What Is An ICO And How Does It Work?

ICO And How Does It Work

Do you know what ICO stands for? 

ICO or Initial Coin Offering is a concept that’s gradually gaining popularity. As an investor it is only normal that you would want to have all the necessary information about the same – if you don’t know then how can you enjoy the benefits of the same? 

So without wasting any further time, let’s find out more about ICO, and trading robots like the Quantumai App. All you have to do is simply scroll down – keep reading for more information.

Answering, What Is An ICO?

ICO stands for Initial Coin Offering, and is defined as the Crypto industry’s equivalent version to IPO that stands for Initial Public Offering. If there’s a company trying to raise some money for creating a new application, coins, or even a service, can easily launch an ICO for raising money.

Investors who are interested can opt to purchase an ICO for receiving a new Crypto token that is issued by the same company in question. The token might possess some amount of utility associated with the service or product being offered by the company, or even for that matter just represent stakes in the project or the company. 

Key Highlights:

  • Initial Coin Offerings or ICO is a popular method of raising funds for services and products associated with Cryptocurrency. 
  • ICOs share a lot of similarities with IPOs. But at the same time, ICO-issued coins also possess utility for software products or services. 
  • While several ICOs have given back vast amounts of yields to investors, there are many ICOs, all of which were either fraudulent or poor performers. 
  • For participating in any ICO, you will be required to purchase some digital currency that’s already established accompanied by a solid understanding of how Crypto exchanges and wallets work.
  • In most cases, ICOs are often entirely unregulated making it mandatory for investors to be cautious and diligent in their research and investments, when it comes to ICOs.
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So, How Do ICOs Work? 

If a Crypto project aims towards raising money via ICO or Initial Coin Offering, the first step of a project organizer is to find out how to structure it. There are different ways to structure the same including, 

Static Supply & Static Price:

 A company can set some specific goal of funding or even limit for the same. This means that every token which is being sold in the Initial Coin Offerings comes with a preset price, and the total supply of tokens remains fixed.

Static Supply & Dynamic Price:

An Initial Coin Offering can have a funding goal that’s dynamic and a static token supply. This naturally indicates that the funding amounts received within the ICO actually determines the total price of each token.

Dynamic Supply & Static Price:

There are several ICOs out there, all of which generally comes with a token supply that’s dynamic and a price that’s static. In this case, the funding amount received within the Initial Coin Offerings actually determines the total supply. 

Structuring the Initial Coins Offering is not the only responsibility of a Crypto project – it is also in charge of creating a white paper, which in turn is made available on the new website for the token, so that potential investors could check out the same. The project promoters utilize their white papers for explaining vital information related to Initial Token Offerings.

These information usually include,

  • What is this project about?
  • What is the purpose that the project will fulfill once completed?
  • What is the amount of money the project actually needs?
  • How many virtual tokens, founders keep?
  • What is the kind of payment which is going to be accepted?
  • How long will the Initial Coins Offering camping even run?
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The project usually releases white papers as a vital part of its Initial Coins Offering campaigns, which it creates for encouraging both supporters and enthusiasts of the said project for buying at least some tokens. Investors can conveniently use their digital currencies for purchasing the new tokens.

It is becoming increasingly common for most investors to make payments using Cryptocurrencies like Ethereum or even Bitcoins. In fact, these are quite similar to stock shares, often sold during IPOs to investors.

And It’s A Wrap!

If the ICO fails to raise less than the required amount based on their criteria then the entire amount is simply returned to the investors of the project. Naturally the ICO is then deemed unsuccessful. 

However if the ICO is able to meet the total funding requirements within the stipulated time with the help of tools like the Quantumai App then the raised money is utilized for pursuing the goals of the project.

Don’t forget to let us know your thoughts on the same, in the comments below!

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