Lesson Learning objectives : What are ICOs and IEOs ? How they differ from IPOs ? What is the process to launch a traded cryptocurrency on the market ? This lesson address these important topics in a simple and efficient way, to allow the participant to understand quickly ICOs and IEOs
What are ICOs
An Initial Coin Offering (ICO) is the mechanism which allows an organization to raise capital for their project (Cryptocurrency to become once launched) prior to their launch on the public cryptocurrency market. An ICO is the equivalent of an Initial Public Offering (IPO) on the stock market. Through this process a project will raise funds by offering their tokens (cryptocurrency) at a defined price to investors. The investors will register, send their funds to the smart contract address in order to purchase tokens before they become available on the public market (exchanges). Once the ICO is done, the tokens will be distributed to the owners which participated in the ICO.
ICO’s became popular and way more accessible when Ethereum was created. As previously mentioned in the previous lesson, Ethereum & Smart contracts created an easy path for cryptocurrencies to be created, launched and run if required on the Ethereum platform. As such, in now days Ethereum tokens ERC20 tokens can be used in this way.
ICOs Compared to IPOs
Compared to traditional IPOs, ICO do present significant advantages ; Significant cost efficiencies and the possibility of retail investors from all around the world to participate in the ICO (Limitations may apply due to certain country regulations such as USA). ICO’s are an event which is quite popular in the cryptocurrency world; In fact due to high volatility and speculation in regards to new cryptocurrency project they represent the chance for an investor to do a 100x return on investment, however, as big returns do come with big risks they could also turn into a 90 % lost. (For more details about about what are our criterias to choose a potential ICO see our advanced course)
What are IEOs
IEOS are referring to Initial Exchange Coin Offering. Once the ICO is done and the tokens distributed (Always refer to the particular ICO guidelines as distribution delays might differ from an ICO to another) the cryptocurrency will then be listed on one or several exchanges to be traded and submitted to the offer and demand mechanism.