Knowledge Base Discussion about initial coin offering

cryptobi

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An initial coin offering (ICO) is the cryptocurrency's universe equivalent of stock market IPO's (initial public offerings).

An ICO aims to raise funds for startups or even established projects via crowdfunding events. Coins or tokens are distributed to investors in exchange for fiat money funds.

The tokens must be employed in the core business somehow so that they can gain valuation as the business succeeds, thus giving investors motivation to join the ICO in the first place.

ICO's use cryptocurrencies, so their scope is global. Theoretically, anyone around the globe can participate in an ICO. Since many ICO's were actually scams and caused major losses for investors, regulations began to be put in place for this kind of event. For instance, US authorities began to check if the distributed tokens constituted securities (were "shares" in the projects). If so then they'd be subject to SEC regulations. For this reason, many ICO's were excluded from the USA.

If you intend to invest in an ICO, due diligence must be performed to check if the people behind the ICO are real (some projects have even used famous actor photos!), if the business does actually have a technical background that makes it viable and so on.

ICO's can be highly rewarding if done right, it's just a matter of choosing wisely and performing due diligence before investing.

Based on Cryptocurrency Knowledge Base Topic initial coin offering
 

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