The world of cryptocurrencies is continuously expanding, and it is showing no signs of slowing. According to the industry’s go-to crypto tracking website, CoinMarketCap, there are over 1,600 separate listings.
Sifting through all of these projects is no small feat, and to make matters more complicated, there are even more coins that are not even listed yet. This is because these projects might still be in a pre-trading stage known as an initial coin offering, or ICO.
As a recent development in the fundraising world, an ICO is a path that many new tech startups are choosing to pursue. Funds are raised for a new cryptocurrency, usually sold to interested parties in exchange for fiat currency or other cryptocurrencies such as ethereum or bitcoin.
When preparing for an ICO, a company will lay out its goals on a whitepaper which will include the project’s plan, the needs the project will fulfill, the cost of the venture, how many tokens (or shares) will be issued, the owner’s stake, payment method and the length of the ICO campaign. The company will then move forward with the offering, typically in several stages. A private sale, pre-sale and the public coin offering.
Private sales typically occur with little-to-no public advertising. These sales target high level investors who may even have a minimum ‘buy in’ that purchasers must fulfil in order to be involved. Private sales often give would-be investors a very generous discount on the cryptocurrency they purchase – sometimes even cents on the dollar.
Pre-sales are usually the first opportunity that public investors have to get involved in a new project. Most of the time, these also include a significant discount on the cryptocurrency being purchased, though not quite as much as during the private sale stage.
Public sales are the final round of sales before the product launches. This round is typically heavily advertised and may even include Airdrops or Bounties to further entice customers to get involved. Airdrops are essentially free cryptocurrency giveaways wherein customers must provide an email address or join a social media platform in order to be eligible for the Airdrop. Bounties are similar, though they might include social media sharing, writing articles about the company, or finding bugs in the program in order to receive some of the cryptocurrency.
In 2017 alone, ICOs raised over US$6.1 billion, and so far in 2018, ICOs have already raised even more, with just under 1000 companies pulling down over US$6.2 billion.
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