What Is an Initial Coin Offering?
An initial coin offering (ICO) is the cryptocurrency industry’s equivalent to an initial public offering (IPO). A company looking to raise money to create a new coin, app, or service launches an ICO as a way to raise funds.
Interested investors can buy into the offering and receive a new cryptocurrency token issued by the company. This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project.
- Initial Coin Offerings are a popular fundraising method used primarily by startups wishing to offer products and services, usually related to the cryptocurrency and blockchain space.
- ICOs are similar to stocks, but they sometimes have utility for a software service or product offered.
- Some ICOs have yielded massive returns for investors. Numerous others have turned out to be fraud or have failed or performed poorly.
- To participate in an ICO, you will usually need to purchase a digital currency first and have a basic understanding of how to use cryptocurrency wallets and exchanges.
- ICOs are, for the most part, completely unregulated, so investors must exercise a high degree of caution and diligence when researching and investing in ICOs.