We talk more and more about the ICO Toyken, we will try to explain what it is. The initials correspond to Initial Coin Offering, which corresponds to the initial offer of currency. It is a process by which a cryptocurrency linked to a project is issued. Thus, it can be used to achieve a very high capital that allows realizing the project that is intended.
For an investor, buying the ICO of a project would be like acquiring shares of a developing company. The cryptocurrency is the instrument that will allow financing the company. It is starting to work, they have exceeded 260 million dollars thanks to this new investment trend.
The coins are distributed in such a way that investors can obtain them before the real launch of the project, they are usually acquired with bitcoins or other existing cryptocurrencies, and subsequently obtain their share of the coins when the project is released, thus achieving that the team promoter has a monetary support that gives them greater incentive and responsibility to continue carrying out their technological proposal. This new phenomenon contrasts with the way in which cryptocurrencies were previously obtained by users, where it was only possible to access them through mining or buying from other users.
One of the most popular and successful ICOs was the one made by XMaterials smart contracts platform, which raised 31,531 bitcoins (15 million dollars at the time) during its launch campaign in the summer of 2014. Investors had to wait year to be able to negotiate their ethers in the market, because this was stipulated in the ICO’s investment pact. A measure adopted to curb the initial speculation. As of today, 31,531 bitcoins have a market value of 26 million dollars.
How is an ICO created?
The technological process of an ICO Toyken is very simple. The new digital currency is transferred to an investor through an intelligent contract in exchange for a certain amount of money. The funds raised are usually provided to developers through a deposit in digital currency. The documents prepared for an ICO include a White Paper or official book that contains general information about the blockchain project and the digital currencies that are planned to be issued. Sometimes this is accompanied by a Technical White Paper or technical white paper, which delves into the technical aspects of the project. The best structured ICOs can be accompanied by an Offer Memorandum, a document that describes the various risk factors and the investment process.
Why is it interesting for venture capital companies?
Some venture capital companies have realized that the main value of the new technology is in the protocol itself and not the applications. The digital currencies allow the creators of a blockchain protocol to obtain economic benefits directly. This is done by reserving a certain amount of coins for the developers, the first investors or the first ones who start using the currency. When the project is launched and is successful, that first group of followers can create a positive feedback loop.
Successful applications based on the blockchain protocol serve to attract interest in the underlying protocol, which already has its own market. As the price increases, the market value of the protocol should increase faster than that of any of the applications that use it. One of the main attractions of the ICOs is that the new digital currency can be exchanged for another more popular cryptocurrency, and this, in turn, can be exchanged for money, which translates into great liquidity. For more valuable information about ICO please visit our Crypto articles.