In an IPO, an investor receives shares of stock in a company in exchange for her investment. In the case of an ICO, there are no shares per se. Instead, companies raising funds via ICO provide a blockchain equivalent to a share a cryptocurrency token. In most cases, investors pay in a popular existing token like bitcoin or ethereum and receive a commensurate number of new tokens in exchange.
It’s worth noting just how easy it is for a company to launch an ICO to create tokens. There are online services that allow for the generation of cryptocurrency tokens in a matter of seconds. Investors should keep this in mind when considering the differences between shares and tokens a token does not have any intrinsic value or legal guarantees. ICO managers generate tokens according to the terms of the ICO, receive them, and then distribute them according to their plan by transferring them to individual investors.
Early investors in an ICO operation are usually motivated to buy tokens in the hope that the plan will succeed after it launches. If this actually happens, the value of the tokens they purchased during the ICO will climb above the price set during the ICO itself, and they will achieve overall gains. This is the primary benefit of an ICO: the potential for very high returns.
ICOs have indeed made many investors into millionaires. For example, in 2017, there were 435 successful ICOs, each raising an average of $12.7 million. So, the total amount raised for 2017 was $5.6 billion, with the 10 largest projects raising 25% of this total. Furthermore, tokens purchased in ICOs returned an average of 12.8 times on the initial investment in dollar terms.