ICO - Dark Street CryptoCurrency Wiki



What is an ICO? (Crypto Wiki)



ICO stands for Initial Currency Offering and is similar to the term IPO (Initial Public Offering) long used for initial offering of financial securities on exchanges.  While the terms sound the same there are a variety of major differences between the two.

ICO is a mechanism for raising capital for a developer of a cryptocurrency that follows a crowdfunding model utilizing Blockchain technology as a method of transaction.


How It Works:  
ICO's generally follow the pattern:

  • White Paper Released
  • Funding goal of ICO is set
  • ICO Marketing Campaign by developer explain merits and details of their project
  • ICO is opened and funds are raised by various blockchain platforms in which investors can buy them on. 
  • If the ICO meets its funding goals then project goes forward, if the project fails to reach threshold the money is returned to investors.

Generally a developer of a crypto currency will release a detailed plan called a Whitepaper.  The plan describes what the currency/project is, how it will work, its purpose, the amount money to be raised and the number of tokens issued.  Generally, the cap on tokens and the share of tokens will be released will also be mentioned.  ICO will also release details on specific terms raised in the white paper as well as technical details.

ICO's have be run using Blockchain technology that makes it so investors are anonymous and that the transactions can be trusted between the parties.  It is possible this could change as various government and regulators seek to add transparency in the market.  The US Security Exchange Commission has begun to talk about the need to regulate the market and for the parties involved in an ICO transaction to be known.  Thus far ICO's have no been registered with the SEC.  ICO are also generally open to all investors where as IPOs are blocked to only high level and professional investors.  In an IPO an investor is purchasing shares of a stock, in a ICO an investor is buying a token from a developer.  Another component of ICOs tend to be using technology to circumvent legal contracts.  Proponents say these make the market more egalitarian and efficient.  However critics warn of potential for fraudulently enterprises to abuse the system.  The lack of regulation puts the onus on the investor to do due dilligence and understand the ICO and its risks.


A White Paper is generally released with:
Purpose of Project
Money to be raised
How money will be used
How the Project works (Underlying technical aspects, terms, economics)
# of Tokens released
Total number of Tokens (Is there a cap and how that works)


Pre ICO
A process where sale of tokens could be done in blockchain market prior to official ICO.  The Pre ICO can help set up major investors in the market to validate the market prior to ICO.  Not all projects have a Pre ICO.  In particular a Pre ICO is used when there is not already a large investor attached to the project.

Platforms:
Platforms used for ICO's include:

  • Ethereum
  • Waves
  • TokenMarket

Information Sources on ICOs:
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