For over a year, the development of an ICO mechanism aimed at attracting finance to create any projects has continued. The meaning of the system is that at the expense of existing virtual money a new cryptocurrency is being implemented, which is in the process of formation. In a generalized form, such currencies are called tokens. Simply put, a user can exchange his or her ethers or bitcoins for another type of currency. Often, ICO in the circles of experts is also called crowdsale.
The creator of new projects forms his own tokens, which are subsequently implemented between investors. After launch, each owner can manage their tokens at their discretion. For example, they can be used both within the project, and as a kind of currency. It is also possible to sell them for the same bitcoins or other virtual currencies or common fiat money (euros or dollars).
It is noteworthy that there are no officially registered bills or other documents regulating this mechanism. Any resident of our planet can launch projects based on ICO. All processes take place on a confidential basis, and the principle of operation is as similar as possible to crowdfunding that does not lose its relevance.
An ICO can be formally described in the following steps:
1. Announcement. Startups submit their ideas about the project for discussion on the network. At this stage, it is possible to attract investors who are interested in the idea, but are not yet ready to engage in financing due to the lack of presentation. And also possible publications in online publications and other marketing campaigns.
2. Conclusion of contracts. For the official holding of the action, registration of a legal entity is required, which can initiate an offer.
3. Full promotion in order to attract investment injections. Unlike the first stage, here the initiators of the ICO provide a full presentation, in which there is all the data about their project.
4. The implementation of tokens. First of all, they are sold on the site organized by the owners, which may be the official site. If the procedure is successful, then tokens are promoted on all major exchanges.
In general, the procedure is similar to an IPO, although there are several significant differences. The main thing is that many countries regulate IPOs by law. This makes the process of launching and selling peculiar shares more complicated, but in return guarantees full protection from the state. Moreover, both organizers and investors are protected from any incidents. In the case of ICO, ideas are realized at your own peril and risk.
Cryptocurrencies, like the entire sphere related to them, are developing rapidly. There are many hypotheses and assumptions as to what this may lead to. Recently, experts have noted the fact that ICO is developing too quickly. Accordingly, there are no guarantees that this system will collapse in the future. Over the entire period of existence of cryptocurrencies, enough similar examples have accumulated. At the same time, it is worth paying attention to the success of the Ethereum currency, which was developed after a successful ICO campaign.