The term ICO (Initial Coin Offering) originates from the areas of blockchain, crowdfunding and finance. An ICO is a modern form of corporate financing. Companies use this method to raise money for new blockchain projects.
In contrast to traditional financing rounds on the stock exchange (such as an IPO), companies do not offer shares in an ICO, but digital coins or tokens. These tokens can be used later - for example, to gain access to certain services or to be traded as an investment.
An illustrative example: a start-up is developing a new, innovative payment app based on blockchain. To finance the project, the company launches an ICO. Interested parties invest money, usually cryptocurrencies such as Bitcoin or Ethereum, and receive tokens of the new app in return. If demand for this app increases later on, the tokens can also increase in value.
An ICO harbours opportunities, but also risks, as the industry is poorly regulated. You should therefore always inform yourself well before investing. Nevertheless, an ICO is a quick and easy way for many start-ups to raise capital for exciting blockchain projects.
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