All I know about ICO is that some companies make their own coin and then those coins are bought by investors. So looks cool :) But why the companies should be happy if they will have more investors which will be buy their coins? How will companies get that money from investors?
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2 Answers
Cryptocurrencies, and by extension issued tokens, live in a legal grey zone.
ICOs are just a means to use blockchain-issued tokens as a funding mechanism. If it weren't for the legal grey area, it seems to me that they're exactly the thing that investor accreditation laws are intended to prevent: raising money from people who are vulnerable to being scammed.
From what I've seen so far, almost every ICO is just lots of talk, without any indication that there is a plan or competence to implement anything but the off-the-shelf ICO smart contract. In other words, a modern incarnation of a pump-and-dump scam.
So to answer your question: the advantage is raising lots of money quickly, without needing to follow up on any promises.
I believe that ICOs are putting the whole ecosystem in a bad light, and are likely to result in legal problems.
answered Jul 10, 2017 at 0:30
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I think the answer can also add/elaborate the following advantage: It is lot easier to create an ICO than the alternative of traditional regulated VC funding. Commented Jul 11, 2017 at 11:36
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@sanket1729: easier is not necessarily better. The difficulties in obtaining "traditional regulated VC funding" might, in fact, be precisely aligned to the requirements for protecting the market from scams. (More likely not "precisely" ... but probably far better than the alternative under discussion here). Commented Jul 11, 2017 at 17:44
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I completely agree with that. Which is why I feel that the point should be included in answer. People flock to ICO over traditional funding not only because it avoid regulation/accountability(as mentioned in answer) but also because it is way easier (erc20). Commented Jul 12, 2017 at 2:16
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It is way easier exactly because it bypasses all means for buyers to guarantee rights for something real in the future. If it weren't for that fact, there would be little appeal to them I believe. Commented Sep 10, 2018 at 15:50
An Initial Coin offering, also normally spoken as an ICO, could be a fundraising procedure within which new operation sell their crypto tokens in exchange for bitcoin and ether. It's somewhat the same as an Initial Public offering within which investors purchase shares of an organization.
In ICO, companies sold new digital assets to the investors and most of the time they called it "token sale", “ICOs” or "crowdsale". Actually, the process of ICO is almost like IPO (Initial Public Offerings), but instead of buying the shares of the company, investors buy digital "tokens" or Their ICOs (new cryptocurrency coins) believing the value of those coins will rise in the future.
