Initial Coin Offering(ICO) is similar to Initial Public Offering(IPO). A Cryptocurrency startup raises money through an Initial Coin Offering. The startup releases a white paper which states the concept of the startup, how things will proceed and other things necessary for the project.
The ICO usually runs for a specific number of days. The tokens should be sold during these days and the tokens unsold will be destroyed after ICO is over. And the team decides how many tokens will be available for the ICO and the value of each token. A certain number of tokens will be reserved for the team to maintain the superiority and for developing and maintaining the project.
The tokens will be exchanged for fiat currency or the virtual currency(like Bitcoin or Ethereum) as decided by the team.
The ICO sets up two limits for fundraising.
Soft cap:
The soft cap is the minimum fund the ICO should raise in order for the project to be developed. If this limit is not reached the ICO is said to be unsuccessful and the amount is returned to the investors.
Hard cap:
The Hard cap is the maximum fund that can be raised by ICO. Most of the ICO's can't reach the Hard cap. Only very famous projects like Status or Brave browser have reached its hard cap.
Later in 2013, Mastercoin promised to create a layer on top of Bitcoin to execute smart contracts and tokenize Bitcoin transactions. The developer sold some million Mastercoin token against Bitcoin and received around $1mio.
Several other cryptocurrencies have been funded with ICO, for example, Lisk, which sold its coins for around $5mio in early 2016. Most prominent however is Ethereum. In mid-2014 the Ethereum Foundation sold ETH against 0.0005 Bitcoin each. With this, they receive nearly $20mio, which has become one of the largest crowdfunding ever and serves as the capital base for the development of Ethereum.
ETH, for example, was sold at 0.0005 Bitcoin and is worth today 0.05 BTC. Augur token (REP) were sold for around 0.005 each and are now traded at 0.01.
On the other side, many ICO ends with losses. Cryptocurrencies like Lisk, IOTA-token or Omni did not hold the value in Bitcoin the token has been assessed at the ICO (or struggle to keep it). Often ICO is even used by scammers and semi-scammers: Build a glossy website, write some blocks of bullshit bingo, promise the greatest project/cryptocurrency ever, and be happy if you receive just 50 or 100 Bitcoin. Besides the large and successful ICO, like Lisk, Melonpost, Augur or Iconomi, many small and shady ICO's did collect funds and delivered nothing at all.
Tags: ICO, Hard cap, Soft cap, Cryptocurrency, ICO, Bitcoin, Ethereum
The ICO usually runs for a specific number of days. The tokens should be sold during these days and the tokens unsold will be destroyed after ICO is over. And the team decides how many tokens will be available for the ICO and the value of each token. A certain number of tokens will be reserved for the team to maintain the superiority and for developing and maintaining the project.
The tokens will be exchanged for fiat currency or the virtual currency(like Bitcoin or Ethereum) as decided by the team.
The ICO sets up two limits for fundraising.
Soft cap:
The soft cap is the minimum fund the ICO should raise in order for the project to be developed. If this limit is not reached the ICO is said to be unsuccessful and the amount is returned to the investors.
Hard cap:
The Hard cap is the maximum fund that can be raised by ICO. Most of the ICO's can't reach the Hard cap. Only very famous projects like Status or Brave browser have reached its hard cap.
Short History of ICO's
Maybe the first cryptocurrency distributed by an ICO was Ripple. In early 2013 Ripple Labs started to develop the Ripple called payment system and created around 100 billion XRP token. The company sold these token to fund the development of the Ripple platform.Later in 2013, Mastercoin promised to create a layer on top of Bitcoin to execute smart contracts and tokenize Bitcoin transactions. The developer sold some million Mastercoin token against Bitcoin and received around $1mio.
Several other cryptocurrencies have been funded with ICO, for example, Lisk, which sold its coins for around $5mio in early 2016. Most prominent however is Ethereum. In mid-2014 the Ethereum Foundation sold ETH against 0.0005 Bitcoin each. With this, they receive nearly $20mio, which has become one of the largest crowdfunding ever and serves as the capital base for the development of Ethereum.
Profit and Loss
Most of the ICO's have been profitable for the investors. Its estimated that the value of token increases by 3 times when it goes live.ETH, for example, was sold at 0.0005 Bitcoin and is worth today 0.05 BTC. Augur token (REP) were sold for around 0.005 each and are now traded at 0.01.
On the other side, many ICO ends with losses. Cryptocurrencies like Lisk, IOTA-token or Omni did not hold the value in Bitcoin the token has been assessed at the ICO (or struggle to keep it). Often ICO is even used by scammers and semi-scammers: Build a glossy website, write some blocks of bullshit bingo, promise the greatest project/cryptocurrency ever, and be happy if you receive just 50 or 100 Bitcoin. Besides the large and successful ICO, like Lisk, Melonpost, Augur or Iconomi, many small and shady ICO's did collect funds and delivered nothing at all.
Tags: ICO, Hard cap, Soft cap, Cryptocurrency, ICO, Bitcoin, Ethereum
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