ICO - an initial coin offering - works this way: A company which is creating a cryptocurrency is announcing that they will raise fund through crowdfunding. After that, they will share revenues in token form between the investors. ICO is rather similar to an initial public offering (IPO), of shares on the stock exchange, but there is a difference. This explainer will talk about the advantages of an ICO and how it differs from an IPO.
IPO: Share in Business
With an ICO, in return for bitcoins and ethereum you can recieve a certain amount of new cryptocurrency. And in fact that’s all there is to get. By investing in a company you actually acquire a stake in it, and in some cases even a right to vote.
No shares -No dividends as some companies refuse to pay out but only do it as a last resort.
IPO: One of a Kind
Currently, almost all new cryptocurrencies are based on the Ethereum platform. That is, they can offer different possibilities, but they have one point in common. A firm can find an entirely new niche, creating a unique technology and providing people with what they always desired, but couldn’t obtain. What’s more important is that companies must land a licenses for their products and activities, and blockchain startups don’t owe anything to anyone, so the risk of fraud is fairly high.
Recently the U. S. Securities and Exchange Commission (SEC) said that companies which gain funds through the sale of digital assets must follow the law of the federal securities. But it doesn’t mean that any ICO will be regulated the same way as an IPO, so an investor can’t know for sure what sort of a deal he is getting into.
As a rule, it’s better to be a big investor or a venture fund in order to participate in an IPO. ICO is much simpler: anyone can visit the company’s website and send money to the project.
ICO: Endless Information
The cryptocurrency theme is very popular, so you can always find information on the project developers and associated rumors. For an IPO it’s less clear: before the public stock offering the company has to submits official documents, but they do not give a complete picture of their plan and prospects of the project.
ICO: Low Price
If you have $1,000 you can buy one share (if you find one so cheap) and hope that the company will not fail right after the IPO. Or you can take the same $1,000 and invest $100 into ten ICO projects. Perhaps, some of them may fail, but the rest could bring you a significant profit.
Firstly of all, it's a trend as nowadays everyone speaks out about cryptocurrencies, blockchain and ICO’s. Don’t you want to be a small but important part of this world?
And the winner is…..Friendship
Who said that you can’t invest both in a new company and in a new digital token at the same time? If tokens attract you more, you can follow the ICO with our calendar.
By Yana Sher