By Shubham Joshi
Initial Coin Offering (ICO): A Beginner’s Guide
If you are amused by cryptocurrencies and searching the ways to enter this virtual currencies world, there are few things you need to know well in advance. It is a high frequency, technology driven ecosystem that calls for utmost care to ward off ‘rugpulls’ and be wary of ‘wash trades’. If these words sound Greek to you, then it is advised to take an ICO route or Initial Coin Offering to explore cryptocurrency markets.
Welcome aboard! Let’s understand the intricacies of ICO and various types of the same.
An initial coin offering (ICO) is a type of capital-raising activity that takes place in the cryptocurrency and blockchain environment.The ICO is similar to an initial public offering (IPO) that uses cryptocurrencies. A company seeking to raise money to create a new coin, app, or service can launch an ICO as a way to raise funds.
Interested investors can participate in an initial coin offering to receive a new cryptocurrency token issued by the company. This token may have some utility related to the product or service that the company is offering, or it may represent a stake in the company or project.
The main advantage of ICOs is that they eliminate the need for intermediaries in the capital-raising process and establish direct links between the company and investors. In addition, the interests of both parties are aligned.
Types of Initial Coin Offerings
The two types of initial coin offerings are listed below:
1. Private ICO
A private ICO is a kind of fund-raising event open to a select number of investors.. Generally, only accredited investors such as financial institutions and high net-worth individuals can participate in private ICOs, and a company can choose to set a minimum investment amount.
2. Public ICOs
Public initial coin offerings are a form of crowdfunding that targets the general public. It is a kind of a free-market where anyone gets the opportunity to invest in a particular cryptocurrency. They are typically riskier than private ones since the barrier to entry is usually lenient. However, due to regulatory concerns, private ICOs are becoming a more viable option relative to public offerings.
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