What is the ico
An ICO ( initial coin offering in English, which we can translate by initial coin offer), is the procedure through which the creation of a new cryptocurrency
What is the ICO?
An ICO ( initial coin offering in English, which we can translate by initial coin offer), is the procedure through which the creation of a new cryptocurrency is financed. It is a process not regulated by official regulatory bodies. Normally, in the process a percentage of the new cryptocurrency is sold to investors in exchange for money or other cryptocurrencies (mainly Bitcoin).
When a startup wants to launch a new cryptocurrency and raise funds through an ICO, it writes a plan in a document called whitepaper . This document reflects what the new cryptocurrency project is about, how much money the project needs to be carried out, how many units of the new cryptocurrencies the creators of the project will receive for themselves, what payment methods are accepted to finance the project. new cryptocurrency, and how long the initial ICO campaign will last.
The new cryptocurrencies that are distributed among project investors are also known as tokens . These currencies or tokens fulfill a function similar to the actions distributed in an OPS (public subscription offer) in the creation and IPO of a new company. If not enough funds are raised to finance the new cryptocurrency project, the ICO is considered to have failed and the money is returned to investors.
Investors in an ICO hope that the new cryptocurrency project will be successful and that they will be able to sell their currencies in the future for a value greater than what they acquired .
How to use ICOs:
Without doubt, the main objective for which the creator of the token decided to make the first ICO was to raise money . A clear example is Ethereum, which managed to raise $ 18 million.
But on the other hand, we find those who participate economically in ICOs. These, what they pretend is to profit, since of normal, the cryptocurrencies rise fast of price. In addition, the initial participants of a project are more likely to obtain benefits.
One of the main advantages of ICOs is that financing is not achieved by traditional methods such as banks or investors in venture capital, therefore, conditions will always be better .
As for individual investors , they have the opportunity to finance very innovative companies directly . This is positive, since traditional financing methods are usually only available when it comes to a large amount of capital, and not for smaller amounts. This is due to the risks and legal issues that come into play.
Fund a Blockchain based project:
It is important to keep in mind that an ICO not only serves to finance the creation of new cryptocurrencies, but also, to finance projects based on the Blockchain or the blockchain .
The Blockchain is a system that allows you to have all the information encrypted in a secure way and only shared between the parties linked to the transaction that is going to be carried out, in order to register the economic transactions that have been made with the cryptocurrency.
In the beginning, the blockchain was only used for the creation of virtual currencies, however, it can currently be used for multiple tasks, such as cloud computing , managing copyright , as well as storing and modifying data in a safe and verifiable way.
However, whenever you want to use Blockchain technology for special use, there must be an associated currency for it to be carried out. Normally, these currencies are called token , to avoid confusing said project with the creation of a new cryptocurrency. Therefore, an ICO can be created to finance the project and changing these pre-mined tokens for money. These tokens can also be used within the same project to make payments for specific services.
Therefore, we already see that ICOs will both help us to finance the creation of new cryptocurrencies as projects created from the Blockchain or blockchain system.
As it is an innovative system with little experience, we can still talk about some risks when deciding to participate in an ICO, such as the fact that the project does not go well and the coins that are delivered in exchange for money that has no value.
Another risk is that the security of the cryptocurrency is not correct and someone can hack the system and steal the money. An example of cases like this was that of DAO, in which they managed to steal more than 150 million dollars from investors.
It is also important to keep in mind that these types of operations are not legally regulated, but are outside the conventional financial system. This is a problem that is struggling to solve, since they are beyond the reach of governments and this means they have no control of money or taxes. Not long ago, Korea was considering the possibility of banning cryptocurrencies. This lack of regulation has opened numerous debates about whether ICOs and cryptocurrencies are an illegal system, but for now, it is still in operation and there are many who decide to invest through this method.
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