The full name of "ICO" is Initial Coin Offering, which is a fundraising method used by projects to raise funds to support their development by creating new cryptocurrencies and selling them to early investors in exchange for existing cryptocurrencies.
How ICO Works#
• Project Preparation: The project team drafts a whitepaper 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 platforms, etc., to attract potential investors' attention.
• Investor Registration: Potential investors need to register on the project's official website or platform and submit necessary identity verification procedures.
• Investor Purchase: Registered investors can use fiat currency or other cryptocurrencies to purchase tokens issued by the project, with the vast majority of projects only accepting cryptocurrency payments. The purchase process may involve selecting token quantity, price, and payment method.
• Token Issuance: The project team issues tokens to investors according to the set rules and terms.
ICOs allow 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.