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Initial coin offering (ICO): What are they, and how do they work?

Initial coin offering (ICO): What are they, and how do they work?

How It Works
07/08/2020 by Koinal
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When a company seeks to offer stocks to the public to raise money for its needs, it might issue an Initial Public Offering or IPO. When an organization seeks to bring new cryptocurrency to the market, they might issue an Initial Coin Offering or ICO. The offering provides the public with an opportunity to assess the activity and participate.
Initial coin offering

The term coin may identify a currency that has value outside of its environment. A token is a currency that only exists within its digital ecosystem. A token may be a utility token meant to be used as a medium of exchange. The other type is a security token. The difference is important for regulation. A security token must meet certain requirements under the US Securities laws.

Along with a white paper, the initial offering can provide detailed information, introduce a currency, and explain the benefits and purposes for its issuance. The initial offering provides terms of sale that may offer incentives for initial subscription and larger purchases. Sales usually move in stages to ensure that as the supply of coins goes down, the value will rise.

Participation

Buyers and investors can acquire units in an offering by sending their cryptocurrency to the sponsor organization. Koinal can provide a convenient means of purchasing cryptocurrency for investment. Koinal offers the convenience of buying with a bank credit card or debit card.

A Strong Beginning

In July 2014, the Ethereum offering raised $20 million. It was the first offering that demonstrated the potential for cryptocurrency fundraisers. The attention that it created among developers and investors led to a steady rise in events and investment. Ethereum was a landmark event because it involved more than selling units of Ether; the Ethereum platform is a place for an unlimited amount of development, including smart contracts.

A Vast Potential

Initial offerings are simple processes. A company might issue a whitepaper with a full set of details about the project, DApp, or platform. The coins are units of the currency that the company will issue when and if it meets the goals set to put in the whitepaper or announcements.

The initial offering can raise millions of dollars or other currency equivalents in a matter of minutes and hours. The trend of fundraising through ICOs is uneven; it was impressive in 2018 but dropped sharply in 2019. The total for 2017 was $5.6 billion; it grew to more than $7.8 billion in 2018.

Funding Goals

ICOs often work within a set of funding goals. The offeror needs to raise funds, and it must meet its planned level of need to go forward with the currency.

Join the Project

The initial offering is a crowd sale for a blockchain-based system. Initial offerings have supported DAPP developer’s fund projects. From the investor’s point of view, an initial coin offering is an entry point to join a project that interests them.

Initial offerings are a strength of cryptocurrency because it is an open and straightforward method for introducing a concept and creating funding. The simplicity favors broad participation since many projects in the regulated sectors do not go to market because of the required steps and procedural difficulties. The openness and simplicity can also provide opportunities for claiming more than will be delivered. Investors must weigh each initial offering carefully and thoroughly examine every aspect.

When you are ready to purchase currency on an exchange or through an initial offering, Koinal can provide a safe and efficient buying process. An initial coin offering represents an opportunity to get an initial position in a cryptocurrency issue, and Koinal can help.

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