ICO - what is it in simple words

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ICO - what is it in simple words

ICO - this is Initial Coin Offering - the initial placement of coins, for these coins in the future it will be possible to purchase services or goods of the future company for which it is created.

An ICO company usually issues its own money (tokens), which can be buy with cryptocurrency

In other words, ICO is a tool for attracting working capital to a business, which is formed from the sale of tokens.

You can draw parallels with a joint-stock company where shares are issued and distributed among investors, taking into account the funds contributed to the company, only in this case shares are issued, and in ICO these are tokens that rise in price over time if the project is successful.

Unlike the IPO of the initial public offering by large companies that have a product, a run-in business, the sale of an ICO, as a rule, a company has nothing, neither property nor sales is just an idea, and how good it is is decided by potential investors who want to finance the project.

Isn't this just another scammer? Yes, it happens, as in fact, in fake charitable foundations, and in raising funds for non-existent repairs of hospitals and kindergartens. But it is not the cryptocurrency that is to blame here, but the scammers who collect funds with the deliberate goal of embezzling them.

 Our opinion: the initial coin offering market is currently in its infancy, as we assume some countries will actively participate in its regulation in order to develop a unified concept around the world.

The main problems of ICO existing today:

  • No one can guarantee income, otherwise such initial coin offerings will be subject to securities laws, which entails a number of bureaucratic registrations
  • Fraudulent actions by companies that open ICO (such companies are called scams)
  • Poor understanding by investors of the process of investing in such companies
  • Lack of legal regulation
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