ICO is the name given to a type of crowdfunding to provide initial investment opportunities for entrepreneurs on projects with blockchain and cryptocurrency. Popularisation of blockchain had increased as cryptocurrencies like bitcoin and Ethereum are used frequently. In today’s world, it is possible to find tens of successful projects with single ICO.
What is Crowdfunding?
Crowdfunding is an alternative system for traditional financial tools (taking loan from bank). You are telling your project and asking investors to invest to your project online. Generally, amount of investments is low, however, number of investors are high. Based on your agreement, you are offering certain benefits to investors if your project has necessary funds. Here ICO is the name of crowdfunding on these cryptocurrencies based projects.
How Did ICO Become Popular?
As crowdfunding and cryptocurrencies become popular, people guided their attention to this direction. Everyone who saw the value increase in these software-based projects, started to invest in this area. When it comes to cryptocurrency, it is possible to invest with money as well as cryptocurrencies like BTC and ETH. Using this financing type, different successful projects were realised. This success inspired entrepreneurs. Thus, ICO concept had become popular.
What is Token?
We often see Token concept when we are dealing with ICO. This concept has a similar meaning to the general use. Token is the right to use the services presented within the project. We can call “the right of use”. Project investors receive certain amount of token. Tokens could be cryptocurrencies to buy and sell bitcoin and could be a valid currency for a specific project. After financing and realising the project, investors could either use or sell these tokens.
What is the Difference Between IPO and ICO?
At first look, IPO (initial public offering) and ICO are similar. The fundamental principle of both concepts are to realise a project through crowdfunding and giving shares to investors from total value. However, IPO often belongs to large investors. On the contrary, $100 could be invested to a project with ICO. Another difference is that since “cryptocurrency” is given to the investor after ICO funding, ICO is not subjected to law in many countries. However, IPO funding could be tracked with laws.