ICO is short for Initial Coin Offer. When introducing a new cryptocurrency or crypto-token, developers offer a limited number of units to investors in exchange for other major cryptocurrencies such as Bitcoin or Ethereum.
ICOs are an incredible tool for rapidly raining down on development funds to support new cryptocurrencies. The tokens offered during the ICO can be traded on cryptocurrency exchanges, assuming there is enough demand.
Ethereum ICO is one of the most notable successes, and the popularity of the first coin offers is growing as we talk.
A brief history of ICOs
Ripple is probably the first cryptocurrency to be distributed by ICO. In early 2013, Ripple Labs began developing the Ripple payment system and generated about 100 billion XRP tokens. These were sold through an ICO to finance Ripple’s platform development.
Mastercoin is another cryptocurrency that also sold several million tokens for Bitcoin during an ICO in 2013. Mastercoin aims to mark Bitcoin transactions and execute smart contracts by creating a new layer on top of the existing Bitcoin code.
Of course, there are other cryptocurrencies that have been successfully funded by ICOs. In 2016, Lisk raised about $ 5 million during the First Coin Offers.
However, Ethereum’s ICO, which took place in 2014, is the most notable to date. During the ICO, the Ethereum Foundation earned about $ 20 million by selling 0.0005 Bitcoin each. Ethereum, using the power of smart contracts, paved the way for the next generation First Coin Offers.
Ethereum’s ICO, a recipe for success
Ethereum’s smart contract system has implemented the ERC20 protocol standard, which sets out the basic rules for creating other compatible tokens that can be processed in Ethereum’s blockchain. This allowed others to create their own tokens in accordance with the ERC20 standard, which can be sold directly to Ethereum with ETH.
DAO is a notable example of the successful use of Ethereum’s smart contracts. The investment company raised $ 100 million worth of ETH, and investors received DAO tokens that allowed them to participate in platform management. Unfortunately, the DAO failed after being attacked.
Ethereum’s ICO and ERC20 protocols described the latest generation of blockchain-based projects through their first coin offerings.
It has also made it much easier to invest in other ERC20 tokens. You simply transfer the ETH, paste the contract into your wallet, and new tokens will appear in your account so you can use them as you wish.
Obviously, not all cryptocurrencies have ERC20 tokens living on the Ethereum network, but any new blockchain-based project can offer an Initial Coin Offer.
Legal status of ICOs
When it comes to the legality of ICOs, there is a bit of a jungle. Theoretically, tokens are sold as digital goods, not as financial assets. Most jurisdictions have not yet regulated ICOs, so if we consider that there is an experienced lawyer in the founding teams, the whole process should be undocumented.
However, some jurisdictions have become aware of ICOs and are already working to regulate them in a similar way to the sale of stocks and securities.
In December 2017, the US Securities and Exchange Commission (SEC) classified ICO tokens as securities. In other words, the SEC was preparing to stop ICOs that they thought were misleading investors.
There are some cases where the sign is just a help sign. This means that the owner can only use it to access a particular network or protocol, in which case it cannot be defined as a financial guarantee. However, the capital verses that aim to assess value are very close to the concept of security. True, most miracles are performed specifically for commercial purposes.
Despite the efforts of regulators, ICOs still remain in a gray legal area, and until a more precise regulation is implemented, entrepreneurs will try to take advantage of the First Coin Offers.
As a rule, when it comes to the final form of regulation, appropriate cost and effort can make ICOs less attractive compared to traditional financing options.
The last words
For now, ICOs remain an incredible way to fund new crypto-related projects, and there are more successful projects in the future.
However, keep in mind that everyone is starting ICOs these days, and many of these projects are fraudulent or lack the solid foundation they need to thrive and will be worth the investment. For this reason, you should do a thorough research and research the group and background of any crypto project you want to invest in. There are many websites out there that list ICOs, just do a Google search and you will find some options. .