WHAT IS AN ICO?

For a few years now, especially since the creation of Ethereum there has been a rise of a new phenomenon, an alternate sphere of business funding known as ICOs. But it wasn’t until last year 2017 that this new way of seeking funding truly exploded and some would even say reached a stage of proliferation. In My opinion the cryptocurrency market is among the most exciting things that have happened to humanity in the past 10 years, and despite having already spent a bit of time with us, large swathes of people are still getting familiar with the industry and as such the giddiness and excitement about it all is as fresh as ever. So what is all the fuss about ICOs?

What is an Initial Coin Offering?

An Initial Coin Offering or ICO for short is the new innovative way through which people with smart ideas all over the world with products that are based on the blockchain technology seek funding from the general public in a decentralized way, without going through the stock markets, regulators or any kind of middleman. An ICO is a crowdfunding like activity in which startups present their ideas to anyone interest, wherever they might be all over the world and ask them to take part in funding the said product or project in a way they effectively become part stake holders in the project when it comes online, in proportion to their investments

Difference between an ICO and an IPO

The ICO and an IPO have similar objectives in that its initiators are looking for some kind of funding from the public, but the ICO is starkly different from the IPO in the following aspects:

Virtual Vs Tangible: The main difference between a product that goes through an IPO and an ICO is that IPOs are usually done for already existing companies with tangible assets and most likely great track records of being good at what they do, on the other hand ICOs are almost exclusively for startups that even after they come into being, will only reside in the virtual realm.

Regulatory Framework: IPOs in their entirety are conducted under strict regulatory frameworks and oversight from authorities in any given jurisdiction, whereas ICO much like the rest of the cryptocurrency and blockchain industries till date remain completely unregulated and as such its initiators don’t have to file anything or follow any rules of any country. More often than not, its initiators even remain anonymous and as such no one has the means of racking them down.

Fractionability: Buying into an ICO is a much more flexible endeavor than IPOs. A person can buy into an ICO in fractions or to a large number of decimal places of the unit of the product that is being sold, whereas IPOs have to be bought in whole numbers and often with minimum number of shares allowed to be bought.

Direct Access: ICOs are decentralized in nature and don’t require middlemen, stock brokers or any kind of centralized facilitator or agent, unlike the IPO where the investor needs to have a stock broker who files on their behalf, and buy the shares. When it comes to selling as well, the investor in an ICO can easily sell off to the next buyer directly unlike shares where the investor needs to go through the stock market.

Conclusion

Even though ICO's could be very profitable they are also very risky, especially with the over saturation in the market. Make sure to do your due diligence before investing in any ICO. There are main factors to take in to consideration. A good way to go about it its by using "Token Metrics" a term defined by Ian Balina as his cryptocurrency following.

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