You probably have heard about a privately held or public companies with their name having either limited (private “ltd”) or plc (public liability company), a company becomes a plc when it offer its shares to members of the public to become shareholder with the company and trades its shares on the particular country stock exchange for its daily stock transactions. Public offering is a big step for companies aiming to sell their shares on the stock exchange and this can either increase its share price or spell doom on the offering day as to how much it can raise boils down to public judgment on the underlying value of such company and how much a share is worth, this is a brief summary on what conventional public offering is about
In digital cryptocurrency (world of bitcoin, litecoin, ethereum and others), blockchain plays a major role whereby it’s the ledger that reflects daily transactions of these digital currencies. In the same way public company shares trades stock on the exchange, digital currency community are bringing forth initial coin offering whereby coin users can trade their coins daily coined as initial coin offering (ICO), it’s an unregulated means of crowdfunding by use of cryptocurrency which can be used to fund startup or source for capital for same, a percentage of initial coin offering newly issued cryptocurrency is sold to investors in exchange for legal tender or other digital currency such as bitcoin.
ICO can be used to sell a right of ownership, royalties to a project; the coin in an ico represent a symbol of ownership interest in a particular enterprise (a digital stock certificate) preferably. Contrast to IPO where an investor gain shares in ownership of a company, in ICO the investor buy coins of the company which can later appreciate in value if the business is successful; as the particular company invested in (bought ICO from) becomes successful, the coins bought from them in form of digital certificate value appreciates.
The pioneer investors in the coin are motivated to buy coins hoping the plan (startup) underneath becomes successful after its launches which will translates to the cryptocoins value going higher than when they purchase them for the startup project. Ethereum is a successful example of initial coin offering that was profitable to its early investors in the name of smart contract (ethereum program code that help developers create their own self-executable programs that runs on the platform, fully decentralized) which has ETHER as its coins. The 2014 saw ethereum project announced and its initial coin offering raised $18 million in bitcoin or $0.40 per ether. Ethereum project went live in 2015 and in 2016, a value for an ether goes as high as $14 with market capitalization of over $1 billion
Initial public offering (IPO) deal with investors, initial coin offering (ICO) deals with enthusiasts keenly interested to invest in startup more like a crowdfunding. ICO differs from crowdfunding in that IPO investors are motivated by prospective return on investment (ROI) while ICO funds are more like a donation for the new project, this is the contrast between them which makes people refer to ICO as crowdsales.
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