The full name of "ICO" is Initial Coin Offering, the first token issuance, which is a fundraising method for projects to raise funds to support their development. The project creates a new cryptocurrency and sells it to early investors in exchange for existing cryptocurrencies.
How ICO Works#
- Project Preparation: The project team drafts a white paper detailing the project's goals, technical details, use cases, token allocation, etc., and sets fundraising goals.
- Project Announcement: The project team announces the ICO plan, usually publicly promoting it on websites, social media, and other platforms to attract potential investors' attention.
- Investor Registration: Potential investors need to register on the project's official website or platform and submit the necessary identity verification procedures.
- Investor Purchase: Registered investors can use fiat currency or other cryptocurrencies to purchase the tokens issued by the project. The vast majority of projects only accept cryptocurrency payments. The purchase process may involve choosing the token quantity, price, and payment method.
- Token Issuance: The project team issues tokens to investors according to the set rules and terms.
ICO allows projects to raise funds without following the traditional venture capital route. However, ICOs have faced criticism due to their largely unregulated nature, with some being proven to be scams or failed projects, leading regulatory authorities to increase scrutiny and take regulatory actions.