Initial coin offerings are more of Initial Public Offerings. They are open to just about anyone to participate in (provided the laws permits them to). Also, they sell objects which investors can hold for their investments. And they’re both a means of getting funding for projects and public participation. They both write whitepapers stating their business model and solutions. But how does it work? Since they sound like IPOs their system works very much like IPOs. Basically, this is what happens with ICOs.
A company comes up with a project and promote it: The project is developed with the idea of solving an existing problem that the developers hope their target audience will appreciate. Then, the developers promote the idea.
Developers seek for funds by launching an initial coin offering: Before launching the ICO, the developers create a blockchain and a new altcoin. This altcoin is what the investors will hold for their investments. So how will investors get their ROI if it’s just altcoin? First, the project developers assure the investor that their business model will be based on their blockchain. Payments for services and products will be made with the new altcoin. When their product is in demand, then the value of the altcoin increases.
Developers using the money generated from an ICO on their project.
The top upcoming ICOs all follow the same approach in boosting their investors’ confidence.