There are a lot of ways businesses generate funds for their projects. One is by bootstrapping, another way is by meeting an investor angel or launching an Initial Public Offering. Using the methods mentioned above will require that you share your investment with your backers. But Initial Coin Offerings don’t have this limitation. That’s the major reason for the increase in ICO launches. Many big corporations in the United States are either considering an ICO, have ongoing ICOs, or have launched one the past.
So what’s an ICO? Simply put Initial Coin Offerings (ICO) is just like IPOs except for the following differences.
ICOs sell tokens (new cryptocurrencies) while IPOs sell part ownership of their business (aka shares).
ICOs are lightly regulated and don’t require the stock market. IPOs are heavily regulated and require the stock market.
ICOs don’t pay any form of compensation to investors IPOs pay a dividend to investors at the end of their financial year.
These differences are advantages for businesses launching ICOs. However, there are some similarities between IPOs and ICOs. One of which is being open to the general public and the way they make profit or loss. Investors make a profit if the price of the token goes up or a loss if the price of the token falls.