ICO explains

ICO explains: 

This is behind the financing model of the blockchain scene With the so-called initial coin offering, a new financing model has developed in the world of crypto currencies. We explain what it is all about and what the risks are.  

Initial Coin Offering: What does ICO mean?  

The term Initial Coin Offering (ICO) is based on the English term Initial Public Offering (IPO). This refers to an IPO in which shares are offered from existing shareholders' holdings or from a capital increase on a capital market. While in such a first place but company shares are sold, it is in an ICO to sell so-called tokens.  Basically, these tokens can be thought of as digital coupons whose function can vary depending on the ICO. In most cases, they serve as the currency for the project being funded with them. In this case, investors are given the opportunity to invest early in a cryptocurrency that is actually not yet available. 

The idea: 

If the project is successful, then the value of the token should also rise above the original issue price.  The fact that more and more investors see it as a worthwhile investment opportunity is shown by the fact that in 2017 alone more than 180 million US dollars were invested in various ICOs. According to Smith + Crown, this value was only $ 101 million in 2016. And for the developers of cryptocurrency and blockchain products, the model makes sense, because they can finance their work without going through the traditional capital markets.  

As mentioned, tokens can also be more than just a monetary value. An example of this is the Ether Block Blockain based DAO, which stands for "decentralized autonomous organization", decentralized autonomous organization. Through the tokens sold at the ICO, the owners get a vote on the future of the organization. In a way, the tokens are similar to a classic stock, except that it's not voting in a company, but in a purely digital organization.  Another example is Storjcoins. These were sold by Storj.io, a decentralized cloud storage vendor at an ICO. They can be traded like a normal cryptocurrency, but can also be used directly to pay storage space at the provider. You see: tokens sold with an ICO do not necessarily have to be seen as a mere investment opportunity.  ICO: And what about the risks?  

The traditional capital markets are subject to all sorts of regulations that serve above all to protect investors. For ICOs, however, these guidelines do not apply. This is considered either a disadvantage or an advantage, depending on who you ask. But the fact is that investors should look very carefully before investing in an ICO.  It is also no coincidence that many ICOs avoid this very concept and instead speak of a "crowdsale" or sometimes even a donation. 

However, the competent regulatory authorities from all over the world are unlikely to watch this activity permanently. Therefore, many insiders are already worried that the US Securities and Exchange Commission could crack down on ICOs. Many investors also want a bit more security. At the moment, every ICO only keeps a close eye on the respective project.  

Conclusion  

ICOs are an extremely exciting development, but everyone should be aware of the risks. Those who do not deal sufficiently with the topic can burn their fingers very quickly.