What Is ICO & How Does It Works

Businesses are getting essentially digital with the passage of time. New business entities are taking refuge in Cryptocurrency in order to save money; sometimes evade taxes and be out of unnecessary state intervention.

That is why they go Crypto.

They are actually running towards decentralized networks where they would be able to trade freely.

Companies are therefore using ICOs, a kind of crypto to raise sums of money or funds to raise business.

What Is ICO?

ICOs are one kind of Cryptocurrency that is used to draw money to run projects in business. ICOs operate in different spheres of business.

Investors get Unique Currency Tokens for their investments.

These tokens act as a kind of security for the companies. Collection or buying of ICOs are a bit equivalent to purchasing shares at the IPOs. 

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Basic Characteristics Of  ICO

There are some innate characteristics of the ICOs the new business entrants need to be mindful about:

• ICOs operate in decentralized networks,  and Decentralized Autonomous Organizations (DAOs).
• The tokens or coins issued by ICOs, are generally selling participation in an economy.
• This denotes the participants are able to buy a certain percentage of the ownership of the company.
• When the investors buy shares, it does not imply, that they have any kind of voting rights.
• The ICO coins that are released always have a defined or definite number, that is entities are not able to release the tokens as per their discretion.
• The coins and tokens that are released, are ready to be treaded in the open market.

The aforementioned characteristics make ICO’s a bit equivalent to that of  IPOs though there is a marked difference between both ICOs as well as IPOs.

Why ICOs?

The first enticing point is that the project would be outside the purview of the Centralised agency. That is why it won’t be under the subject of direct Taxation.

While ICOs are considered only as a tool for raising money, they can be used to kickstart businesses to be taken into the Market. This can use Cryptocurrency to trade in the market.

One of the most enticing characteristics of ICOs is that the investors will be able to collect or buy coins with heavy discounts.

The reason that propels the investors to go for ICOs, is that the returns of the value invested are extremely high compared to buying stocks in the Initial Public Offerings. After the launch of the Cryptocurrencies, the Initially bought token gained values in general.

Therefore there is no reason  ICOs will not be among the convenient ways for the business to trade on Cryptocurrencies.

Working Of The ICOs

In order to launch ICO you need to be mindful of certain things that need to be kept under consideration:

1. Firstly you need to think and do the needful strategy to understand that your project really needs an IPO at all.

2. You will be operating in the market, and for that, you need to know who are your competitors.

3. You need to have thorough research on the legal side of things before investing in the ICO for your project.

4.  You will have to create an ICO token.

5. You will have to write a white paper where you are to provide a detailed explanation of the mission and vision of the project.

6. The last thing that you need is to launch a website.

The first step is establishing the Blockchain and setting up protocols and rules for business. Then you are supposed to release the tokens which will be treaded in the Exchange.

In order to create Cryptocurrency, you will have to join a Cryptocurrency exchange.

An account will be created after talks between you and the exchange. Post consultation they will create an account on behalf of the business entity.

The entire documentation of the investors will depend on factors and one of them is the domicile of the investors.

This is the way the entire working of the ICOs gets initiated and processed. These are carried out within the structure created in liaison between the business entity as well as the Exchange.

Conclusion

In order to conclude it could be understood that ICOs, a variant of Cryptocurrencies are now used by businessmen to raise capital.

The first thing that is released includes tokens. When Cryptocurrencies get created the value of initial tokens automatically increases.

ICOs have certain benefits and advantages. The project gets initiated and processed between the businessman as well as the Crypto Currency exchange. Token holders or shareholders are the third major players here.

So, if you have understood all about them, let us know in the comment section. You can post your queries there as well and we will get back to you.