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How Does an Initial Coin Offering Make Money?

Initial Coin Offering (ICO) is an analogue of Initial Public offering (IPO) in crypto world. The main difference lies in the item, which is being offered.

Initial Coin Offering (ICO) is an analogue of Initial Public offering (IPO) in crypto world. The main difference lies in the item, which is being offered. When we are talking about IPO – it means that a company wants to raise capital and, in order to this, places own shares on the stock exchange. When we discuss ICO – it means that a company wants to raise funds via selling own crypto coins (tokens) on the crypto exchange.

Thereby, investments become profitable through IPO and ICO in the same way: business must make money. Unlike shareholders, who get a part of company’s year profit, token holders increase their capital due to the token rising price.

Any company can do an ICO to attract investors:

  • Team creates a business plan and describes it in a document essentially detailing exactly how the system would work (whitepaper);
  • Then develops the special cryptocurrency – token of the company, which would confirm equity participation;
  • Make a website to show who are the team members and why this business idea could be very useful;
  • Ask people to send money via Bitcoin, Ether or another payment method in exchange for the tokens;
  • Raise planned funds and use them to embody the ideas shown in whitepaper;
  • Place the token on the crypto exchange for a free sale in hope that everything goes well, the token will be in demand, which would raise the value of it.

How you can make money on ICO?

If you buy tokens (exchange crypto currency or fiat money for them) in the beginning of the company’s way, and the team works according to the plan in the whitepaper – eventually the price rises. If you choose a right ICO, you can earn a real wealth as the price might increase in 10 or even 100 times. Imagine that Airbnb would have had an ICO and anyone could have bought its tokens when this platform was only a startup.

The main risk in this kind of investing is choosing the right ICO. Analyzing a project for investing you should pay attention on:

  • Who are the people on the team? Have they already built successful business? What reputation, experience and skills do they have? Can you trust this team?
  • What is the main idea? Do you believe it will be in demand on the market? Will people pay for this product or use this service? What and the forecasts and market research results?
  • What is the market for this project like? Does it exist now or will it appear eventually? Is there any competition, who are the main players? Will be the product competitive enough?

At ICO Widgets platform you can find the detailed info on any ICO Rating as well as tips for the full analysis of the projects. As well, you will get to know with the IEO list – fundraising events performed on the top listed crypto exchanges.