An initial coin offering is a financing model of recent origin. Take advantage of the issuance of cryptocurrencies to raise funds for the initial growth of a project.
Through the issuance of a certain amount of cryptoactive elements, a company or business project seeks financing. That’s because you receive compensation in the form of fiat money in return.
In other words, these companies create an offer of cryptocurrencies whose sale will mean receiving dollars or euros (mainly) with which they can cover the costs or initial capital of their journey.
However, it is also common for the consideration to be made in the form of other financial assets, those known as tokens and even other types of cryptocurrency.
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Initial Coin Offering vs. Traditional Investing
It is important to note that the acquisition of tokens from these issues does not transform the buyer into a shareholder or partial owner of the startup. Instead, it only entails the entry into the stock portfolio of said cryptos.
Another common way to find this concept in the economic context is with the acronym ICO. They come from the Anglo-Saxon denomination “initial coin offering”.
Highlights of an Initial Coin Offering
This economic and financial concept of growing relevance in recent years stands out for a series of characteristics or features to take into account:
- Financing method: This practice is often used in the form of crowdfunding by collecting funds from numerous investors.
- Financial kick-off mechanism: It is associated with new projects or training, which seek to start their economic activity.
- Blockchain Leverage: Existing crypto resources or platforms are usually used, mainly Bitcoin.
- Digital environment: The development of telecommunications and digital investment platforms motivates this activity.
- Accessibility. Compared to other expressions of investment such as the traditional purchase and sale of securities in stock markets, this modality supposes greater speed and simplicity.
All these conditioning factors imply the need for supervision in key areas such as cybersecurity and compliance with the financial regulations of each territory.
However, it is a financing system that is currently undergoing its first steps at a great speed.
That is why economic and financial institutions around the world try to configure their surveillance and regulation at the same time.
The initial coin offering in the current context
Due to the pronounced development of the cryptocurrency concept and its potential expansion, this type of offer has recently established itself as a widespread financing tool.
In this way, investors or companies of various kinds have the ability to gather or raise instruments such as cryptocurrencies with high levels of liquidity in a short period of time.
In this sense, this practice is also widespread as a patronage tool in the context of the Internet. It is used more and more frequently when it comes to giving economic support to incipient business models on the network.