ICO Meaning, Pros and Cons
What is an ICO?
ICO meaning, the word is an acronym that means Initial Coin Offering, that is to say, initial offer of currencies. This acronym ICO is very similar to IPO, Initial Public Offering a term used when a firm goes public and wants to offer shares to potential investors in exchange for money. And exactly ICO meaning, it has to do with the financing of a business project.
ICO as a funding method
A few years ago, hundreds of tokens were created because of how ease they can be developed, and firms have come to realize that they can be used to finance themselves.
The ICO meaning (Initial Coin Offerings), these are firms create a token, decide which value will have or what it will be used for, and they presell it uses the money they will make to finance themselves. It is something equivalent to the Kickstarter but taken to the world of finance as crowdsourcing.
This method of financing and obtaining of liquidity started to be used in 2014, but it has not been until the last year when it has exploded and started to invest big in tokens generated by the firm.
With this, firms that issue tokens can finance themselves without resorting to risk capital, so they do not need to sell part of their company or deal with those who control risk capital.
What are the tokens?
Tokens are coins offered during an ICO meaning in the crypto industry and can be considered equivalent to shares bought in an IPO. Also, called cryptos, since they are digital currencies like Bitcoin, Ethereum or Ripple, created on block-chain technology.
From an ICO meaning that tokens will have a value, these tokens will be the equivalent of shares issued in an IPO. Like stocks, these tokens with value will give to the investor by the company or the project, voting rights and, sometimes, a possibility of receiving dividends.
While this will be the most significant comparison of an ICO with an IPO, the vast majority of ICO meaning will issue tokens that are an asset that gives investors access to the possibilities of a particular project and not the ownership of the company itself.
ICO Meaning Security
Another risk involved is that the security of the crypto might not be the right one and someone could manage to hack into the system and steal the money. An example of cases like this was that of DAO, in which they managed to take more than 150 million dollars from the investors.
It is also important to bear in mind that any law does not regulate this type of operations, plus they are outside of the conventional financial system. It is a problem that is struggling to be fixed, as they are beyond the reach of governments and this means, they have no control over the money or taxes.
Not too long ago, Korea was considering the possibility of banning all cryptos. This lack of regulation has opened up many debates about whether ICO meaning, cryptos are an illegal system or not, but by now, it is still working, and many investors decided to invest through this method.
ICO Meaning good for what?
It is clear that the token creator when making an ICO meaning to raise money. A successful example of this is the Ethereum, which managed to reach 18 million dollars before it was launch. Of course, it represented an initial injection of funds which came in handy when this project started.
On the other hand, there are those who act in the ICO meaning. What the actors intend is, of course, to make a profit. The cryptos rise quickly in price (we will not discuss here if there is a crypto bubble or not), and whoever is among the first actors of a project have the higher chances of making high profits.
ICO Meaning Key Features for:
- Anyone can join in a project, Autonomous Organization (DAO) or an economy.
- ICOs of currencies generally sell shares in an economy, while ICOs of tokens sell a property right or royalties from a project/DAO.
- The ownership of the tokens does not always give the investor the opportunity to vote on which direction of a project or DAO, with the rights of the investor integrated into the structure of the ICO, although generally, the investor will be able to put funds throughout the life of the investor.
- Most ICO meaning to involve the creation of a defined number of coins or tokens before the sale.
- ICO Meaning prices usually are established by the creators of the economy, project or DAO.
ICOs might have multiple rounds of fundraising, with currencies or tokens on offer, increasing their value
- until the launch date, so that the first investors are likely to have greater rewards incorporated within their tokens as an incentive to be among them. First buyers.
- ICO meaning, once currencies or tokens are negotiable on the open market.
Is it convenient to use an ICO Meaning?
Investors are surprised with the returns and the increase in the market capitalization of cryptos. During the past year and although there are some good chances, which in some cases can even be described as incredible, risks are there. Something to consider before entering the blockchain world and especially the ICO.
Any investment, especially those who might give profits of more than 100% in a few months, you will find pros & cons.
The advantages of ICO Meaning?
Having the possibility of creating an ICO to fund a project has some advantages.
The clearest is that the creators of the crypto do not have to obtain funds through the usual circuit (banks or risk capital investors).
Which means better conditions can be achieved.
For individual investors, it also represents an advantage:
The usual channel for these financing projects is usually not available to private investors or only for significant capital.
Of course, the reason why this possibility does not exist is that there is usually a very high associated, which is that banks and risk capital management typically do not aim to retailers, but specific and qualified investors (both for strategic and legal reasons).
Disadvantages and risks of an ICO Meaning
It is not gold any token that shines. Almost all the advantages and features that we have just reviewed also have their dark side. These are the risks of an ICO:
Little security for investors. Rarely are there real tests of technology or the business that the company develops. In many cases, it is just a project that might work or not.
Uncertainty around the value of the tokens. There is so much expectation before the possible benefits of an ICO meaning. Sometimes, the prices of the tokens reside more in the potential demand than in the real product. If this kind of demand does not happen, then the value of the token will not grow.
The volatility of the market. Something that increases its value from 100 to 16,000. And then falls to 6,000 can only be qualified in one way: volatile. Thus, investments in tokens and cryptos require permanent attention.
Unawareness of investors. If not expressly requested, the company that carries out the ICOs will never know the real identity of the investor. This opens the door for illegal organizations to launder money through the purchase of tokens.
Impending changes in legality. Each country has adopted the ICOs to its legislation. There are hardly any regulatory precedents for this type of instrument. That means not that it is not subject to regulations? On the other hand, following cases such as Switzerland and China cases.
It is expected that in the near two years or less, most countries will opt for specific legislation in this sector.
What to expect of the ICO Meaning in 2018
“It’s not too late to make a fortune with ICOs, ” says Sheffield Clark, CEO of Coinsource.
Last year when ICO became strong enough. New firms used them instead of lending their capital to risk capital organizations. They issue two types of cryptos in an ICO:
- A utility token, which acts as a discount coupon for the purchase of their products or services,
- A security token, which is something like buying shares.
Utility tokens are the most common. Once issued, these coins will be traded in crypto exchanges all over the world.
“Some see it as the new magical funding elixir,” says Clark. “But there are many examples of ICO meaning related to projects that are instilling a positive change for a community. With the personal financial benefit (to the founders) which is not really of great importance.
These guys are technology geniuses. They want to build something that people will remember and use forever, he says:
“People with brilliant ideas will normally be rewarded.” As well as the people who invest.