Presently, the three-letter word – ICO has evolved to be a buzzword in the blockchain industry that we find people throwing it around now and then.
But, do you know what ICO means?
ICO, the abbreviated form of Initial Coin Offering is typically a fundraising mechanism used by new project owners to sell their underlying token in exchange for cryptocurrencies. ICO is similar to IPO – Initial Public Offering where investors buy company shares.
Though ICO’s are pretty much a new thing in the blockchain industry, it became a popular topic for discussion within no time. Often, the majority of the people regard ICOs as unregulated projects that helps project owners gather illegal funds of capital. On the other hand, some people view it as quite a remarkable invention in the traditional venture-funding model.
Recently, the decision taken by the U.S. Securities and Exchange Commission (SEC) about the status of tokens issued in the scandalous DAO ICO has left many investors and project owners rethinking their funding models. An important criterion included under this decision is the monitoring whether or not a token passes the Howey Test. In case a token passes the Howey Test, it will be considered a security, but keep in mind that the restrictions put up by the SEC are still valid on you.
Thanks to technologies like ERC20 Token Standard, ICOs are considered easy to structure. Often, ICOs function by having investors send funds in the form of bitcoin or ether which are then send to smart contracts and distributed in the token in the future.
So, what are the benefits of ICO?
As of now, ICOs aren’t controlled by any central authority and are thus unregulated. Therefore, project owners can an unlimited amount of fund without being restricted by any central authority.
When compared to IPOs, ICOs are like a short duration. Thus, when working with ICOs, you won’t have to wait for a long period of time to see results.
One of the greatest advantages of ICO is that they are open to everyone as compared to IPOs which are exclusive. ICOs being open to everyone, help raise funds for projects from all around the world without posing any country barriers.
Unlike IPOs that aim to collect dividends, ICOs work by promoting the company and its services to gain more investors. Furthermore, ICOs also don’t collect commission or taxes.
To learn more about ICO, or to avail our ICO services, reach out for a free consultation.
