ICO is short for Initial Public Offering. When launching a new cryptocurrency or crypto-token, developers offer a small amount of money to exchange it for other major cryptocurrencies such as Bitcoin or Ethereum.
ICOs are amazing tools for rapid development funding to support new cryptocurrencies. Tokens issued during the ICO can be traded and traded on cryptocurrency exchanges, assuming there is sufficient demand for them.
The Ethereum ICO is one of the most popular success stories and the popularity of Initial Coin Offerings is growing as we speak.
A brief history of ICOs
Ripple is probably the first cryptocurrency distributed through an ICO. At the beginning of 2013, Ripple Labs started to develop the Ripple payment system and created about 100 billion XRP tokens. This was sold through an ICO to support the development of the Ripple platform.
Mastercoin is another cryptocurrency that has sold several million Bitcoin tokens during the ICO, and in 2013. Mastercoin aims to showcase Bitcoin transactions and execute smart contracts by creating a new layer on top of the existing Bitcoin code.
Of course, there are other cryptocurrencies that have been successfully funded through ICOs. Back in 2016, Lisk raised nearly $5 million during its Initial Funding.
However, Ethereum’s ICO that took place in 2014 is probably the most famous to date. During their ICO, the Ethereum Foundation sold ETH for 0.0005 Bitcoin each, raising approximately $20 million. With Ethereum harnessing the power of smart contracts, it paved the way for the next generation of First Aid.
ICO for Ethereum, the way to win
Ethereum’s smart contracts system has established the ERC20 protocol standard that establishes the basic rules for creating other shared tokens that can be purchased on the Ethereum blockchain. This allowed others to create their own, ERC20 compatible tokens that could be traded for ETH directly on the Ethereum network.
The DAO is a well-known example of the successful use of Ethereum smart contracts. The company raised $100 million in ETH and investors received it in exchange for DAO tokens that allowed them to participate in the management of the platform. Sadly, the DAO failed after it was hacked.
Ethereum’s ICO and their ERC20 protocol have defined the latest generation of blockchain monetization projects through Initial Coin Offerings.
It also made it easier to invest in other ERC20 tokens. You just transfer ETH, put the contract in your wallet and the new tokens will appear in your account so you can use them as you wish.
Obviously, not all cryptocurrencies with ERC20 tokens live on the Ethereum network but pretty much any new blockchain project can launch an Initial Public Offering.
Legal status of ICOs
When it comes to legal ICOs, it’s a jungle out there. In theory, tokens are traded as digital assets, not financial assets. Many jurisdictions have not regulated ICOs yet assuming that the founders have an experienced lawyer on their team, the entire process should be paperless.
Despite this, some authorities have recognized ICOs and are already working to regulate them in the same way as the sale of shares and securities.
Back in December 2017, the US Securities And Exchange Commission (SEC) classified ICO tokens as securities. In other words, the SEC plans to stop ICOs that it deems to be misleading money.
There are times when the sign is just a helpful sign. This means that the owner can use it to access a particular network or protocol where it cannot be interpreted as a financial security. However, tokens whose purpose is to appreciate in value are closer to the concept of security. In fact, most purchases are made for investment purposes.
Despite the efforts of the regulators, ICOs are still in the legal realm and until clear rules are established entrepreneurs will try to profit from Initial Offerings.
It’s also worth mentioning that when regulations are at their peak, the cost and effort required to comply can make ICOs less attractive compared to traditional fundraising methods.
A final word
Currently, ICOs are still an amazing way to raise new crypto-related funds and there have been many successful ones to come.
However, keep in mind that everyone is starting ICOs these days and most of these projects are scams or lack the solid foundation they need to succeed and make money. For this reason, you need to do your research and research the category and profile of any crypto project you want to invest in. There are several websites that list ICOs, just do a Google search and you will find alternatives. .