First Coin Offering (ICO) is a crowdfunding method utilized by fresh cryptocurrency businesses to increase capitals. Back in ICO, some percentages of the recently issued cryptocurrencies are offered to folks who are interested in supporting the project. They’re sold to exchange for other based cryptocurrencies like Bitcoin, Fiat and Ether.
Backers buy the new cryptocurrency with a goal to make a profit when it increases in value. It is similar to the principle of people making a profit once the share they purchased at the stock market increases in value. ICO is different than buying shares at a stock exchange because you don’t receive a share of the ownership right when you invest in the new tokens.
Brief History on ICOs
At the beginning stage, ICO was conducted by companies such as Mastercoin, Ethereum and Karmacoin. Ethereum conducted one of the biggest ICO in 2014 by raising a total of $18 millions in the early phase of 2014. They violate the record by raising 3,700 Bitcoins which is equivalent to $2.3 million dollars over the first 12 hours of the effort. Kik ran the initial mainstream ICO in September 2017 but the job was interrupted by a phishing scam via the flow of a fictitious URL in the social websites.
Now, ICO sales are now increasingly more popular with approximately 50 token sales being conducted each month. Starting from 2017, ICO has been growing at a quick pace with $2 billion value of token sales successfully conducted. This proves it is not likely to become a temporary method used by fresh cryptocurrency company to raise funds but it’s here to stay for extended term.
Nowadays, ICO token sale is so popular that at least a couple ICO starts every day. It has been predicted that more than $4 billion value of token sales will be conducted this past year. They figure out how to increase a total amount of $2.3 million in the market presale.
How Can ICOs Fundraising Work?
A cryptocurrency company which wishes to increase capitals through ICO must offer a few details including job description, project purpose, amount have to be raised, percentage of tokens the company will keep, kinds of virtual currencies accepted, and the period of this ICO campaign. Backers who are interested will email the seller and ask for more details of this job before performing a transaction. If they raise the amount for your campaign, they will execute the scheme to complete the project. If not, they will return the money back to the backers.
How Scammers Use ICO to Take Out Fraud?
ICO can be performed to help raise capital for various kinds of companies and charity organization. Additionally, it has been utilized as a tool by scammers to run frauds. Scammers would use means to grow the ICO value temporarily and abandon the job afterwards to earn a fast profit. Ethereum Tokens happen because of the lack of regulation by the authorities. The same as any investment, there is a risk when coming to put money into the initial coin offering.