About Initial Coin Offering

Initial Coin Offering (ICO) is the same as that Initial Public Offering (IPO). The main difference between the two is that the ICO is for the cryptocurrency while the IPO is for the stocks.

A company seeking to raise money for an app, service, or coin can launch an ICO to raise funds. The IPO functions for the stocks only and it makes a private entity to a public company which is good for any company to increase its market value in the world.

For ICO, the interested investors, invest in the company in their initial coin offering to receive the cryptocurrency tokens issued by the company.

The market of ICO works the same as that of IPO, after listing the value of the coin tends to change on the basis of demand and supply of the coin.

The ICO’s work is the same as IPO, the ICO has yielded high returns over the course of time. These coins have increased over a long course of time, like that of shares like for over 20 years, the share prices have increased but there are companies whose share prices have fallen as well but in the case of coins in the last 5-6 years, the coins have increased significantly like the price of Bitcoin and Ethereum.

The ICO can be done in different ways – 

  • Private ICO – In private ICO, only a selected number of individuals are allowed to invest in the coins and a minimum amount is set by the company for the investment. The company generally goes to high net – worth individuals and financial institutions.
  • Public ICO – In public ICO, the coin offerings are made from the general public at large. In this type of investing, anyone can become an investor.

Due to regulatory reasons, the private Initial Coin offering is becoming famous over the world. The public can buy these coins from different apps of trading which provide the option to trade. In 2017, in ICO’s more than 7 billion dollars were raised through ICO’s. While going into 2018, the amount of ICO nearly doubled. During a private-based ICO, a UK-registered company raised over 1.2 billion dollars. 

The Initial Coin Offering are structured in different ways which are – 

  • Static Supply and Static Price – A company can set the specific limit or funding which means the supply is fixed and each token sold has a present price. In short, there is pre-set price and the number is limited.
  • Static Supply and Dynamic Price – The dynamic price goal is to provide for the funds received determines the overall price of the coins and the supply of token is static. In this the number of coins is limited and the price is dynamic.
  • Dynamic Supply and Static Price – The price is specified, which provides the number of coins that can be sent to the market. In this the price is preset and the number is dynamic.

An investor needs to own cryptocurrency to invest in an Initial Coin  Offering. The new tokens issued can be purchased by established cryptos such as Bitcoin or Ethereum. Initial Coin Offering investors need to have two wallets at a time – 

  • One is to save the currency for trading or buying or selling such as Bitcoin or Ethereum.
  • Another wallet is to hold the token or currency being sold for ICO.

IPO is highly regulated by government organizations, as all the nations have different stock exchanges to regulate the stocks and the rules for regulating them. Though the ICO’s are not regulated and there is no regulatory authority, it depends on the country whether they want to regulate them or not.

Recently Indian Government in the budget provided information regarding the taxation policies regarding crypto, that there will be a 30% charge.

The main difference between an ICO and IPO is that ICO participants are gambling their money, as they don’t know whether the price of the coin in which they are investing whether the price will increase or decrease in value in the original price of purchase. 

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