The business world is changing at an insanely rapid pace with technological advancements coming in day-in and day-out. These advancements are targeted towards the motive of improving the business techniques, introducing new businesses, and in some cases, replacing the fundamental components of the business system.
Amidst the recent technological advancements, Initial Coin Offering (ICO) has been an event that has changed the course of cryptocurrencies. However, before we dive deep into the realms of ICO, let’s shed some light on what cryptocurrency is and how people trade with it.
What is Cryptocurrency?
The concept of cryptocurrency is a digital currency that is designed to perform purchases and trades with. The unique selling point of any cryptocurrency is its strong cryptography that allows the currency to have strong online ledgers which provide traces of the funds and can be tracked directly towards the source. One of the most common disadvantages of online funds transfer and payments is online theft of your money. Luckily, strong cryptography restricts anybody from accessing your digital currency without your dedicated permission.
The majority of people involved in cryptocurrencies see them as potential investment opportunities. Since the crypto market works similarly to a traditional stock market, the concept is not as difficult to understand. However, little research before stepping into the trading world wouldn’t hurt.
To sum it up, cryptocurrency is nothing but another medium of payment that replaces the fundamental concept of paper-based currencies. Although currently, purchasing goods and services is not as common with cryptocurrencies as it should be, tech enthusiasts believe that this normalization is bound to happen shortly.
How Many Currencies are there?
In the entire crypto market, a rough estimate of over 10,000 different cryptocurrencies is currently available to the public for trading on a variety of platforms. Many of these begin their journey with an Initial Coin Offering (ICO) that allows the investors to acquire tokens of a currency at the beginning prices. ICO events are hyped because usually, currencies that come through the channel of hosting an ICO end up in the top 10 cryptocurrencies in terms of the total market cap of the crypto market, its greatest example is Ethereum. The ICO calendar will help you find the potential ICOs that are scheduled for the current year.
How Do People Benefit From It?
The world of cryptocurrency is highly uncertain. You should get an idea from the pricing shifts in Bitcoin (a leading cryptocurrency) which was priced at about $40,000 per bitcoin in January 2021 and managed to rally up to $60,000 in April. This benefitted the investors and allowed them to fill their banks with great returns on their initial investments.
Things You Need to Know About an ICO
Now that we know what cryptocurrencies are and how they benefit the general public and investors, let’s direct our focus towards initial coin offerings.
Initial coin offerings are a healthy activity for crypto startups to raise funds for their projects. In return for these investments, they provide liquidity tokens to the investors that are redeemable at any point. However, since cryptocurrencies are unregulated, you need to make sure the ICO is legit and is backed by a genuine company to avoid any scams.
Types of Initial Coin Offerings
Let’s have a look at the different types of initial coin offerings.
● Private ICO
Private initial coin offerings consist of a limited number of investors. This is mostly limited to high net-worth individuals and is performed by startups who are not planning to provide their tokens at low prices.
● Public ICO
On the other hand, public ICOs can be considered a fancy name for crowdfunding. The general public is allowed to participate and stake their investments to receive tokens of the cryptocurrency. Although these events are lauded by the majority of the crypto market, regulatory concerns are forcing new currencies to only organize private ICOs.
To help you understand the working of ICOs, here are the factors that can be considered as the pillars of an initial coin offering by a cryptocurrency startup.
Identification of Investment Targets
Since an initial coin offering is performed by a cryptocurrency startup, they organize these events to collect money for continuing the production of their core product. The primary motive is to raise capital for almost all ICOs. These fundraising campaigns allow the company to gain both funds and publicity in the crypto market and help them kickstart their trading journey with the PR boost.
Process of Creation of Tokens
Since investors are investing their money in the initial idea of the business, they plan to receive a commodity in return for their investment to ensure their investment won’t be wasted. For this reason, the startup company provides an asset that is created on the technology of blockchain to the investors in the form of a token. This token is tradeable and can be used to liquidate the funds invested in the company. They cannot be rendered equal to the cryptocurrencies themselves because they are just a specific type of modification of the parent currency. These tokens provide the owners a stake in any specific product or service created by the company and not in the entire company, like stocks.
Promotional Campaigns to Spread the Word
At the time of these offerings, the company released promotional campaigns in the crypto market to spread the word about the event and attract potential investors.
Since cryptocurrencies have been around for a while now, it is difficult to assume that there are avid internet users who are unaware of them. This is why this explanation of how ICOs work will hopefully answer the question of What is an ICO and how they can be traded by both the general public and high net-worth individuals. Considering the potential monetary benefits of investing in ICOs, more and more people should be aware of these investment opportunities to ensure that more and more people can get rich.
Benefits of an ICO
It’s a no-brainer that an initial coin offering is beneficial for the startup company and for investors who are investing their money. However, how can the investors be so sure that their investment is safe and this is not another fancy representation of a Ponzi scheme?
To clarify these and all kinds of doubts, let’s go over the basic benefits of initial coin offerings.
● Concept of Decentralization
The biggest flex of cryptocurrencies is their facility of being a decentralized finance (DeFI) platform that is unregulated and cannot be controlled by any organization or institution or government. Due to this facility, people are both skeptical and happy when making their investments because at one point they are frightened that their investments might get lost but the trust in blockchain technology restores their trust in the currencies and helps them hold their assets until the appreciation of their values.
● Cost Variation
There is hardly any currency available on the crypto market that doesn’t face volatility in terms of costs. Since it’s a free market and is controlled by the people, the price trends are also changed and controlled by the people. This is both advantageous and disadvantageous for the people. Those who want to cash out their assets at an appreciated value like the cost variation of this market. Whereas, people who are willing to enter the market are often found complaining about the high prices.
● Cryptocurrency Profits Utilization
The majority of the crypto financiers are reluctant to withdraw their funds in their bank accounts because when converting the crypto funds into FIAT currency, you have to pay taxes on it. This is why people prefer preserving their digital assets in digital wallets and consume them on platforms that support payments through crypto. However, since that’s not an option in most cases, investing in an ICO is a good option for financers to ensure their assets are not getting wasted and their value doesn’t depreciate due to inactivity.
● The facility of Instant Buy-In
The most efficient aspect of ICOs is that you can easily participate without having to wait for the due processes to be performed like any other investment opportunity. The only prerequisite required to purchase tokens of a specific coin is that you should have funds at the time of purchase.
● Global Buyers and Sellers of Tokens
Since the crypto market contains global buyers and sellers, you don’t have to worry about purchasing or selling your tokens whenever you want. This liberty of being able to find a buyer or seller at any point in time makes the trading of tokens and cryptocurrencies an absolute success in the modern-day.
Since cryptocurrency has been a hot topic this year, new people are flocking into the world of crypto and beginning to learn about crypto trading. A small sample size of this flock is also interested in the aforementioned initial coin offerings that are provided by both promising businesses and frauds who are willing to earn quick money through treachery. However, ICOs are becoming increasingly important in the tech world and people are finding them to be an extremely profitable outlet to multiply their investments and gain profits.
