What are Some of the Benefits of an ICO?

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What are Some of the Benefits of an ICO?

What are Some of the Benefits of an ICO?

An initial coin offering is a perfect crowdfunding vehicle that is “open, distributed, and liquid.” The biggest breakthrough of ICO occurred in 2017 when the ICO number increased significantly, and, according to studies, the amount of capital attracted through the ICO outperformed traditional venture capital funds. One can draw this inference from the definition of an ICO, that an ICO aims to raise funds to pay the costs incurred during a blockchain’s or coin’s development. One of the success measures of ICO is the listing of coins on various virtual platforms, which is important and defines the success of investors, companies, or entrepreneurs. ICOs are favored for their multiple benefits for organizations that issue tokens, investors, and consumers.

Below, we’ll discuss the usually analyzed advantages/benefits of ICO, namely;

Convenient for start-ups and investors

The biggest advantage of an Initial Coin Offering (ICO) is that it gives access to a range of people, from freelancers and startups to mature investors. There aren’t any time constraints; contributors can also invest at any time, unlike traditional funding set-ups. Anyone who wishes can become an early investor. Thus, ICOs are a favorable option for Startups because, more often than not, startup companies lack the required funds to kick-start their project but can potentially raise their value over time.  

A Token launch is similar to the sale of API keys, and it’s difficult to restrict the sale of these keys to accredited investors alone. Hence it is bound to increase the buyer base relative to traditional equity financing for a start-up.

Online Marketing

It’s easier to gather information about tokens via surfacing the net. Buyers interested in these coins can learn about the ICO through the organization’s website, online forums, messaging applications, and social media websites. The internet leverages ICOs, and a large, general audience is attracted to the venture if marketed right. Also, companies seeking to raise capital through innovative blockchain-based technologies do not need high marketing and advertising costs which helps to reduce the cost of raising capital. 

Swift and unchallenging mechanism

All the transactions are done online. One can sell tokens internationally over the internet. Instead of relying on regulatory filings, as with other exchange forms like IPOs, stocks, bonds, etc., an ICO relies on blockchain technology to maintain a ledger of its multiple transactions. Data is constantly updated within seconds. All this makes an ICO less time-consuming, less energy-draining, and more efficient.

Decentralization – Blockchain 

From substantiating and establishing contributions to distributing tokens, ICOs only require monitoring and updating the distributed digital ledgers.

A distributed ledger lets all investors know about the ICO process daily, as the status of an ICO at each time is written on the Blockchain. This decentralization concept prevents issuers’ fraudulence over investors through ICO. ICO also changes our notion of property rights. As in the case of tokens, the final arbiter of who possesses what property is not a national court system but an international blockchain. 

High liquidity

High liquidity refers to an asset’s ability to be quickly bought or sold in the market without significantly affecting its value. ICOs are advantageous because early contributors have more liquidity in early-stage companies. Most popular tokens could exceed $100 million in 24-hour volume. Huge liquidity premium alone causes tokens to predominate (provided they are legally and technically feasible) because the time to liquidity enters inversely in the exponent of the compound annual growth rate. 

Profit Potential & High ROI

ICOs are said to be unregulated and risky for investment, but surely “the profits from the hits outweigh the losses of the misses.” For instance, the price of bitcoin was around $100 in June 2013 and was trading at $4,000-5,000 in early September 2017. Now investors are searching for a token that can replace bitcoin in terms of economic appreciation. Many are citing Ethereum as “the next bitcoin.” 

ICOs are high-risk and high-reward assets. Investors seek high liquidity and the ability to recover the invested money quickly and other additional returns. A quick fix is provided to them through an ICO, making it a fairly attractive investment solution.

Read more: How to Raise Capital Through an ICO?

Democratizing model/network

Initial Coin Offerings (ICOs) are changing fundraising by democratizing access to financial capital. It’s the era of globalization of financing. ICO virtualization has made it possible for anyone, anywhere in the world, to invest in a company that is established or operating in any country. ICOs have caused the significance of going to Silicon Valley / Wall Street to raise funding to diminish. Everything is on the internet from the workings, marketings to opportunities. It paves the way for more expanded investment opportunities as more international clients/investors are lured into these projects. 

Lack of intermediaries

Tokens mean instant custody, not requiring the role played by intermediaries. Elimination of financial intermediaries automatically minimizes the cost of funding and also the funding speed. There’s also less government control compared to traditional financing methods.

Concluding remarks

The amount of funding attracted by the ICO remains the most commonly used indicator for the success of companies or entrepreneurs. Organizations are considering issuing tokens as they are assumed to be securities. Because unlike holding a stock of a company (whose products a contributor never used), ironically, tokens can be more tangible than securities. On the market end, token buyers are trying to be more cautious about buying and trading ICO tokens. On the other hand, the cryptocurrency community is putting its best efforts into regulating token sales and conducting due diligence on behalf of the public.

In the end, we’ll advise you if you have an inclination in the crypto universe and are interested in buying ICOs, practice proper precaution before you invest in a company just to be safe.

By |2022-10-11T15:38:54+05:30October 11th, 2022|Products|Comments Off on What are Some of the Benefits of an ICO?

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