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January 11, 2022

What is an ICO?

What are ICOs and what are they used for?

An ICO, which is short for “Initial Coin Offering”, is a way to raise financing for a crypto project.

You may already be familiar with IPOs - “initial public offerings”. This is when companies issue shares to be traded in public stock exchanges like Wall Street. In contrast, In an ICO, instead of shares, companies issue tokens as a representation of partial ownership.

Why do they do that? To raise good, old-fashioned, hard cash. Remember: Just creating a token or coin is easy and doesn’t do much by itself. The creators have to convince the public that their project has value in the first place, and get the tokens into peoples’ hands so that they can establish a market.

An ICO accomplishes just that. By putting their token up for sale publicly, those creators allow investors to buy a stake of their token in return for real money. If investors buy those tokens, the creators get to keep that money to work with. If things go well, it could be lucrative for investors to have gone in early, as they could potentially sell their holdings for gain.

But be careful, because the potential for abuse is high. With speculators rushing into crypto, hoping to ride a wave, lots of ICOs are just a scam. The creators never intended to build a real product and just take the money and run. Always do your own research and don’t trust any single resource.

And next time we’ll talk about what a Metaverse is and how it could become the killer use case for crypto.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.

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