certain group of investors, and the company orchestrates who will be backing and how much. When it\u2019s about a public <\/span><span style=\"font-weight: 400;\">initial coin offering,<\/span><span style=\"font-weight: 400;\"> everyone is allowed to purchase coins on a crypto exchange platform.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, you will find other types on the market. These are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interactive initial coin offering: There are no restrictions on how much backers can purchase, which adds to more investing.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Security token offering: it is very similar to an IPO since the coin works as a share of stock. It is also intensively supervised by the SEC.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Initial supply auction: This is a tactic where the business is issuing the coin by establishing a high opening price and reducing it until a functional market price is established.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Simple agreement for future tokens: It\u2019s like funding a pre-revenue startup, which is risky enough. With this kind of token, early buyers are secured by an agreement that ensures the coin\u2019s future use scenario.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Airdrop: it\u2019s a pretty interesting method to generate new coins. The company distributes a certain amount of coins free of charge to just enroot a brand new market.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">By the way, not all coins have a <\/span><span style=\"font-weight: 400;\">crypto ICO<\/span><span style=\"font-weight: 400;\">. They are supposed to be mined from the very beginning. A good example of such is Litecoin.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"alternatives_to_ico\"><\/span><span style=\"font-weight: 400;\">Alternatives to ICO<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">ICO<\/span><span style=\"font-weight: 400;\"> is an attractive and yet chancy investment endeavor. If you are not sure you can bear the risk, consider other options. For example, you can zoom in on individual coins and anticipate until they become a common use and gain popularity. The thing is some projects fail, and others succeed. It is complicated enough to estimate which one will shoot, so it\u2019s recommended to wait and see what comes next after the coin\u2019s release before any investments.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Also, for newbies in this industry, it is better to start with well-known coins, such as BTC and ETH. At present, mutual funds and many crypto ETFs are just accessible like never before, they might be a gateway into the crypto industry with no need to invest in an <\/span><span style=\"font-weight: 400;\">ICO<\/span><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"ico_vs_ipo\"><\/span><span style=\"font-weight: 400;\">ICO vs IPO<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">What is an ICO<\/span><span style=\"font-weight: 400;\"> against an IPO? How to discern?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To scale up development, companies need to collect extra funds. There are two options for that &#8211; beginning with little investing and \u2018cranking up\u2019 as far as their corporate resources allow, or raising funds from outside investors. The latter ensure a needed influx of funds and get a piece of a pie, in their turn. Simply put, they receive a part of the ownership stake. One more way is going public and getting financial support from private backers by offering shares at an IPO.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An ICO looks like a crowdfunding event where any \u201cbeliever in the idea\u201d can finance a new venture. But unlike crowdfunding where raised money is donations mostly, supporters of ICOs expect to get great returns from their investments. Because of that, ICOs are more regarded as \u201ccrowdsales\u201d.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, there are two main aspects that distinguish the two &#8211; regulation and structure. ICOs are not controlled or managed by state institutions like the Securities and Exchange Commission. Another difference is that an ICOs is decentralized and thus comes with a freer structure as an IPO does.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As for the structure, an <\/span><span style=\"font-weight: 400;\">initial coin offering<\/span><span style=\"font-weight: 400;\"> might be organized in many ways. In one case scenario, there\u2019s a certain restriction to funding, and every token sold at the event comes with a pre-price. Also, the general token supply is well defined and stable here. In another case scenario, the supply is fixed but an investment goal is flexible. In this situation, the allocation of digital assets to backers will depend on the inputs received.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Finally, there\u2019s another option with a flexible supply that depends on the amount of inputs collected. The worth is stable here and there\u2019s no restriction to the number of total coins.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"example_of_initial_coin_offering\"><\/span><span style=\"font-weight: 400;\">Example of Initial Coin Offering<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">ICOs are becoming mainstream and the sums collected are impressive due to powerful projects. When assessing them, two aspects are factored in &#8211; the funds collected and the earnings from inputs.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You can stumble upon the projects that collected few funds but delivered great returns. Thus, in 2014 Ethereum got around $18M over 42 days. The venture was a game-changer amongst ICOs, especially due to its breakthrough development &#8211; dApps (decentralized apps). From the very beginning, ETH cost 0.67 bucks and in September 2020, for example, the coin\u2019s value was 348.99 bucks.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In 2015-2016, Antshares had its two-stage <\/span><span style=\"font-weight: 400;\">ICO.<\/span><span style=\"font-weight: 400;\"> Over this period of time, it received $4.5M. It wasn\u2019t the most leading ICO at a time but it delivered colossal revenue for lots of supporters. The firm was later renamed as NEO. At an ICO, the worth was up to $0.03 and when it hit its all-time high, the worth was $187.40.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The latest ICOs have brought considerably big amounts in relation to the overall funds collected. Dragon Coin, for example, gathered $320M over a one-month <\/span><span style=\"font-weight: 400;\">ICO<\/span><span style=\"font-weight: 400;\">. The firm behind the EOS platform outshined Dragon Coin\u2019s results and got an impressive $4B over a one-year ICO.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"pros_and_cons_of_the_event\"><\/span><span style=\"font-weight: 400;\">Pros and cons of the event<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">IPOs allow investors to possess the pieces of the company\u2019s pie in relation to their funds invested. In ICOs, shares do not exist. Here, the companies drawing investments at ICOs offer a blockchain, an analog to a stock &#8211; a cryptocurrency token. The most common scenario is when backers or supporters pay with well-known coins like <a target=\"_blank\" rel=\u201dnofollow,noopener\u201d href=\"https:\/\/godex.io\/coin\/btc\">BTC<\/a> or <a target=\"_blank\" rel=\u201dnofollow,noopener\u201d href=\"https:\/\/godex.io\/coin\/eth\">ETH<\/a> and get in return a proportional quantity of novel tokens.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To be honest, it\u2019s super easy to arrange an ICO to create coins. Some web services allow shaping new coins just in seconds. Thus, backers should remember that compared to shares, tokens do not suggest any legal warranties or have no intrinsic value. The team behind the ICO releases the digital assets according to its guidelines, gets them, and later shares them out to backers as stated by the plan.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Investors when first putting in money expect that the asset\u2019s worth will go up from the initial one at an ICO and bring about great returns. This is the principal advantage of an <\/span><span style=\"font-weight: 400;\">initial coin offering<\/span><span style=\"font-weight: 400;\">. By the way, many supporters have become millionaires, though.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you do a little research, you\u2019ll find out that in 2017 the overall amount of money collected at ICOs was about $5.6B. Amongst the projects, ten ventures got 25% of the overall sum. What\u2019s more, coins bought at the event gave back an average of 13 times on the opening input (in USD).\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Lots of ICOs brought about great returns during the last decade, which gives beginners some hope that they have all the chances to succeed. Herewith, there are some pitfalls and challenges since ICOs are not controlled by state institutions. This means you can stumble upon fraud and scam participants who are hunting for badly informed investors. As it\u2019s not controlled, nor managed by the government, money lost because of fraud or the lack of expertise might be never compensated.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Back in 2017, the buzz around ICOs drew the attention of state institutions in China. As a result, the People Bank of China forbade such events and any relevant services. The ban actually fined completed deals. In 2018, such giants as Google, Twitter, and Facebook removed any ICO advertising.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"how_to_receive_ico\"><\/span><span style=\"font-weight: 400;\">How to receive ICO?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">If you\u2019re willing to jump into the game, survey different <\/span><span style=\"font-weight: 400;\">upcoming ICOs<\/span><span style=\"font-weight: 400;\">. Decide what currency you\u2019d like to purchase and when the needed ICO is going to take place. The very next step is to find a secure crypto wallet to keep it safe or set up an account on the exchange platform to trade it. So, here are a few steps to purchase a token during the event:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Create an account within an exchange platform<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Find a secure wallet (software, hardware, or paper)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Go to the ICO website, <\/span><span style=\"font-weight: 400;\">purchase an ICO<\/span><span style=\"font-weight: 400;\"> offer and transfer cryptos to the wallet.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">In most cases, ICOs\u2019 prerequisites suggest exchange accounts. If you\u2019re not tech-savvy, you\u2019ll experience some trouble setting up an account and a wallet. Thus, investigate a bit and make sure your wallet is secure enough. So should be the exchange you picked for trading.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"do_i_need_an_initial_coin_offering\"><\/span><span style=\"font-weight: 400;\">Do I need an Initial coin offering?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">If you\u2019re that kind of a trader who buys and sells day and night, then this industry might be a good activity for you. You might like following trends and keeping tabs on the volatility of the crypto market. If you\u2019re not ready to lose a lot, keep your crypto holdings to a minimum.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">High-profile experts at JPMorgan Chase advise keeping up to 1% of holdings in BTC when diversifying a portfolio. But they did not say a word about an ICO, which might mean you can give it a shot.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you\u2019re about to purchase a small quantity of coins (ones from a recent ICO, for example) and then keep it for a while, it actually might work. But do not go the extra mile in a way to lose money and always keep your portfolio diversified to smooth the risk coming from an ICO.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"conclusion\"><\/span><span style=\"font-weight: 400;\">Conclusion<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">ICOs promise big returns as there are always potentially great projects behind them. But in the meantime, the risks of losing funds are high. Most events are not supervised, but some are controlled by the SEC.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Again, unlike an IPO, a <\/span><span style=\"font-weight: 400;\">crypto ICO<\/span><span style=\"font-weight: 400;\"> does not provide any legal liabilities, which puts you in danger of not having investments recovered. But if you pick the right asset, you might become a millionaire. However, good advice here will be to start small and invest wisely and no more than you are able to lose.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Table of Contents How is ICO working?5 types of Initial Coin OfferingAlternatives to ICOICO vs IPOExample of Initial Coin OfferingPros and cons of the eventHow to receive ICO?Do I need an Initial coin offering?Conclusion Do you remember movies about eighteenth-century balls? Mamas were taking their daughters out in those tight corsets to spot decent marriageable [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":6038,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[132,1871],"tags":[108,113,1561,812,1667],"yst_prominent_words":[],"class_list":["post-6037","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-crypto-currencies","category-crypto-market","tag-bitcoin","tag-blockchain","tag-cryptocurrency-market","tag-ethereum","tag-ico"],"lang":"en","translations":{"en":6037},"pll_sync_post":[],"_links":{"self":[{"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/posts\/6037","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/comments?post=6037"}],"version-history":[{"count":2,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/posts\/6037\/revisions"}],"predecessor-version":[{"id":6041,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/posts\/6037\/revisions\/6041"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/media\/6038"}],"wp:attachment":[{"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/media?parent=6037"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/categories?post=6037"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/tags?post=6037"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/godex.io\/blog\/wp-json\/wp\/v2\/yst_prominent_words?post=6037"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}