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Understanding the Initial Coin Offering
Initial coin offering (ICO) is a digital method that is used by the startup business that wishes to raises; the company will offer product and services that are related to the cryptocurrency and the block space. The company that wishes to raise money create a new coin or appl and launches the initial coin offering; it is similar to the initial public offering. If you are interested in the investment, you are can buy the coin hoping for the future. The investment can either perform poorly or give you a huge return. You need to have a basic understanding of the cryptocurrency and exchange if you want to invest in them ICO.
For the company that want to raise capital, the first step involves creating the white paper. The whitepaper has many components like the description of the project, what the project shall achieve, how long ICO shall run, capital that the startup intend to raise, and the type of payment that shall be accepted. The final version of the whitepaper offering. The offer contains the details of the project. Once the offer has been signed, the ICO start date is then announced and the marketing campaign begin. When the marketing camping is done in the right manner, the company will be able to raise enough fund. After marketing campaign is complete buying and selling of the token will be done.
There are many benefits that the company will enjoy when it raises money through ICO. The project is not taxed. This is very different compared to the initial public offer. There are few intermediaries that are involved in the selling of the digital coins. The investors will thus make a decision based on the content of the white paper that provides the company that is raising the fund. The investor is charged fee in IPO but for ICO no fee is involved.
The number of ICOs that are heating the market every day are very many. More than 100 companies are a success every week. You should know that there higher the return of the investment, the more the risk that is involved. The main benefit of ICO over IPO is that you can cash in and out at any time.
ICOs has been an unregulated method of raising capital since its inception in 2013. One of the main challenges of lack of the regulation is fraud and the startup companies failing. Many people have called for the registration of ICO as security for better disclosure. Financial professionals such as Chris Brummer have explained ways through which ICO should be disclosed. The financial professionals have also tried to find remedies to the many shortcomings of the ICOs.