What is Initial Coin Offering and How do ICO Tokens Work?

Initial coin offering or initial currency offering (ICO) is a method of raising funds and a public sale of enterprise tokens in the form of cryptocurrency. This method is used in projects that have not yet developed a blockchain technology as a platform for digitization.

In ICO funding system, payment is typically made using cryptocurrencies such as Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH) or Ripple (XRP) but in some cases, banknotes and fiat currencies are also accepted. Let's explore what the Initial Coin Offering is and how ICO tokens work.

Initial coin offering (ICO)

What is Initial Coin Offering and How do ICO Tokens Work?

What is Initial Coin Offering (ICO)?

Initial Coin Offering(ICO) is a type of funding and an unregulated means by which funds are raised for a new cryptocurrency project based on blockchain.

Initial Coin Offering (ICO) funding system is a token sales campaign organized by startups to bypass the rigorous and systematic capital collection process required by venture capitalists or banks.

In an ICO campaign or a token sale campaign, a quantity of cryptocurrency is sold to the project supporters, ie investors or buyers of the project currency, in exchange for legal tender or other cryptocurrencies such as Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH) or Ripple (XRP).

This currency can be purchased from early selling campaigns called Pre-ICO, which is to sell "tokens" ("coins") before launching ICO and against Bitcoin or ETH or dollar or euro, but the investor does not receive the tokens or the currency of the project immediately but after the launch of the ICO.

The ICO campaign is a campaign in which the investor gets the symbols (coins) or the currency of the project directly into his portfolio based on a block chosen by the project.

The use of ICO funding system is most popular among projects that have not yet fully developed their blockchain technology platform, product, or service.

Stages of Initial Coin Offering (ICO)

ICO Cryptocurrency is often done in two stages:

Pre-Sale

The currency is opened for sale for the first time and has certain limits to buy where it cannot be purchased in small quantities, but is targeting buyers who are able to buy large amounts of currency.
A bonus is offered to buyers at this stage in the form of a significant discount on the price or an additional percentage of the amount purchased is offered free of charge upon purchase.

Crowd-Sale

The sale of the currency is opened again without any limit to the purchase and can buy small quantities and is available to all who want to buy regardless of the value of their capital.
A reward is offered to buyers at this stage but at a much lower value than the first stage reward.
The Crowd-Sale is the stage immediately preceding the introduction of currency on the trading platforms in the cryptocurrency market.

ICO Projects - The Blockchain Tokens

The Blockchain Tokens are distinctive symbols of the project and each project has its own symbols, as if it offers you shares of the company, in return for your investment.

The tokens are specified in a certain number that cannot be increased or decreased after the disengagement of ICO or Pre-ICO. These tokens are also distributed to investors or individuals or who want to buy.
The organized project of the ICO gets money to invest in developing the idea of the project.

This token after the expiration of the ICO period can be traded on any platform like Bitcoin, or any currency can be exchanged.

How do ICO Tokens Work?

ICO usually involves selling a new cryptocurrency at a discount as part of a way to raise funds for the company.
ICO companies generate tokens according to ICO conditions, receive them, and distribute them according to their plan by converting them into individual investors.
If the cryptocurrency succeeds and is valued - based on speculation, the investor makes a profit.

How can you Get ICO Tokens?

Determine your goals precisely.
Ensure that your project actually needs an Initial Coin Offering (ICO).
Activate all social media marketing channels.
Create a strong team.
Prepare a pricing plan.
Register for an ICO through the project's website.
Get Bitcoin Litecoin or Ether.
Move your cryptocurrencies to a wallet you control.
Buy ICO tokens.
Participate in an ICO by sending your cryptocurrencies to their address.
Write a white paper.
You get ICO tokens to your address.
Test your project before launching.
Run a pre-sale.
Launch a website.
Prove your statements.

The Benefits ICO Tokens

Initial Coin Offering (ICO) is used to define a process of raising funding for a new cryptocurrency project based on blockchain technology.

The benefits of ICO are for everyone involved. Many benefits to shareholders are also advantages to founders.
At least, these benefits encourage more shareholders to adopt ICOs over other options and put their money into the ICO cryptocurrency market.

ICO offers a great opportunity to maximize gains from currency appreciation based on project strength and currency trading volume on cryptocurrency trading platforms.

ICO projects are very important for the development of technology, services, and applications and are very profitable, provided that the project is carefully studied, especially the following points:

Project Idea
White Paper
Roadmap for the implementation of the project
Developers Team
Amount of currencies available (Available supply)
Method of distribution of available currencies

When participating in an ICO funding system to purchase a cryptocurrency for a project, the following information must be clearly specified:

Purchase limits, if any.
Circulating currencies to buy.
Duration of the first offer.
The capital to be raised during the initial coin offering

The study of the project should produce your own investment plan in the first offer in terms of:

The stage in which the project will participate and purchase.

Buying currencies will be a long-term or near-term investment

The amount of currency you buy to take advantage of discounts and bonuses in the initial supply stages.

Set an initial target price for selling currencies to ensure timely capital recovery and participation in trading or other initial offers.

In order to execute the purchase, the buyer's wallet address must be registered to convert the currency purchased - pre-sale to the crowd-sale, regardless of the timing of your participation in the initial currency offering.