ICO is short for Initial Coin Offering and it is used by a lot of businesses and startups across the globe to sidestep the controlled and thorough procedures of raising the capital required by investors and banks. An ICO is one of the best ways to raise funds for new cryptocurrency ventures and blockchain projects.
The crypto coins are just like company shares that are sold to investors in transactions of Initial Public Offering (IPO). If the initial coin offering fails to meet the minimum funding requirement, the money will be given back to the first investors. In such scenarios, the initial coin offering is termed “unsuccessful.” If the requirement of the fund is met within a stipulated period, the money will be used to complete an old scheme or initiate a new one.
This means that any action taken by small ventures and startups will have an effect on the price of their cryptocurrency tokens. Small ventures and startups team discussions are likely to be made open to the public, and the team might be queried several times in one day regarding the price of their token.
Here Are Some Vital Characteristics of an Initial Coin Offering
- An ICO’s price is often fixed by the creator(s) of the project, decentralized autonomous Organization, or economy.
- The crowd sale might have several fundraising rounds with coin offerings or tokens.
- The value of the tokens offered will continue to increase until the day it will be released.
- People that invested early are likely to get better rewards included in their cryptocurrency tokens as an incentive.
Differences and Similarities between IPOs and ICOs
- Initial coin offering only gives investors rights to a specific project, but the right does not extend to the company that is launching the project. Whereas, initial public offerings investors the ownership of a startup or business depending on the number of shares they have.
- ICOs have several fundraising rounds, whereas IPOs are onetime sales with several intermediaries to determine the conditions.
IPO vs. ICO