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Introduction to ICOs
So what is an ICO? An initial coin offering (ICO) is an unregulated means of crowdfunding that is typically conducted via a crypto currency blockchain or custom website built solely for this purpose. These sites truly are amazing and very diverse in their nature, not to mention style and functionality as well. Early ICO’s were often organized just for funding the development of actual new crypto currency tokens/chains, but modern ICO’s have become incredibly elaborate, with separate budgets for marketing, community growth and so on. There are highly different incentives built into many of these crowdsales, for miners, node operators, and investors alike.
What do you get in ICOs?
In the most common cases, crypto tokens are provided to all or the majority of investors in exchange for funding. Oftentimes, a large portion of the supply will be locked in for a set time, and more often than not, a one-year lockdown will be pop up as the most frequent unit of measure. This is to ensure that early adopters and patient token holders will be able to receive adequate profits, as a fair return for their early support of the new community. This does not mean that this is always the case, not all ICO’s turn out to be profitable upon release, so doing through research is advised.
Even so, the history of crypto currency ICO’s isn’t without its dark spots (always check if an website is real and not an ico scamming one). The most notable being the DAO hack, the first Ethereum ICO and one of the largest crowdfunding campaigns in history.
How are ICOs created?
There was a long period after the dao fiasco during which ICO’s were pretty much rare and few between. This has changed in the last 12 months, with projects popping up left and right. Most are based on the Ethereum blockchain, with hacks still happening even today: https://www.wired.com/2016/06/50-million-hack-just-showed-dao-human/
It is a tried and tested formula, with the actual existence of tokens as well as all accompanying chain movement, defined by ironclad mathematical smart contract algorithms. A highly transparent ecosystem has been created, so it’s no wonder that there are this many projects springing up. We from CoinStaker are now trying to cater specifically to this market, check our list of ICOs coming soon.
Unlike an initial public offering (IPO), acquisition of the tokens (in some cases shares or even derivate token assets/vehicles) is not government regulated. It’s an interesting conundrum since technically these projects are rarely rooted in one country or jurisdiction, with whole development and marketing teams stretching out across the globe. This truly is an exciting time for the FinTech industry by large, a genuinely global market, where all that is needed is a new idea and able people to turn it into a reality. No tariffs or government intervention, middle men are kept to a minimum, and surplus managers rendered obsolete with automation.