In the cryptocurrency world, ICOs (Initial Coin Offerings) are the equivalent of initial public offerings (IPOs). ICOs are a new way to raise funds for a project, i.e. launching a new coin, app, service, product, etc. 

The cryptocurrency landscape has changed dramatically since this concept arrived and evolved in many different ways. The number of projects and amount of money raised through ICOs has increased significantly over the past few years, with a total market capitalization of over $100 billion. It’s highly likely that this market, along with ICOs, will grow a lot in the near future. 

In this post, we’ll provide you with a quick explanation of initial coin offerings (ICOs) and how they can be useful for businesses.

What is an ICO (Initial Coin Offering)?

An initial coin offering (ICO) is a type of capital-raising activity in the cryptocurrency and blockchain realms. A cryptocurrency-based initial public offering is known as an ICO (IPO). However, because the two fundraising initiatives are so dissimilar, it is not the most realistic comparison. Startups generally use an ICO to raise funding.

The fundamental benefit of ICOs is that they eliminate intermediaries from the capital-raising process, allowing companies and investors to communicate directly. Furthermore, both parties’ interests are linked.

This one-of-a-kind token works as a currency, giving investors access to specific aspects of the issuing company’s project. These coins are unique in that they help support open-source software projects that would otherwise be impossible to fund using traditional means.


How do ICOs Work?

An ICO is a complicated technique that necessitates a solid understanding of technology, finance, and the law. The fundamental idea behind ICOs is to use blockchain technology’s decentralized networks in capital-raising efforts to align the interests of multiple stakeholders. The following are the steps in an ICO:

  1. Establishing investment objectives

Every initial coin offering (ICO) starts with a company’s desire to raise capital. The company determines the fundraising campaign’s aims and prepares suitable documents for potential investors about the company or project.

  1. Token production

The next phase in the initial coin offering process is the creation of tokens. To put it another way, tokens are digital representations of an asset or utility on the blockchain. The tokens are tradeable and fungible. Because the tokens are simply adaptations of current cryptocurrencies, they should not be mistaken for cryptocurrencies. Unlike stocks, tokens rarely provide an equity stake in a company. Instead, the majority of the tokens give their owners a piece of the company’s product or service.

Companies can create tokens by using specific blockchain platforms. The creation process is relatively simple since a company does not have to write code from scratch as in the case of creating a new cryptocurrency. Instead, existing blockchain platforms that run Ethereum are used to create tokens.

  1. Campaign for promotion

To attract new investors, a company normally undertakes a promotion campaign at the same time. To reach the largest number of investors, most campaigns are run online. However, ICO advertising is now prohibited on several major web platforms, including Facebook and Google.

  1. The initial offer

The tokens are offered to investors after they have been created. There may be numerous rounds to the offering. The company can then utilize the ICO funds to develop a new product or service, while investors can either use their tokens to benefit from this product or wait for the tokens’ value to rise.


Merits and Demerits of Initial Coin Offerings

ICO Merits

The following are some of the advantages of participating in an Initial Coin Offering (ICO).

  • Easily accessible to investors and new businesses
  • The main benefit of an ICO is that all transactions are completed online. Everything can be easily researched and traced via the internet.
  • Tokens can be purchased by anyone.
  • Tokens are traded all over the world.
  • It is feasible to generate a profit.
  • There is a lower entry barrier.

ICO’s Demerits

Despite the numerous advantages of investing in initial coin offerings, there are some drawbacks to be aware of.

  • Because there are so many ICOs competing in the market, many blockchain technologies are subject to change. With so many variables influencing their present worth, investors might expect quick price swings in their assets, which can be either an exhilarating challenge or a chaotic experience.
  • ICO-related regulatory systems are still in their infancy.
  • Many ICOs are the result of start-up enterprises and other private entities lacking the capital to launch their potential ideas. While investors can anticipate large returns in the future, there is no assurance that the companies in question will be able to deliver on their promises, which means investors may not always get what they expect.

The first stage for a cryptocurrency project that wants to generate funds through an ICO is to figure out how it will be structured. ICOs can be created in several ways, including:

  • A company can specify a specified financial goal or limit, which means that each token sold in the ICO has a predetermined price and the overall token supply is fixed.
  • An ICO can have a fixed supply of tokens and a dynamic financing goal, meaning that the overall price per token is determined by the amount of money raised in the ICO.
  • Some ICOs feature a dynamic token supply but a static price, which means that the supply is determined by the amount of investment received.



ICOs are undeniably beneficial to both investors and businesses. This is a simple approach to raising funds in exchange for providing investors with special privileges. Before investing in an ICO, you should conduct thorough research. Examine the company’s history, records, and other relevant information. You can earn a high return on your ICO investment if you address all of these concerns. Investors have benefited enormously from several initial coin offerings (ICOs). Countless others have been exposed as frauds or have performed horribly. To take part in an ICO, you’ll likely need to buy a more established digital currency and have a basic understanding of cryptocurrency wallets and exchanges. Because ICOs are largely unregulated, investors should proceed with caution and due diligence while studying and investing in them.

As ICOs are a new concept, some people are concerned about the value of the tokens and how simple it is for the issuer to get wealthy. Only time will tell whether this is the way of the future for business or merely a get-rich-quick scheme for a few. It’s best for businesses to keep looking at this space and adapt useful aspects in their product/service offerings accordingly.