Cryptocurrency beginners might be curious and a bit confused when they see the new tech jargon. We bet ICO is one of those terms. It is easy to mix it up with IPO, IEO, and even IFO. In this article, we’ll give you clarification on what ICO is and its significance to the trading industry. Read through the end to get a clear picture.
What is an ICO?
Short answer: An ICO is a crypto fundraising event in which the project owners sell their coins to the investors to gain capital.
ICO stands for Initial Coin Offering and is a type of capital-raising activity. In other words, the coins are offered to raise funds. The interesting thing is the project investors will receive a share of revenue, privileges, or special offers in return for using the coins generated in the system.
In general, the investors would invest or hold the coins in the fundraising projects in hope that they will turn into “unicorns.” Therefore, the investors will do their research on the projects from the Whitepaper to look for the details and information about the projects. They will invest through ICO fundraising if they can see that the projects have potential.
What is an ICO Portal?
Short answer: The ICO Portal provides ICO projects screening service to the investors, to reduce the risk of fraud.
The ICO Portal serves as a provider of digital tokens to general investors. On the other hand, ICO Portal’s main objective is to screen those who wish to issue the ICO, analyze the business plans, as well as, check and verify that the source codes match the information disclosed in the whitepaper, apart from getting to know the investors for the risk assessment.
What is an ICO Launchpad?
Short answer: An ICO launchpad collects ICO projects’ information to help investors make the best decision before investing.
ICO Launchpad is a platform that collects all of the interesting information about ICO projects to help investors find the best one. It can be compared to a central market that serves as a marketplace for buyers and sellers. As a result, fundraising, consulting, marketing, and receiving support in technical aspects can be easier too.
Launchpad is widely used by ICO crypto launchers and project owners, for example, the popular platforms in 2022, Binance Labs, Huobi Prime, OKEx Accelerator, Bitfinex Pulse, etc. These platforms gain their popularity from their ability to raise funds for a variety of projects while also creating a large user community.
Most importantly, every project owner must undergo screening from an ICO Launchpad. The criteria may differ, but they all take into account the project’s feasibility, target audience, and many other important factors. If the project is approved, it will be supported by the particular platform in terms of marketing, technical support, and fundraising.
What is an ICO Token?
Short answer: An ICO token refers to the coins released from the project owners in the ICO fundraising for the investors to buy. In return, they receive benefits from the project.
Those interested in investing in ICO tokens have the same goal to raise funds and reap the benefits. When there are fundraisings in many different currencies, the investors will receive each of the project’s ICO tokens. In short, the idea of ICO tokens is similar to a share certificate of a company. You could earn special offers, benefits, or rewards from that project which depends on the details written in the Whitepaper.
List of the ICO Tokens
The list of ICO Tokens entirely depends on whether the projects meet the ICO Portal’s criteria. Investors can find more information on the website or ICO Portal that offers the services.
What are the differences between ICO and IPO?
ICO and IPO share very similar fundamental principles, but they also have a few differences. The most significant ones between an IPO and an ICO are how they are reviewed, and verified by the SEC. The further details are as follows.
IPO: An IPO stands for an initial public offering. It is similar to the ICOs, but the tokens are offered by private companies to the public.
ICO
- ICO usually starts with business plans, ideas, and theories. Consequently, there is not enough business data to calculate the business balance sheets.
- ICO portal plays a more important role when there is an ICO launched in some country, for example, Thailand. According to the SEC rules, it is not permitted for retail investors to invest more than TBH 300,000 or US$ 8,458 per project with less than 4 times the shareholders of the amount that the ICO issuer offers to the retail investors, or not more than 70% of the total offering value – depending on which value is greater.
- ICOs have Whitepaper that provides information to investors. For more options, there is also an ICO Portal that regulates and checks Smart contracts to ensure the investors before making the decision.
IPO
- IPO will be protected under the Securities and Exchange Act and there are regulations both before and after the offering.
- IPOs have the mandatory investment prospectus announced to the public
Pros and Cons of ICOs
This kind of fundraising always comes with its pros and cons. Let’s look at the comparison as follows
Pros of ICOs
- Quick fundraising process
- Instantly tokens received
- Transparent Smart contracts with high accuracy
- The received tokens have instant value and can be exchanged for fiat money.
Cons of ICOs
- High risks
- Without the lack of proper research, investors may be deceived and lose their money.
- High volatility in cryptocurrency exchange rates
- No legal support for international fundraising
What do we have to look for when seeking a reliable ICO?
ICO fundraising is just like any other investment which has its advantages and potential risks. Investors must research and understand thoroughly to manage their own risk. Once you have decided to invest in the ICO, the following information is what you should look at.
- Business plan review and the objectives of the ICO project fundraiser
- Check the token holder rights, according to the Whitepaper.
- Make sure that the smart contracts details on the website correspond with the Whitepaper
- Check for the hacking and criminal history of the digital wallet used for the fundraising
Furthermore, investors must be cautious in the following cases.
- In the case of international fundraising, there might not be enough information which is a high risk of being scammed.
- It may be challenging to sell or trade digital tokens if they don’t gain popularity as expected.
- Beware of advertisements that promise high returns.
Fundraising is a fundamental aspect of any business that requires a lot of capital. An ICO is a fundraising tool that plays a role and meets the needs of investors in the crypto world. However, investors need to understand and study these tools very well.
Disclaimer: The information provided in this article is not intended to provide investment or financial advice. Investment decisions should be based on the individual’s financial needs, objectives, and risk profile. We encourage readers to understand the assets and risks before making any investment entirely.
