The ICO is a short Initial Coin Offer. By launching a new cryptocurrency or cryptocurrency token, developers offer investors a limited number of units in exchange for other major cryptocurrencies, such as Bitcoin or Ethereum.
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ICOs are an amazing tool for development funds to support new cryptocurrencies that can rain fast. Tokens offered at an ICO can be sold and traded on cryptocurrency exchanges, assuming there is sufficient demand for them.
Ethereum is one of the most notable ICO successes and the popularity of Initial Coin Offerings is growing as we speak.
A brief history of ICOs
Ripple is the first cryptocurrency distributed through an ICO. In early 2013, Ripple Labs began developing the Ripple payment system and created approximately $ 100 billion in XRP tokens. These were sold through an ICO to fund the development of the Ripple platform.
Mastercoin is another cryptocurrency that has sold several million tokens for Bitcoin at an ICO, also in 2013. Mastercoin aimed to tokenize Bitcoin transactions and execute smart contracts by creating a new layer on top of the Bitcoin code.
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Of course, there are other cryptocurrencies that have been successfully funded through ICOs. In 2016, Lisk raised about $ 5 million in its Initial Coin Offer.
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However, Ethereum’s 2014 ICO was probably the most notable so far. During the ICO, the Ethereum Foundation sold ETH 0.0005 per Bitcoin, raising nearly $ 20 million. Ethereum harnessed the power of smart contracts to pave the way for the next generation of Initial Coin Offers.
Ethereum’s ICO, a recipe for success
The Ethereum smart contract system has set the standard for the ERC20 protocol, which sets out the basic rules for creating other compatible tokens that can be traded in the Ethereum blockchain. This allowed others to create their own tokens, according to the ERC20 standard, which can be negotiated directly with ETH on the Ethereum network.
DAO is a notable example of the successful use of Ethereum’s smart contracts. The investment company achieved a $ 100 million ETH and received investors in exchange for DAO tokens to participate in the governance of the platform. Unfortunately, DAO failed after being hacked.
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Ethereum’s ICOs and their ERC20 protocols have reported on projects based on the latest generation crowdfunding blockchain through Initial Coin Offers.
It is also very easy to invest in other ERC20 tokens. You just transfer the ETH, paste it into your contract wallet and the new tokens will appear in your account for you to use as you wish.
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Clearly, not all cryptocurrencies have ERC20 tokens that live on the Ethereum network, but a new project based on almost any blockchain can launch an Initial Coin Offer.
Legal status of ICOs
As for the legality of the ICOs, there’s a bit of a jungle there. In theory, tokens are sold as digital goods, not financial assets. Most jurisdictions have not yet regulated ICOs, so if the founders have an attorney in their group, all processes should be paperless.
However, some jurisdictions have been informed of ICOs and are already working to regulate similar sales of shares and securities.
In December 2017, the U.S. Securities and Exchange Commission (SEC) classified ICO tokens as securities. In other words, the SEC was preparing to stop ICOs that it believes are misleading investors.
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In some cases the token is just a token availability. This means that the owner can use it to access a particular network or protocol. In that case, it may be defined as financial security. However, equity tokens that value value are relatively close to the concept of security. In fact, most token purchases are made for investment purposes.
Despite efforts by regulators, the ICO remains in the gray legal realm and until a clearer set of regulations is put in place, entrepreneurs will try to take advantage of the Initial Coin Offers.
It should also be noted that when the regulation finally takes shape, the costs and efforts required to comply with ICOs may be more attractive compared to conventional funding options.
For now, ICOs continue to be an amazing way to fund new cryptography-related projects and have had a lot of success with others to come.
However, keep in mind that everyone is launching ICOs these days and many of these projects are fraudulent or do not progress and lack the solid foundations that are worth the investment. Therefore, you should definitely do some in-depth research and research the crypto project team and background you want to invest in. There are many websites that list ICOs. Do a Google search and you will find some options. .