|GIFA Token' concept of Initial Coin Offering (ICO)|
Cryptocurrency is at a crossroads right now. The widespread adoption of cryptocurrency is accelerating at a breakneck pace as millions of people realize its potential for financial freedom and flexibility.
What Is an Initial Coin Offering (ICO)?
An initial coin offering (ICO) is the cryptocurrency industry’s equivalent to an initial public offering (IPO). A fintech company that wants to entice new investors and participants in the financial enterprise can launch a new coin, app, or service. Interested investors can buy into the (ICO) offering and receive a new cryptocurrency token issued by the company. This token may have some benefit utility additional to value in using such a token in exchange for the product or service from any participating merchant and business brands.
- Initial Coin Offerings (ICOs) are a popular fundraising method used primarily by fintech startups wishing to offer products and services, usually related to the cryptocurrency and blockchain space.
- ICOs are similar to stocks, but they sometimes have utility for a software service or value for a product offered.
- Many ICOs have yielded massive returns for investors who participated in the project.
- To participate in an ICO, you will usually need to purchase a token, keep your digital currency, and know how to use cryptocurrency wallets and exchanges.
How an Initial Coin Offering (ICO) Works
When a cryptocurrency startup raising money through ICO, it usually creates a whitepaper that outlines what the project is about, the need the project will fulfill upon completion, how much money is needed, how many of the virtual tokens the founders/investors will keep, what type of currencies will be accepted, and how long the ICO campaign will run for.
Investors looking to invest in ICOs like GIFA Token should first familiarize themselves with the cryptocurrency ecosystem more broadly. In the case of most ICOs, investors must purchase tokens after creating an account with pre-existing crypto exchange. This means that an ICO investor needs a cryptocurrency wallet set up for a currency like bitcoin or Ethereum, as well as having a wallet capable of holding whichever token or cryptocurrency. With GIFA exchange a person who opens an account no need to worry because a wallet and trading platform will be available.
How does one go about finding ICOs in which to participate?
There is no recipe for staying abreast of knowing the latest ICOs. ICOs generate a substantial amount of hype, and there are numerous forums online in which investors discuss new opportunities. There are also some dedicated websites like (GIFA Token sale is currently underway which started on 10/09/2020 and will end on 09/03/2021. Take action now if you want to participate in this great opportunity of initial coin offering./) that aggregate ICOs, allowing investors to discover new ICOs and compare different offerings against one another. To make the right decision: Here you came in the right place:
Initial Coin Offering (ICO) vs. Initial Public Offering (IPO)
For traditional companies, there are a few ways of going about raising the funds necessary for the development and business expansion. A company can start small and grow as its profits allow, remaining beholden only to company owners. However, this also means they may have to wait a long time for funds to build up. Alternately, companies can look to investors for early support, providing them a quick influx of cash—but typically coming with the trade-off of giving away a portion of an ownership stake in the company. Another method is to go public, earning funds from individual investors by selling shares through an IPO.
|Illustration photo of ICOs / Getty Images|
While IPOs deal purely with investors, ICOs may deal with supporters that are keen to invest in a new project, much like a crowdfunding event. But ICOs differ from crowdfunding in that the purchasers of ICOs are motivated by a prospective return on their investments while the funds raised in crowdfunding campaigns are basically donations. For these reasons, ICOs are referred to as “crowdsales.”
ICOs also retain at least two important structural differences from IPOs. First, ICOs are largely independent, meaning that government organizations like the do not oversee them. Secondly, due to their decentralization nature and lack of regulation, ICOs are much freer in terms of structure than IPOs.
ICOs can be structured in a variety of ways. In some cases, a company sets a specific goal or limit for its funding, which means that each token sold in the ICO has a pre-set price and that the total token supply is static, for instance, the GIFA exchange has suppled 20,100,000,000 tokens (Twenty billion and one hundred million tokens). In other cases, there is a static supply of ICO tokens but a dynamic funding goal—this means that the distribution of tokens to investors will be dependent upon the funds received (i.e. the more total funds received in the ICO, the higher the overall token price).
|ICOs' structure / Sabrina Jiang|
Still, others have a dynamic token supply which is determined according to the amount of funding received. In these cases, the price of a token is static, but there is no limit to the number of total tokens (save for parameters like ICO length).
In an IPO, an investor receives shares of stock in a company in exchange for her investment. In the case of an ICO, there are no shares per se. Instead, companies raising funds via ICO provide a blockchain equivalent to a share—a cryptocurrency token. In most cases, investors pay in a popular existing token—like bitcoin or ethereum—and receive a commensurate number of new tokens in exchange. ICO managers generate tokens according to the terms of the ICO, receive them, and then distribute them according to their plan by transferring them to individual investors.
Early investors in an ICO operation are usually motivated to buy tokens to earn profit returns. The value of the tokens they purchased during the ICO will climb above the price set during the ICO itself, and they will achieve overall gains. This is the primary benefit of an ICO: the potential for very high returns.
ICOs have indeed made many investors into millionaires overnight. For example, in 2017, there were 435 successful ICOs, each raising an average of $12.7 million. So, the total amount raised for 2017 was $5.6 billion, with the 10 largest projects raising 25% of this total. Furthermore, tokens purchased in ICOs returned an average of 12.8 times on the initial investment in dollar terms.4
Example of an Initial Coin Offering (ICO)
As the ICO space got bigger and bigger, so too did the sums raised by the largest projects. When evaluating ICOs, one can consider both the amount of money raised in the ICO as well as the return on investment.
Today it's numbering 82815 at press time, let’s take a look at some of them. More recently, ICOs have generated significantly larger amounts in terms of total funds raised. During a one-month ICO ended in March 2018, Dragon Coin managed to raise about $320 million. More recently, the company behind the EOS platform shattered the Dragon Coin’s record by raising a whopping $4 billion during a yearlong ICO.20 EOS (EOS), currently is the 5th biggest cryptocurrency with almost $12 billion in market cap, is attempting to build a network that can utilize inter-blockchain communication and is
TRON (TRX) is ranked 10th among all the cryptocurrencies at the time of writing, and is described as a ‘open-source protocol for the digital entertainment industry.’ It aims to launch a content platform with ecosystem connecting all people creating different kinds of content.
An ‘enterprise level public blockchain platform’ VeChain (VEN), the 15th cryptocurrency in terms of market cap, is planning to implement Internet of Things (IoT) technology to provide private keys for each product that make it possible to track them.
Sometimes ICOs with a remarkable return on investment are not the projects that raise the most money and vice versa. Ethereum's ICO in 2014 was an early pioneer, raising $18 million over a period of 42 days. Ethereum has proven to be crucial for the ICO space in general, thanks to its innovations with regard to decentralized apps (dApps). When it debuted, ether was priced at around $0.67, and as of Sept. 24, 2020, it trades at $348.99.6
In 2015, a two-phase ICO began for a company called Antshares, which later rebranded as NEO. The first phase of the ICO ended in Oct. 2015, and the second continued until Sept. 2016. During this time, NEO earned about $4.5 million. While it is not one of the largest ICOs in terms of money raised, it has provided exceptional ROI for many early investors. The price of NEO at the time of the ICO was about $0.03, and at its peak, it traded at roughly $187.40.17 18.