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What is ICO – Initial Coin Offering Explained and Simplified

What is ICO?

I’ve heard this question multiple times. I hear people keep asking it and getting mixed signals, so I decided to create a simple Explanation what is an ICO, because I believe things shouldn’t be complex. Let’s keep it simple and here are my thoughts.

ICO stands for Initial Coin Offering, but to be honest when someone asks what is ICO and you give him “Initial Coin Offering” I don’t believe things get clearer for him. I don’t believe that’s the answer people are hoping to receive asking this questions. The second question will be what’s Initial Coin Offering and on and on it will go. So I will try to explain it differently. The reader needs to get the main idea behind the true meaning and not just a BS answer that doesn’t explain anything just brings up more questions. When people are asking questions in most of the times they are not looking for a definition, but for a general explanation, that’s simplified.

what is ico

ICO as Fundraising

ICO could be compared to a Kickstarter when you raise your funding, Kickstarter idea is – let’s assume you want to sell furniture, tech, clothing whatever and you pre-sell your merchandise through the world – China, United States, Germany using Kickstarter. That’s how you gather your funding for your business. Pre-selling your merchandise. ICO is a little similar to that. You gather your funding with cryptocurrencies – Bitcoin & Ethereum. Although you don’t give investors a product in return, instead, you give them your coin. A share of your company. Technically, you don’t give the coin, you’re offering the coin.

ethereum ico

Most well known, most successful ICO – Ethereum

A couple of years ago, Ethereum founder – Vitalik Buterin created a whitepaper and did their own ICO, offering Ethereum coin in exchange for Bitcoins. So a lot of people around the world, who believed in the project and had Bitcoin, exchanged or bought Ethereum. That’s how Ethereum started. That’s what ICO is in general. I hope that sort of answers the question – what is ico.

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Of course, there are other, multiple, successful ICO’s.

Where do you keep your coins/tokens?

So let’s assume you participated in an ICO for xyz project. You exchanged your Ethereum or Bitcoin for this xyz coin. So when and where will you get it? Depends on the project itself. In the most projects, you can just leave your Wallets address and the tokens will be distributed there. Of course, you can’t send bitcoin or any coin that’s based on bitcoins blockchain to your ethereum wallet and the other way around.

P. S If this gets confusing I’ll write a post about Cryptocurrency Wallets.

should i invest in ico

Should you invest in ICO?

I’m not going to give you advice on this one, I’m not going to try and persuade you or influence you in any way. I personally have tried trading and investing in multiple cryptocurrency projects, but I’ve come to a realization that it’s not for me. I’m here for the long run. I’m also not going to give you any specific project in which you should be investing, or “which is the next bitcoin”, that’s all just speculation. I can tell you have I pick my projects and it’s simple – the team and the idea and use-case behind it. What problem is the project solving? If you can’t explain the problem the project is resolving in 30 seconds or less, well, guess what? Then you’re sh*t out of luck. If I truly believe, that’s something that society can benefit from, or that it’s necessary, I will most likely consider investing. L

ike I said before, I’m not going to give you out any projects and try to influence you. I’m not a financial advisor, and you shouldn’t listen to “advisors”, do your own research and don’t invest more, then you can afford to lose, because, let’s be honest, the market still is very unstable.

What is ICO – Summary (TL:DR)

If you still didn’t understand what is ICO, then I will give it my last shot and try to summarize everything.
ICO is a great and a new opportunity for startups all around the world to gather funding and pay for the development, by giving back value to their investors. The investors get back tokens/coins for their investment that they can later on exchange for other cryptos or fiat currency(fiat – euros, US dollars, GBP etc.).

ICO – Scam?

Is ICO a scam? In general – no. But there are many scams out there. People who raised funding and just disappeared. I’m not going to name any, you can do your own research. That’s why I previously mentioned – do your own research, don’t just invest in a project, because it sounds like a great project or everyone else is investing. Check the team, check their leader, check their whitepaper, check how active is their community etc. And even then it might not be enough. Just be aware.

That’s the fundamental idea behind ICO. I hope it got cleared and now you will be able to explain “what is ICO” to your friend and grandma.

If you’re looking for a cryptocurrency exchange or how to get started with crypto in general, read my other posts, you will find all the information you need.

Thanks for reading guys, if you have any comments, drop a line below.

I’ve to mention that this is not a Financial Advice. I take no responsibility for your actions.
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