ICO
An ICO is an early sale of tokens by a new crypto project. The project uses it to raise funds for further development.
What is an ICO?
ICO stands for Initial Coin Offering. People can buy tokens from a new project, often before those tokens are available on a crypto exchange.
In exchange for the tokens, someone might pay with Bitcoin or Ethereum. The project then uses that crypto for development. The project’s plan is often laid out in a whitepaper: a document that explains the idea.
An ICO can take place while the project is still unfinished. There’s no guarantee that the product will work, that the token will become tradable, or that it will retain its value.
An example of an ICO
Imagine a new crypto project needs money to build its network. It sells tokens in advance to participants, who pay with Ethereum.
Participants get the tokens before other buyers. They hope the project will grow, but they could also lose money if the project fails or turns out to be a scam.
Why are ICOs important in crypto?
ICOs are a way for crypto projects to raise money without a bank. That’s why news about new projects may say that a token sale is coming up or has ended.
A low ICO price doesn’t mean the token will be worth more later. Many ICO projects fail, and participants may sell quickly after the sale, which can cause the price to drop.
When you buy into an ICO, you’re buying tokens, not shares in a company. There’s also no guarantee, oversight, or certainty that you’ll get your money back.
