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Now-a-days crypto currency id used everywhere in the business or in the form of investment. This digital currency is mainly designed to use as a medium of exchange in order to secure the transaction, to control the creation of extra units, and to verify the transferred assets with the help of cryptography. Initial Coin Offerings (ICO), which is also called as Initial Public Coin Offerings (IPCO), is used to raise the funds for crypto currency venture. ICO is mainly used to bypass the regulated capital building process by the startups, which is required by the capitalists or the banks. In this process, backers of the project buy a percentage of crypto currency in the form of tender legally or other forms of crypto currency like Bitcoin.
While raising money through Initial Coin Offerings (ICO), a crypto currency startup needs to create a plan on a whitepaper, the plan includes the basic information like:
· What project is about
· Things and resources needed for the project
· What will be the outcome upon project completion
· How much money is required to startup the venture
· How much of the virtual tokens will be kept by the pioneers of the project
· What type of money is accepted through the project
· The period the ICO campaign will run for
While the ICO campaign is running, the enthusiasts, supporters and the initiators of the firm buy some of the distributed crypto coins in the form of fiat or virtual currency, which is called as tokens. These tokes are similar to the shares of a company sold to its investors with the form of Initial Public Offering (IPO) transaction. During the ICO campaign, if the amount of money raised is not as much as the minimum requirement of the firm, then the money is returned to the backers and the ICO is announced as an unsuccessful project. If the funds raised meet the minimum requirement, the raised money is used to start a new scheme or to complete the current scheme.
One of the successful ICO project is Ethereum, which is called as smart contracts platform. The tokens of Ethereum are known as Ethers. In 2014, Ethereum project was announced and through the ICO, campaign is raised $18 million in the form of Bitcoins or $0.40 per Ether. The project started in 2015, and a year later in 2016, the Ether value got higher and settled on $14 with the market capitalization of over $1 billion.
Though projects like Ethereum was a success and with on record ICO transactions, ICO became the disruptive tool in the digital currency, but the investors cautioned as some of the fraudulent projects revealed causing many investors to lose their money. These fund raising campaigns are not monitored and run by financial authorities like, Securities Exchange Commission (SEC), there are chances of the fraudulent projects more to come up and once you invest your money in such projects, there is no guarantee if you will get it back.
Though Initial Coin Offerings (ICO) has been an innovative tool for raising money for startups, it is not allowed or supported throughout the world. In early 2017, the Government of China banned ICOs from the financial institutions. In Russia, crypto currency is legal, but you cannot purchase actual goods by with any currency other than Russian Ruble.
Many countries like Australia, U.A.E and New Zealand have officially released the guidelines and regulations for using ICOs. Countries like U.S. and Hong Kong have warned people about the risks of handling Initial Coin Offerings (ICO), Securities Exchange Commission (SEC), of U.S. has warned investors to beware of the scammers while dealing with the ICOs, while the UK government authority has announced Initial Coin Offering as highly risked and speculative investment.
Although the highly risked, investors are still considering ICO as one of the most profitable tool to raise money, and with proper information and reliable and trusted projects investing in the ICOs can be less risky and more profitable.
Projects like Mobius Network have published the whitepaper of their project on internet and providing all the information you need before taking a step further with actual investment of your money. Many ICO rating sites feature the current prices of different ICO projects; some even notify you 24 hours prior about the predicted changes in the prices of Initial Coin Offerings (ICO).
Before investing in ICO or any form of digital currency, you should read the guidelines and regulations released by the government authority just for caution, be sure that the ICO project you are going to invest in is trustworthy, gather all the information from the experts and make more out of ICO one of the innovative tools in digital era.