ICO is the abbreviation for the first token release. When launching a new cryptocurrency or crypto token, developers provide investors with a limited number of units in exchange for other major cryptocurrencies, such as Bitcoin or Ethereum.
ICO is an amazing tool for quickly investing in development funds to support new cryptocurrencies. Assuming that there is sufficient demand, the tokens that can be provided during the ICO can be sold and traded on cryptocurrency exchanges.
Ethereum ICO is one of the most significant successes, and with our presentations, the popularity of initial token products is growing.
A brief history of ICO
Ripple may be the first cryptocurrency issued by ICO. In early 2013, Ripple Labs began developing the Ripple payment system and generated approximately 100 billion XRP tokens. They are sold through ICO to fund Ripple's platform development.
Mastercoin is another cryptocurrency that also sold millions of Bitcoin tokens during the ICO in 2013. Mastercoin aims to tokenize bitcoin transactions and execute smart contracts by creating new layers on top of existing Bitcoin codes.
Of course, there are other cryptocurrencies that have been successfully funded through ICO. As early as 2016, Lisk raised about $5 million in its first token release.
Despite this, the Ethereum ICO in 2014 is probably the most prominent ICO to date. During its ICO period, the Ethereum Foundation sold ETH at a price of 0.0005 bitcoins per share, raising nearly $20 million. Ethereum's use of the power of smart contracts paved the way for the next generation of initial tokens.
ICO of Ethereum, the secret of success
Ethereum's smart contract system has implemented the ERC20 protocol standard, which sets the core rules for creating other compliance tokens that can be traded on the Ethereum blockchain. This allows others to create their own tokens that comply with the ERC20 standard and can be traded directly on the Ethereum network with ETH.
DAO is a famous example of the successful use of Ethereum smart contracts. The investment company raised $100 million in ETH, and investors received DAO tokens in exchange for their participation in the governance of the platform. Sadly, DAO failed after being hacked.
Ethereum's ICO and its ERC20 agreement outlines the latest generation of crowdfunding projects based on blockchain through initial token distribution.
This also makes it very easy to invest in other ERC20 tokens. Simply transfer the ETH, paste the contract into your wallet, and the new token will appear in your account, so feel free to use them.
Obviously, not all cryptocurrencies exist in the ERC20 token on the Ethereum network, but almost all new projects based on blockchain can initiate initial token issuance.
ICO's legal status
Regarding the legality of ICO, there is a little jungle there. In theory, tokens are sold as digital goods rather than financial assets. Most jurisdictions have not yet regulated ICO, so if the founders have experienced lawyers on their teams, the whole process should be paperless.
Even so, some jurisdictions are aware of ICO and are already trying to regulate them in a similar way to selling stocks and securities.
As early as December 2017, the US Securities and Exchange Commission [SEC] classified ICO tokens as securities. In other words, the SEC is preparing to stop the ICO that they believe is misleading investors.
In some cases, the token is just a utility token. This means that owners can simply use it to access a network or protocol, in which case they may not be defined as financial security. However, stock tokens designed to increase value are very close to the concept of security. To be honest, most token purchases are made for investment purposes.
Despite the efforts of regulators, ICO is still in the gray legal arena, and entrepreneurs will try to benefit from the initial token distribution until a clearer set of regulations is implemented.
It is also worth mentioning that once the regulations reach the final form, the cost and effort required to comply with the regulations may make the ICO less attractive than traditional financing methods.
For now, ICO is still a great way to fund new projects related to encryption, and there are already many successful projects and there are more projects.
However, keep in mind that everyone is starting the ICO today, many of which are scams or lack the solid foundation needed to thrive and make it worthwhile to invest. Therefore, you should definitely conduct thorough research and investigate the team and background of any encryption projects that you may want to invest in. There are multiple websites that list ICO, and if you are interested, we recommend that you view this ICO Calendar Investment Encrypted Currency item.