An ICO is an Initial Coin Offering, when a startup company gathers funds to cover expenses and development. But no one send cash- to take part in an ICO, you have to own Bitcoin or Ethereum, the two most common coins used to gather funds.
Usually, a company will have a month-long period to sell the new tokens. Buyers send in their Ethereum and receive tokens in a pre-specified wallet. This is a risky moment, as hackers have been known to build cloned sites or send out fake Ethereum or Bitcoin addresses and steal funds.
The tokens will not have a dollar value after the sale. Sometimes, buyers wait for months to see the token appear on one of the exchanges and to discover the right market price. After that, a post-ICO token may rise up to 1,000 times, or tank completely. Investors may choose to sell their tokens to an exchange or hold them for the future.
Some ICO events are very high-profile and create a lot of hype. Others go under the radar, but still offer quality ideas. It is best to research the project ahead of time and look for a skilled team and a clear idea. Smaller projects sometimes never manage to produce a working product. Some projects present nothing more than a vague white paper and a website.
Experts believe the world ICO market has raised more than $1.5 billion in the past months. Most of the funds are still held in Bitcoin and Ethereum, as small amounts are sold to fund the project.
Most ICOs rely on the Ethereum platform to create a proprietary token. But there are alternative platforms that allow token creation. ICO events happen for NEO and Waves platforms.
Recently, China and Korea banned local ICO events until a way was found to protect investors from ICO scams and theft. But the ICO market is still very active and sending Ethereum or Bitcoin is not restricted by laws or national borders. So an ICO is a way to use some of the Bitcoin mining rewards for investment, or some of the Ethereum to build a larger portfolio.