The cryptocurrency industry’s equivalent to an Initial Public Offering (IPO) is an Initial Coin Offering (ICO). ICOs serve as a way of raising funds, where an ICO is launched by a business looking to raise money to create a new coin, app, or service.

Interested investors can buy into the offering and receive a new company-issued cryptocurrency token. This token may be of some use in the use of the product or service offered by the company, or it may simply represent a stake in the company or project.

How an Initial Coin Offering (ICO) Function

When a cryptocurrency startup wants to raise money through ICO, it usually produces a whitepaper outlining what the project is about, how much money is needed, how many of the founders’ virtual tokens will be kept, what kind of money will be accepted, and how long the ICO campaign will run for.

Enthusiasts and supporters of the project purchase some of the project’s tokens with fiat or digital currency during the ICO campaign. Such coins are referred to as tokens and are similar to a company’s shares sold in an IPO to investors.

The money may be returned to the backers if the money raised does not meet the minimum funds required by the company, and the ICO is considered unsuccessful. If the requirements for funding are met within the specified timeframe, the money raised is used to pursue the project’s objectives.