Blockchain technology was developed in 2008. The original purpose of the blockchain was to help sell cryptocurrencies.
However, blockchain has many other valuable purposes. It is helping new generations of cryptocurrencies make their way into the virtual ecosystem.
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Since we live in a world disrupted by technology, we always expect something new from the developers, and our expectations are changing quickly. Technology has manipulated our habits, and now we expect some more from it every day.
Without the innovation and advancement of technology, the 21st century that you see now would not be this fast and smooth. Everything that eases the problems of our life, from phones to the internet, is the gift of technology.
We can now talk to people miles away from us instantly and also can search for random information by sitting in front of a device. This is the process that technology has given us so far, and we are obliged to take that.
On the other hand, blockchain technology is the best discovery of this era, and it has attracted a lot of attention from the public in recent years. Blockchain invented Bitcoin in 2008, and nowadays, people are very interested in using it for Bitcoin trading.
You can also engage in bitcoin trading easily through tools like the bitcoin era. The Bitcoin trading process relies on the distributed public ledger of Blockchain, and that gives you anonymity and security with your transactions.
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Moreover, with the help of this trading process, you will be able to conduct transactions across borders without the involvement of third parties, and thus the transaction fees are far less compared to other traditional trading transactions.
What Is Initial Coin Offering?
This article is focused more on a unique process of fundraising, which is Initial Coin Offering (ICO). ICO is the process of releasing a Cryptocurrency that helps the developer raise funds for a particular project with the help of investors.
It works similarly to the Initial public offering (IPO), but IPO is generally used for raising funds for a company or particular organization.
ICO also can be used for utility support for a product or software. Investors apply and buy the initial coins, and they receive new Crypto tokens. The entire process is carried out over the blockchain.
These kinds of tokens generally represent the stake of a company or utility. IPOs are different because they consider you as part of the company, but ICO does not consider that.
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How is an ICO Carried Out Over the Blockchain?
ICO is a kind of Cryptocurrency project to raise funds through investors. It can be initiated in various ways, but all of them rely on the blockchain to process payments and transmit the coins. Therefore, ICOs wouldn’t be possible without the blockchain.
The project manager of the ICO determines the structure of such coins and distributes them through the blockchain. There are a few ways to structure the coins.
1. Static Price And Static Supply
In this process, a company can set the goals and limits of the funding for the project. So, each token will have a preset price, and also the total token supply limit is fixed.
2. Dynamic Supply And Static Price
This is a process where the price is set already for the tokens, but the supply is dynamic. Through this process, the investors can be more than others.
3. Static Supply And Dynamic Price
In this process, the funds and goals can be dynamic with the help of static supply. Here the supply can determine the price of the tokens at the end.
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White Paper Release
The whitepaper is a pitchbook that Crypto users use to set their parameters. Potential investors will come to you if they know your aim and goals, and situation as well. The whitepaper is there for you to determine your goals and choices.
As an investor, you will get few information like-
- About the Project
- Need of the project
- How much funds needed
- Limit of virtual tokens
- Type of accepted payments
- Possibility of the project and investment.
What Happens to The Funds?
There are mainly two things that can happen to the funds for the investors. If the ICO fails to secure the actual investment it needs, then the project owner will return all the money to the investors.
On the other hand, if the ICO gets successful with adequate funds, then the money will be used to fulfill the project goals. The investors do not consider the owner, but the goal of ICO, to understand the importance of the project so that the value can be high in the future.
Blockchain Makes ICOs Possible But Doesn’t Eliminate All of the Risks
The blockchain has evolved significantly over the last 14 years. One of the biggest changes has been the inception of new cryptocurrencies.
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There are a lot of great things about the blockchain. It has made ICOs possible. Nevertheless, there are still risks when participating in an ICO that can’t be overlooked.
ICO can be easily manipulated. The scam is easy with ICO as the regulations to create an ICO are very few. So, it’s better for you to be cautious about the facts.
Moreover, the legal purposes are there with ICO. It’s not just about creating an ICO, but you have to show a legitimate goal to receive the funds.