The ICO is short on initial coin offering. When launching a new cryptocurrency or crypto-token, developers offer investors a limited number of units in exchange for other large cryptographic currencies such as Bitcoin or Ethereum.
ICOs are great tools for rapidly depleting development funds to support new cryptocurrencies. Brands offered during an ICO can be sold and traded on cryptocurrencies, assuming there is sufficient demand for them.
Ethereum ICO is one of the most notable successes and the popularity of Initial Coin Offers is growing as we speak.
Brief ICO history
Ripple is probably the first cryptocurrency distributed through ICO. In early 2013, Ripple Labs began developing the Ripple payment system and generated approximately 100 billion XRP chips. These were sold through an ICO to fund the development of Ripple's platform.
Mastercoin is another type of encryption that has sold several million chips for Bitcoin during an ICO, also in 2013. Mastercoin aims to tokenize Bitcoin transactions and execute smart contracts, creating a new layer over the existing Bitcoin code .
Of course, there are other cryptocurrencies that have been successfully funded through ICOs. In 2016, Lisk raised about $ 5 million in their initial bid.
However, Ethereum's ICO, which took place in 2014, is perhaps the most important so far. During the ICO, the Ethereum Foundation sold ETH for 0.0005 Bitcoin each, raising nearly $ 20 million. With Ethereum harnessing the power of smart contracts, it paved the way for the next generation of Initial Currency Offers.
Ethereum's ICO, a recipe for success
Ethereum's smart contract has implemented the ERC20 protocol standard that sets the basic rules for creating other compliant brands that can be processed on the Ethereum blockchain. This has allowed others to create their own brands, in accordance with the ERC20 standard, which can be traded for ETH directly on the Ethereum network.
DAO is a notable example of successful use of Ethereum smart contracts. The investment firm raised $ 100 million in ETH and investors received DAO tokens in exchange for allowing them to participate in the platform's governance. Unfortunately, the DAO failed after his insult.
Ethereum's ICO and the ERC20 protocol describe the latest generation of blockchain-based projects through initial coin offerings.
It also made it easy to invest in other ERC20 brands. Just transfer ETH, paste the contract into your wallet and new chips will appear in your account so you can use them as much as you please.
Obviously, not all cryptocurrencies carry ERC20 chips that live on the Ethereum network, but almost any new blockchain-based project can launch an initial coin offering.
The legal status of ICOs
When it comes to the legitimacy of ICOs, it's a little jungle out there. Theoretically, brands are sold as digital goods and not as financial assets. Most jurisdictions are not regulated by ICOs, however, assuming the founders have an experienced lawyer in their team, the whole process should be paperless.
However, some jurisdictions are knowledgeable of ICOs and are already working to regulate them in a manner similar to the sale of stocks and securities.
In December 2017, the US Securities and Exchange Commission (SEC) classified ICOs as securities. In other words, the Securities and Exchange Commission has been prepared to stop ICOs who regard them as misleading investors.
There are some cases where the badge is simply an auxiliary mark. This means that the owner can simply use it to access a particular network or protocol, so it cannot be defined as financial security. However, stock brands that are meant to appreciate their value are very close to the concept of security. Truth be told, most symbol purchases are made specifically for investment purposes.
Despite the efforts of regulators, ICOs still remain in a gray legal field, and until clearer regulations are put in place, traders will try to take advantage of the initial currency offerings.
It is also worth noting that once regulations are finalized, the costs and effort required to comply could make ICOs less attractive than conventional financing options.
For the time being, ICOs remain a great way of financing new encryption-related projects and have had multiple successes with more.
However, do not forget that everyone is launching ICOs today and many of these projects are scams or lack the solid foundation they need to thrive and make it worth investing. For this reason, you should definitely do a thorough research and explore the team and background of any encryption project you would like to invest in. There are many websites out there that list ICOs, we recommend checking out this ICO calendar if you are interested in investing in an encryption project.