The concept of initial coin offering had seen its frequent use after the introduction of cryptocurrency, which was a result of the recession of 2008. As there was a huge financial crisis, a new form of digital currency came, that does not exist in physical form.
Initially, there was a lot of resistance faced by the currency but now, everyone thinks it to be a viable method of investing money and to do activities like purchasing goods etc. The reason why people have shown their interest in crypto trading is due to the underlying technologies that it has to offer for the full security of our money.
This type of currency uses blockchain technology, where there exists no authority to verify any financial transaction. That means there is no controlling authority that is hindering or delaying the monetary processes. In blockchain technology, there is a public ledger that provides full transparency to each transaction taking place.
It uses encoding methods to protect the transaction. It uses high computing methods to do all this that makes it impossible for the hackers and no space is left for any online frauds. Apart from all these benefits, cryptocurrency offers so many other benefits that make it convenient for people to operate their money without any unnecessary formalities.
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The first such instance of coin offering in cryptocurrency has been seen for the Ethereum cryptocurrency.
INITIAL COIN OFFERING AND ITS WORKING
Initial coin offering is a method of offering coins to people in the form of tokens. The offering is done so that some funds are raised so that the further working of that coin is facilitated. Its frequent use has been seen after the cryptocurrency and blockchain technology’s introduction.
People who are seen accepting might either get some partnership, certain stock of that currency, or returns from the offerings made. More often the new startups have been seen using the ICO. The foremost benefits of ICOs are that they, just like many cryptocurrencies, don’t allow any intermediary to operate between the parties and the original owner.
For such raising the company and the party directly communicate and hence resulting in transparent operation keeping in mind the interest of both the parties.
Initial coin offering requires deep-rooted knowledge in the technology that is needed to run an ICO. In the following listed ways, an ICO works:
- For raising the money through the public, many campaigns are initiated that are focused on bringing the investors in its ambit. They are mostly in an online form and for assisting an ICO many social platforms help them through advertising about them.
- The company has to set up a goal focusing on raising money and the several ways through which it can attract the investor.
- The token formation is the other mechanism through which they offer it to the public for the invested money.
- After token formation, they are ready to be offered to the public.
DIFFERENCE BETWEEN PUBLIC AND PRIVATE ICO:
In public coin offering, it is offered to the general public at large for raising such funds and anyone accepting the offering can become a legitimate investor of that offering. It is more constitutional in nature than the private one, where only selected people are offered to become an investor.
In private ICO we can say that it is more centric towards offering its coins to wealthy people and keeping it with minimal partnership, stock sharing, etc. The amount for investment is also pre-decided and people seem to invest in private ICOs more due to the regulations related to it.
Hence, I hope the information shared above helps you all in understanding the basics of the crypto Industry. Wish you all a safe and profitable trading time ahead.