If you study cryptocurrencies for any length of time, you’ll run into the term ICO, and probably with a negative connotation. So, what are ICOs?
An ICO is an Initial Coin Offering. It’s like a stock market IPO, or Initial Public Offering, for cryptocurrencies. New cryptocurrencies offer their coins to an initial group of people, usually at a discounted price. The money gained from the ICO is then used as investment capital to fund the development of that cryptocurrency’s blockchain or project with the promise of future increase in worth of those coins.
Many feel that ICOs share a large portion of the blame for the cryptocurrency crash in 2017. Hundreds of new cryptocurrencies offered ICOs and pulled in billions of dollars, but their projects never materialized, and investors lost out. Regulators stepped in and defined most cryptocurrencies as securities and declared that those ICOs were illegal because you can’t sell unregistered securities. Since then, ICOs have pretty much disappeared and this is why people don’t think positively about them.
In 2019, a new thing arrived: the IEO, or Initial Exchange Offering. A handful of new cryptocurrency exchanges have offered an IEO of coins tied to their exchange. These coins are used as an exchange instrument between fiat currency and cryptocurrencies. Because of how they’re used, they don’t fall under the definition of a security, making them legal to sell.
It’s uncertain how many ICOs and IEOs will be offered in the future, if any, as innovators and entrepreneurs await clarity from regulators. Whether or not they’ll be a part of our future, it’s unmistakable that ICOs have had a large impact on the history of cryptocurrency.