What happens during an ICO?
Do you know what ICO means? The acronym usually refers to Initial Coin Offering, and it can be seen as the equivalent of an IPO in the mainstream investment space. This crowdfunding method is becoming increasingly popular among startups.
In this article, we will get an insight of the difference between an ICO and a token sale. Let’s start!
What happens during an ICO?
ICOs appeared in blockchain projects starting from July 2013, with the first one being held by Mastercoin. During an ICO the blockchain company sells specific tokens in exchange for BTC or ETH. Its purpose is to raise funds to develop a new or ongoing project, whether it be a new digital coin or an app. The investor will purchase the token, expecting an increase of its value sooner or later. The investor funds are the means of pursuing the company’s goals. Overall, ICOs are made to ease and speed-up the capital-raising process.
Never mistake coins with tokens
In the crypto world it can be hard to have a clear understanding of certain terms. Sometimes, people tend to use one word to refer to another, to the point that confusion is the inevitable effect. So, never make the mistake of confusing coins with tokens. They are two different things, having different purposes and functions.
Coins are currencies that are totally independent from any platform. Bitcoin provides the most popular example. Their only function is to be means of payment.
Tokens are significantly different from coins. First of all, they are usually generated by a Smart Contract System, and are programmable. The levels of value they can store are complex and multi-faceted. They are not just a coin, for coins are typically offered, while tokens are generated. In short, a coin is designed to do just one thing, and a token allows it to do multiple functions.
What is a Token sale?
Token sales represent one of the stages of an ICO. When a company aims to raise funds for its project through the Initial Coin Offering, it usually creates a plan written on a whitepaper. The purpose of whitepapers is to describe what the project is about, how much money it needs, how long the ICO will last, and many other things. After the whitepaper is done, there comes the token sale. During this period, a certain number of crypto tokens are on sale, generally in exchange for cryptocurrencies.
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