An initial coin offering (ICO) is a token sale or crowdfunding event offered by cryptocurrency startups, existing projects, and blockchains, looking to raise money from investors to fund new and ongoing development.
It’s very similar to initial public offerings (IPO) that take place in the traditional finance world of stocks.
ICOs sometimes offer pre-sale or discounted token prices in exchange for capital investment.
The token that an investor receives is normally the newly created token being issued by the company offering the ICO.
Investors participating in ICOs generally believe they will make a profit by investing early into a startup or project before the general public has a chance to invest.
However, investing in an ICO is not a guarantee the value of the asset an investor receives will increase over time.
Extreme caution should be taken when investing in an ICO.
Anyone with proper access to technology can start and offer an ICO, as there is very little regulation of ICOs, even in the U.S.
This lack of regulation has led to ICOs being used by scammers to target unwitting investors, which has resulted in countries like China outright banning all ICO activity.