Crypto Academy Week 9 - Homework Post for @imagen

What is ICO

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ICO stands for "Initial Coin Offering." they are another form of cryptocurrency used by businesses to collect money. Investors earn exclusive cryptocurrency "tokens" in return for their monetary investment in the company through ICO trading platforms. ICO is a form of crowdfunding in which a digital token is created and sold to raise funds for a project's growth.

This one-of-a-kind token works like a unit of currency, granting investors access to some aspects of the issuing company's project. These tokens are unique in that they aid in the funding of open-source software projects that would otherwise be difficult to support using conventional methods.

How do ICO’s Work?

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Startups will raise money using the ICO funding model by issuing tokens on a blockchain (a list of records protected with cryptography) and then distributing tokens in return for a monetary donation. These tokens, which can be exchanged on cryptocurrency exchanges and transmitted throughout the network, can be used for a variety of purposes, ranging from granting access to a specific service to entitle holders to company dividends. Tokens are known as utility tokens or security tokens depending on their purpose.

• Utility Token: Utility tokens, also known as "user tokens" or "app coins," are digital tokens that signify potential access to a company's product or service. ICO startups will use utility tokens to raise money to finance the creation of their blockchain ventures in return for potential access to the service from customers. Utility tokens are not intended to be a regular investment for a share of the business, and this function exempts utility tokens from federal securities laws if properly arranged.

• Security Token: In contrast to utility tokens, if a token's value is derived from an external, tradable asset or may increase in value through the efforts of others, it may be known as a security token and subject to federal securities regulations. Failure to comply with these regulations may result in expensive penalties and may jeopardize a project's completion.

Pros and cons of ICO:

Pros

• Community building: provides project developers with the ability to build a community around their projects. A healthy society lends enormous credibility to a product. Furthermore, community members will have a real say in the projects' direction and hold the developers accountable.

• Exposure for projects: The buzz that surrounds an ICO will help a project gain a lot of traction. The more attention the project receives, the more people will become aware of it. As a result, the number of potential investors grows.

• Early access to potentially valuable tokens:Some tokens have the ability to grow in value and become true cryptocurrencies. ICOs enable investors to invest in potentially valuable tokens for a low cost. For example, 1 Ether cost 35-40 cents during the Ethereum presale. At the time of publishing, one Ether costs $2,501

_{ETH current price according to Coinmarketcap}

Cons

• Attracts a lot of scammers: Since ICOs need very little documentation, they attract a lot of scammers who can simply produce a fake white paper and make off with a large sum of money.

• Network Congestion:The increased activity during ICOs puts a lot of pressure on the blockchain, which could lead to a bottleneck.

• Storing the tokens:There is a possibility that any of the tokens will not be able to be stored in any of your crypto-wallets.

Differences between ICO (initial Coin Offering) and IEO (Initial Exchange Offering)

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The IEO (Initial Exchange Offering) is identical to the ICO (Initial Coin Offering). It's also a way for new businesses to raise money by offering new cryptos to the general public. However, as the name implies, it entails raising funds through a cryptocurrency exchange. As a consequence, IEOs are stored on a cryptocurrency trading platform.
Investors buy the sold tokens before they become available on the market, similar to an ICO. Only exchange participants who have enrolled will be able to participate in IEO.

The difference between ICO and IEO is shown in the table below

ICO	IEO
The issuer of the token offer the token directly without any escrow	The token is offered by an exchange which act as an escrow
Interested users does not need to verify his/her identity	Identity verification is needed before the user can participate
The participants usaully have access to his/her token	Participant does not have access to their token because it is usually locked

IOTA

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IOTA is the only big cryptocurrency that does not conduct transactions using a full Blockchain. Instead, it utilizes a method known as The Tangle.

The Tangle: is a system that allows users to validate a transaction in real time as it is being carried out.

IOTA project is centered on the word "Internet of Things," or "IoT." The concept is used to describe a future in which a variety of "things," such as appliances, vehicles, and automated service providers, interact with one another.

IOTA is a unique and creative project as a result of all of this. Furthermore, it aspires to serve a whole new market, clearly anticipating and preparing for the future. It's easy to see why their initial coin offering (ICO) at the end of 2015 was a success, raising over $400,000. One billion IOTA tokens were sold for $0.001 each. It is currently trading at around $2.35

_{IOTA current price according to Coinmarketcap}

Conclusion

It a great honour to learn under the umbrella of professor @imagen I must confess I enjoyed his course.
I hope to learn more from him.

Cc:-
@steemitblog
@steemcurator01
@steemcurator02
@imagen