WHAT IS AN ICO IN CRYPTO
Teams can use an Initial Coin Offering (ICO) to raise money for a project in the cryptocurrency industry. Teams create blockchain-based tokens for an ICO to sell to early backers. Users receive tokens they may use (now or in the future), and the project receives funds to support development, acting like a crowdfunding phase.
2014 saw the rise in popularity of the practice after Ethereum's development was paid for with it. Since then, it has been used by hundreds of businesses, with different degrees of success (especially during the 2017 boom). The two techniques of raising capital are essentially very different, despite the name being similar to an initial public offering (IPO).
IPOs typically relate to existing enterprises that sell shares of a portion of their company to raise money. As a fundraising tool, ICOs, on the other hand, enable businesses to generate money for their product at a very early stage. Investors in ICOs do not get any equity in the company when they buy tokens.
For tech businesses, ICOs can be a feasible substitute for conventional investment. Without a working product, new entrants frequently struggle to raise finance. Established companies rarely fund ventures in the blockchain industry based only on the merits of a white paper. Additionally, the absence of bitcoin regulation discourages many people from adopting blockchain firms.
However, established businesses also employ this technique. Reverse ICOs, which operate quite similarly to ordinary ICOs in terms of functionality, are occasionally launched by well-established businesses. In this instance, a company decentralizes its ecosystem by issuing a token in addition to its existing product or service. As an alternative, they may hold an ICO to attract more investors and generate money for a brand-new blockchain-based product.