COs (Initial Coin Offerings) have become a popular way to fund cryptocurrency projects. An ICO is an event in which a new cryptocurrency project sells part of its cryptocurrency tokens to early adopters and enthusiasts in exchange for money today. ICOs provide a way for cryptocurrency project creators to raise money for their operations. Most ICOs raise money in Bitcoin or other cryptocurrencies.
The ICO usually takes place before the project is completed, and helps fund the expenses undertaken by the founding team until launch. For some of the larger projects, part of the ICO money goes into a foundation that provides ongoing support to the project. They also work as an initial distribution model for the cryptocurrency tokens, especially those with a proof of stake consensus algorithm.
How They Work
ICOs are typically announced on various cryptocurrency forums, notably on Bitcointalk. The announcement thread contains key information about the project, such a whitepaper (if present), project goals, timelines for ICO and project development, team involved, previous experience of the team members, notable features of the project, and other ICO details.
Funds are typically collected in Bitcoin, either via a global, public address (in which case the participants need to send Bitcoin from an address they control the private key for), or by creating accounts of each participant and providing them with a unique Bitcoin address. Best practices dictate that all funds ultimately be held in a multi-sig address that is made public.
The specific dynamics of an ICO may vary. They typically include a few weeks of raising money, at least, and try to raise as much as there is demand. Occasionally, some ICOs will instead cap the total amount raised (such as DigixDAO which capped the total fundraising at around $5.5 million). A small percentage of tokens are usually reserved for early promotion bounties, such as forum signature campaigns or social media and newsletter campaigns.
Once the ICO is completed and the project launched, the ICO tokens get listed of cryptocurrency exchanges to trade against other cryptocurrencies. The largest exchange by volume today is Poloniex. The price usually reflects the overall cryptocurrency market sentiment, project-specific news, and the addition of new features.
However, there is an important thing to remind that ICO is just a way for fund raising , in which many scams get use of it. So before you invest ICO, Please make sure that you know what they are doing and the potential of it. DO NOT ALL IN TO IT !!!!
Hope that the above information is useful for the newbies :)
ICOs are just similar to IPOs in stock markets. Much potential but also much risk involved. Always don't go all in and pay attention on news and discussions regarding the coin you are in.
You're right. But actually many people think that the ICO that they have bought will be the next bitcoin. And the scamers get use of it. So we should know more information of ICO before we invest on it. Just don't act as Herd behavior... :)
I guess people would learn from their experience of losing :) Once they got hurt they won't behave the same again...psychology stuff
Yes. There are so many ICO available and I think people just like draw a lottery ....
if people are using the same amount of money they buy lottery tickets in ICOs I don't see any problem though... they can afford to lose
but yeah greed is always here to move us
So don't all in into it is OK：）
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good stuff, thanks for sharing!
Actually I am also a newbies and just meet with those thing for just about a mouth... But it is responsible to state the risk of ICO....