Thread by @AltCryptoGems

Here's a brief Introduction to ICOs!

In 2018 a a ton of crypto projects raised a staggering USD $5B in ICOs. With a total mcap of over $900B, the cryptocurrency market has attracted the attention of many, including traders looking for quick cash with few regulations.

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What Are ICOs?

The word ICO is an abbreviation for Initial Coin Offering, this is a marketing strategy used by owners of cryptocurrency projects to raise capitals for further development of their project, through the use of ICO trading platforms, such as; CG and many more.

Hence, the investors receive unique cryptocurrency "tokens" in exchange for their monetary investment in the project. This unique token gives investors exclusive access to certain features of the project.

How Does It Work?

When a cryptocurrency startup firm wants to raise money through an ICO, it usually puts its plans (road map) on a "white paper" this white-paper helps to provide investors with important information which includes, but is not limited to:

What the project is all about; what objectives the project will aim to fulfill upon completion; how much money is necessary to undertake the venture; how many virtual tokens the issuers will keep for themselves (team tokens); what type of currency is accepted;

How long the ICO campaign will run for; the initial market capitalization of the project; market value of the said token; the platform that will host the ICO; the exchange that the token can be traded on once on mainnet and who the team is behind the white paper.

The company issuing the ICO prepares the white paper prior to launching the currency. It is a pivotal component of ICOs, as many investors ask for a whitepaper draft before deciding whether to invest or not.

The importance of ICOs

Through the ICO fundraising model, startups can raise capital by issuing tokens on a blockchain (a list of records secured using cryptography) and then distributing tokens in exchange for a financial contribution.

These tokens, which can be transferred across the network and traded on cryptocurrency exchanges, can serve an array of different functions, from granting the holder access to a particular service, to entitling them to company dividends.

In conclusion, An ICO is similar to online crowdfunding, but for cryptocurrency. This tokens can be used in two ways, either with a utility function or a security function.

A utility token is generally unregulated and used by startups to gain capital to fund their projects in exchange for future access to the service in development.

On the other hand, a security token is generally treated like a stock, a tradable asset with ownership qualities, and is regulated by the SEC. The concept of ICOs are new and raises some concerns with the actual value of the tokens and how easy it is for the issuer to get rich.

Ultimately, time will tell whether this becomes the future of funding businesses or merely a "get rich" scheme by issuers.

Fun fact: #Binance started out with ICO as well! #BNB was worth like $0.10 during the #ICO!

That's it for now! Thanks for reading!

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