Initial Coin Offering (ICO) is a crowdfunding strategy utilized by new cryptocurrency businesses to increase capitals. In ICO, some percentages of the newly issued cryptocurrencies are offered to people who are interested in supporting the project. They are offered to swap for other established cryptocurrencies like Bitcoin, Fiat and Ether.
It’s comparable to the principle of people making a profit when the share they bought in the stock exchange increases in value. ICO is different than buying shares at a stock exchange cause you don’t get a share of the ownership right when you invest in the new tokens.
Short Background on ICOs
In the beginning point, ICO was conducted by companies like Mastercoin, Ethereum and Karmacoin. Ethereum conducted among the largest ICO in 2014 by increasing a total of $18 millions in the early phase of 2014. They break the record by increasing 3,700 Bitcoins which is equal to $2.3 million dollars over the first 12 hours of this effort. Kik conducted the first mainstream ICO in September 2017 however, the job was interrupted by a phishing scam through the flow of a fictitious URL from the social websites.
Now, ICO earnings have become increasingly popular with around 50 token sales being conducted every month. Beginning from 2017, ICO has been growing at a quick pace with $2 billion value of nominal earnings successfully conducted. This demonstrates it isn’t likely to be a temporary method utilized by fresh cryptocurrency company to increase funds but it is here to stay for extended term.
Nowadays, ICO token sale is so popular at least a couple ICO begins every day. It has been predicted that over $4 billion value of token sales will be conducted this year. They figure out how to increase a total amount of $2.3 million in the market presale.
How Can ICOs Fundraising Work?
A cryptocurrency company that wants to increase capitals through ICO must offer a few details including job description, project purpose, amount have to be increased, percentage of tokens the company will keep, kinds of virtual currencies accepted, and the timeframe of this ICO campaign. Backers that are interested will email the seller and ask for more details of this job before performing a trade. If they successfully increase the amount for your campaign, they will execute the scheme to complete the undertaking. Otherwise, they’ll return the cash back into the backers.
How Scammers Use ICO to Carry Out Fraud?
ICO can be conducted to help raise capital for a variety of types of companies and charity organization. It has also been utilized as a tool by scammers to conduct frauds. Scammers would utilize ways to grow the ICO value briefly and abandon the project afterwards to make a fast profit. Scams happen because of the lack of regulation by the government. The same as any investment, there’s a risk when coming to put money into the first coin supplying.
Table of Contents
License CC BY-NC-ND 4.0