ICO is short for Initial Coin Offering. When launching a new cryptocurrency or crypto-token, the developers offer investors a small number of units in turn for other major crypto coins such as Bitcoin or Ethereum.
ICOs are amazing tools for quickly pouring development funds to support new cryptocurrencies. The tokens offered during an ICO can be sold and bought and sold on cryptocurrency deals, assuming there is sufficient demand for them.
The Ethereum ICO is one of the perhaps most obviously successes and the popularity of Initial Coin Offerings is growing as we speak.
A brief history of ICOs
Ripple is likely the first cryptocurrency distributed via an ICO. uniswap From the outset of 2013, Ripple Labs began to develop the Ripple payment system and generated approximately 100 billion XRP tokens. Just read was sold with the ICO to fund Ripple’s platform development.
Mastercoin is another cryptocurrency that has sold a few million tokens for Bitcoin during an ICO, also in 2013. Mastercoin aimed to tokenize Bitcoin transactions and execute smart contracts by creating a new layer on top of the prevailing Bitcoin code.
Of course, there are other cryptocurrencies which were successfully funded through ICOs. Back in 2016, Lisk gathered approximately $5 million in their Initial Coin Offering.
Nevertheless, Ethereum’s ICO that occurred in 2014 is just about the most prominent one so far. In their ICO, the Ethereum Foundation sold ETH for 0. 0005 Bitcoin each, raising almost $20 million. With Ethereum harnessing the energy of smart contracts, it provided the way for the next generation of Initial Coin Offerings.
Ethereum’s ICO, a recipes for success
Ethereum’s smart contracts system has implemented the ERC20 protocol standard that sets the core rules for creating other compliant tokens which can be transacted on Ethereum’s blockchain. This allowed others to create their own tokens, compliant with the ERC20 standard that can be bought and sold for ETH entirely on Ethereum’s network.
The DAO is a notable example of successfully using Ethereum’s smart contracts. The investment company raised $100 million worth of ETH and the investors received in turn DAO tokens permitting them to participate in the governance of the platform. Sadly, the DAO failed after it was hacked.
Ethereum’s ICO and their ERC20 protocol have outlined the latest generation of crowdfunding blockchain-based projects via Initial Coin Offerings.
It also made it very easy to invest in other ERC20 tokens. You simply transfer ETH, gravy the contract in your wallet and the new tokens will show up in your account so you can use them however, you please.
Obviously, not all cryptocurrencies have ERC20 tokens living on Ethereum ‘s network but pretty much any new blockchain-based project can launch a short Coin Offering.
The legal state of ICOs
When it comes to the legality of ICOs, it’s a bit of a marketplace out there. The theory is that, tokens can be bought as digital goods, not financial assets. Most jurisdictions haven’t regulated ICOs yet so assuming the founders have a master lawyer on their team, the whole process should be paperless.
Even so, some jurisdictions have discover ICOs and are already working on managing them in a similar manner to sales of shares and securities.
Back in 12 , 2017, the U. S. Securities And Exchange Commission (SEC) classified ICO tokens as securities. In other words, the SEC was preparing to total stand still ICOs they consider to be confusing investors.
There are some cases in which the token is just a computer program token. This means the master can simply use it to access a certain network or protocol in which case they may not be defined as a financial security. Nevertheless, money tokens whose purpose is to appreciate in value are on the notion of security. In all honesty, most token purchases are made specifically investment purposes.
Despite the efforts of regulators, ICOs are still constant in a greyish legal area and until a clearer set of regulations is included entrepreneurs will attempt to benefit from Initial Coin Offerings.
It’s also worth mentioning that once regulations reach a last form, the cost and effort required to comply could make ICOs less attractive compared to conventional funding options.
For now, ICOs remain an amazing way to fund new crypto-related projects and there have been multiple successful ones to comprehend to come.
However, keep in mind everyone is launching ICOs nowadays and many of these projects are scams or lack the solid foundation they need to prosper and make it worth the investment. For this reason, you should definitely do thorough research and investigate the team and background of whatever crypto project you might want to invest in. There are multiple websites out there that list ICOs, just start a search on Google and you’ll find some options.