The cryptocurrency world is currently very exciting yet volatile. There’s so much hype out there and no one wants to be left out. Besides Bitcoins and blockchains, ICOs are the next big thing.
ICO stands for Initial Coin Offering. It works pretty much like an IPO, but it’s for tech startups to raise money from people around the world to fund the development of new applications and ideas. This is very exciting for crowd sourcing projects, and everyone can now have the opportunity to invest in upcoming startups.
How does it work?
There’s a lot that goes on behind the scenes for an ICO to happen. But this is a simple summary:
If a team has an idea for a project that’s related to blockchains, they could come up with a proposal for the community. The proposal will include elements like the business model, revenue streams, technical specs and opportunities in the future.
Details like the amount of tokens for distribution, the price of each token and how the tokens will be used are all ironed out during this period. An ICO date is then selected for the funding event, also known as token sale, to begin.
During this time, the startup will give investors tokens in exchange for the digital currency. Like shares, these tokens are a promise of potential profits in the future. Moving forward, these tokens are then traded on the exchange.
I want a piece of the ICO action.
Are ICOs legal?
Yes and no. As ICOs are unregulated, they are currently happening in a grey area. But as its popularity takes off, ICOs could become regulated in the future. Some have said that the lack of regulation encourages faster innovation.
However, like all investment decisions, you need to do your own research and make up your own mind. Don’t be swayed by the hype and talk of instant millionaires.
So should you be part of the ICO craze? Only if you like to live dangerously. The choice is yours.
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