The opportunities that blockchain technology brings to the digital world are becoming more apparent as it develops. One of the brilliant advantages of blockchain that companies are using globally is cryptocurrency-based crowdfunding. The idea is well-known as an initial coin offering (ICO).
What Is an Initial Coin Offering (ICO)? and How It’s Work
An initial coin offering (ICO) is the first public offering in the cryptocurrency world (IPO). An ICO can be launched by a business to raise money for the development of a new coin, app, or service.
A new cryptocurrency token that the business has issued can be obtained by participating in an initial coin offering by interested investors. This token might be useful in relation to the good or service that the business is providing, or it might signify ownership of the business or project.
With blockchain technology’s advancement, new prospects are becoming clear in the digital world. Crowdfunding with cryptocurrencies is one of the amazing benefits of blockchain that businesses are utilizing globally. The concept of an initial coin offering is well-known (ICO).
The first step taken by project organizers when a cryptocurrency project seeks to generate money through an ICO is choosing the coin’s structure. There are several possible ways to structure ICOs, including:
Each token sold during the ICO has a specified price and the overall supply of tokens is predetermined if a company specifies a specific financial objective or limit.
Static supply and dynamic price: An ICO may have a stable supply of tokens and a dynamic funding target, which implies that the total price per token will depend on the amount of money raised during the ICO.
Some initial coin offerings (ICOs) feature a dynamic token distribution but a static price, which means that the supply is determined by the amount of cash raised.
What significance does an ICO have for your startup?
Exciting investment asset
A more recent asset type with distinct characteristics is ICOs and cryptocurrencies. Cryptocurrencies are viewed as entertaining and exciting investments by many fans.
Boundaries of regulations
Early last year, when ICO valuation finally surpassed the $1 billion mark, Wall Street and governmental organizations felt compelled to take action. To be honest, ICOs has developed into a haven for swindlers and con artists, especially after a series of frauds cost ICO investors millions of dollars in investments.
Different nations throughout the world implement varying regulatory measures, with China going to great lengths to outright outlaw initial coin offerings (ICOs). The Securities and Exchange Commission (SEC) in the US has laid out regulations for ICOs and has even discovered some dubious ones in recent months.
Regulation is therefore not always a negative thing, but it does create new difficulties for firms looking to participate in the ICO market.
Don’t mind the competition
Nowadays, it’s challenging—almost impossible—to watch an entire YouTube video or scroll across Facebook without being inundated with promotional ads for ICO token sales. Startups are investing a lot of money in their marketing efforts for initial coin offerings (ICOs) in an effort to frighten away investors who are finding it more difficult to invest in an oversaturated ICO market.
In addition, when more major players join the fray, the battle will only heat up. The photography company Eastman Kodak stated at CES 2018 that it will start an ICO and enter the bitcoin mining market this year. Following another announcement, the messaging service Telegram revealed plans to make an initial coin offering (ICO) for several billions of dollars within the year.
Control over your startup
You keep a lot of control over your startup with ICOs, including the business concept and fundraising procedure. Startups may occasionally become distracted by the due diligence process that they must go through with venture capital firms and angel investors, and success is not always guaranteed.
As long as your service or product offering is built around a solid business plan, your firm will have a far better chance of generating money and prospering with the flexibility that an ICO can provide.
Therefore, assemble all the materials you’ll need for a whitepaper and a clever marketing strategy if you believe an ICO is the best option for your startup.
Follow Regulations and Compliance to Avoid Fraudulence
Many people believe that ICOs and blockchain technology are unregulated. However, governments around the world are creating regulations at various levels to safeguard their citizens from fraud. Initially, you can use Know-your-Customer (KYC) or whitelisting strategies to confirm the ICO investors. Such procedures ensure that only bona fide investors are taking part.
You may be sure that your tokens were made in accordance with ERC20 guidelines. These requirements guarantee that the ICO tokens are utilized as a form of currency, may be moved between accounts and can be added to cryptocurrency wallets, among other things. Although since their start, ICOs have been seen as unregulated, they are now self-regulated by organizations that are actively engaged in fundraising.
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