Initial Coin Offering – Definition, Types, Characteristics, and More

Initial Coin Offering Definition

ICO (Initial Coin Offering) is an initial coin offering used in blockchain companies. These companies’ applications are based on blockchain technology, such as Bitcoin or Ethereum.

The money they raise is a method of financing, and in return, the investors receive funds. These funds are usually paid out in tokens or coins that can appreciate and increase value over time. They can also be used to interact and use the company’s application.

This sale process organize very carefully, and initially, a pre-ICO system prepares, with good marketing, and then it list on private token exchanger in advance. The launch date define and for a specific time. In addition, these tokens have agree sale price, and an available quantity is sold.

The company presents a document (Whitepaper), which specifies all the project details, technology, purposes, etc. In short, it is about showing investors that it is a profit opportunity.

Many tokens since their birth experiences an exponential revaluation exceeding any expectation. But also several of them, especially during the end of the year 2018, many scams emerges, and some have been caught in their nets.

Types of Initial Coin Offering (ICO)

The first ICO in the history of Master Coin was Omni Layer in 2013, raising $500,000 in BTC. Since then, several sales models have emerged to correct the deficiencies, highlighting the most important ones.

ICO of Limited Sale (Caped Sales)

It sells a fixed number of tokens at a fixed price and consequently at a fixed valuation. This model uses in the massive sales of some We Trust crypto assets, Master Coin, Maid Safe, etc. This causes a lot of losses for some investors due to exchange rate fluctuations between payment currencies. During the years 2016 and 2017, it was the most used.

Unlimited Sale ICO (Uncapped Sales)

This sales model sells as many tokens as the investor wants to buy. Since there is no coin issue cap, much uncertainty create among participants about the valuation they are buying.

Reverse Dutch Auction

It is like a limited sale, but the part of the tokens given to the buyers depends on when the deal ends. For example, if 10% of the passes are sold on the first day, these distributes among the buyers. The ICO team retains the rest, and if it ended on the second day, it would be 20% and so on.

Practical Tips

If you determines to invest in ICOs, you must carefully analyze all details and do a reasonable investigation. Do not act lightly and be critical. If you can choose the right one, the investment can be immense, but you can lose all your capital if you decide lightly.

Characteristic of Initial Coin Offering (ICO)

The characteristic elements of an ICO are the following:

New companies (startups) use them to raise funds by offering and promoting their products and services.

They allow forming or expanding a company’s capital through acquiring cryptocurrencies.

Depending on their purpose, they may have a resemblance to the actions of a company, allowing the participation of third parties.

They avoid the involvement of intermediaries, such as banks or securities dealers.

They are usually unregulated or outside the law.

Advantages of an Initial Coin Offering (ICO)

The benefits obtained by investing in an ICO are varied. Among them can mention.

They allow companies to raise funds from all over the world without the limitations of space and jurisdiction.

The investor receives a token that can give them a lot of stability in stat of the usual volatility of the value of cryptocurrencies.

They are mechanisms that are very easy to design and launch on the market, with online services.

The company feeds on investors’ enthusiasm, who expect good profits in exchange.

How to Participate in Initial Coin Offering (ICO)?

They cannot be bought with fiat currency, and you have to purchase bitcoin or Ethereum first.

Once you have your crypto, you must deposit it in a compatible wallet to facilitate its launch, usually listed by the ICO itself.

We must be attentive at the time of launch. We have been able to verify that many of these ICOs  last minutes, selling all of them in record time.

When acquiring your ICOs, the tokens  transfer directly to your wallet.

Finally, if you want to sell them, you have to find a public exchange, or if you prefer, you can store them in your wallet.

If you are looking for updated information on some ICOs, read it then the token market can help you offer you reliable data.

Technopedia Explains Initial Coin Offering (ICO)

In an initial coin offering, the process begins with the design. Startups can distribute white papers and other resources to showcase project details to potential investors. Founders determine how much of a coin’s virtual value will distributes to investors.

An ICO implies a funding threshold by which it succeeds or fails. If it fails, the money  return to its original owners.

Like other types of early investing, an ICO is inherently risky. ICOs, sometimes referrer to as “crowd sales”, aim to illustrate the principle that “ideas are cheap” and that structure a successful cryptocurrency is more accessible than done. Critics talk about the legality of the tokens and the challenges for these financial companies.

How does an Initial Coin Offering (ICO) Work?

When forming a new company or starting a new project, raising the necessary funds through an ICO is convenient to carry out.

That way:

  • A technical document  creates that will contain the description of the project, in addition to the need to satisfies. Likewise, the money requires, the tokens to issues, and the time or validity defines.
  • At the beginning of the campaign, buyers of the token with cryptocurrencies will attract.
  • If the necessary funds obtain, they are available for the project and achieve all the objectives.
  • If the goalmouths are not met, the money (cryptocurrencies) could return, in which case the project fail.


An initial coin offering (ICO) in cryptocurrencies defines an event where a community raises funds for a new cryptocurrency project. It’s like the cryptocurrency version of an IPO without much of the regulation and process accompanying similar efforts within regulates financial world.

A first coin offering (ICO) is a term for launching a new numerical asset. Like an IPO, an ICO is the first time novel buyers can access a coin in the stock market. But an ICO is not incomplete to cryptocurrencies like bitcoin and Ethereum. Companies also use them to raise funds, as do companies entering the stock market. Learn more about initial coin offerings and whether they make sense for you.

Also Read: Waterfall Project Management – About, Steps, and Benefits

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