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Friday, April 19, 2024

How Does An ICO Work?

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We often talk about the back draws of our modern society, which is creating a bad face of the earth, including globalisation and the concern with sustainability. Besides, many of us are not eager to accept the essence of technology in our modern world. 

The fact is that we are surrounded by technology, and Blockchain is an efficient technology to lead us to a smooth and fast transaction and trading process. Most of us have heard about Bitcoin, and this particular Cryptocurrency has been very popular since 2009. 

Despite its volatile market, this digital currency is encouraging people with its distributed ledger. Apart from that, we can also be anonymous with the cross-border transactions with Bitcoin. So if you want to try and experience it, you can go for the bitcoin era

There is nothing more exciting than using Bitcoin, and to add one more fresh usage, we can convert our focus to Initial Coin Offerings (ICO) led by Blockchain technology. Here we are to decrease your confusion regarding ICO and its process of working. 

What Is ICO?

Initial coin offering is a type of capital raising activity taken by the companies so far. This is done through Blockchain technology and is very popular among startups. Well, it is like the initial public offering (IPO), but here the utility for software or product does work.

The main purpose of ICO is to remove the intermediates and include a different channel between the investor and the company. The stake of the company project is very much related to the ICO, and the investors purchase their ICO to receive new Cryptocurrency tokens. 

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Types Of ICO

There are mainly two types of ICO that we can see in the market so far. 

1. Private ICO

Private ICO is mainly for private investors and is not for the public. It is limited to some people and is very high in value, and financial investors and industrialists are allowed to participate in such ICO. 

In this case, the company can choose the limit of ICO and also can create the investor’s list. 

2. Public ICO

In contrast, the public ICO is more regular and is offered to the general public to become inventors. This is a kind of crowdfunding which is helping many people to become investors. Using Blockchain technology and the aspects of Cryptocurrency, the ICOs are becoming more viable options for investors. 

How Does It Work?

The process of ICO and its working is very much related to the knowledge of finance, technology and the law. Without adequate knowledge, it will not be possible for a person to stick to the right ICO. 

The decentralised process of Blockchain is being leveraged through the ICO for capital raising purposes. 

1. Identification

The first process of ICO is to identify its target. With the intention of raising money for the company, relevant materials are created. The target of the fundraising activity is done by identifying the potential investors and using materials for them. 

2. Creation

This indicates the creation of ICO tokens. These tokens are to represent the assets and the utility in a Blockchain. This creation is just the initial modification of the existing Cryptocurrencies, and these are like non-fungible tokens which cannot be manipulated.

Well, these tokens are not representing any equity stake of a company. This highlights a stake in the service or product created by the company. 

3. Promotion

This is the step to bringing in the investors in your ICO. The promotional process is mainly dependent on online platforms to attract a mass audience. Attacking the audience is very crucial for ICOs as it runs on the Blockchain process and is unknown to many people. 

The process of promotion goes online, and that creates a chance of getting huge investors. These days, large platforms like Google and Facebook have banned the advertising of ICOs. 

4. Offering  

This is the final stage where the company starts offering the created tokens in several rounds. In that way, investors can purchase the tokens and then the company can go for launching the products or services. 

The products or services can be availed through the tokens by the users, and the appreciation of the token value is what the investors hope for. 

Think Before You Invest

ICO are Cryptocurrencies that work on Blockchain processes, and it is far easier to create and use. So, it’s better to know about whatever you are investing in. fraudulent activities are seen to be common for ICOs, and thus you have to be cautious about this process.

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