What is an ICO (Initial Coin Offering)? - Beginners Guide About ICO

After hearing and seeing the rapid development of the value of Cryptocurrency, recently we often hear the term ICO (Initial Coin Offering). In the second quarter and the third quarter of 2017 there were many developers or startup companies that were intensively conducting ICOs to raise funds from the public for the success of developing their projects. Funds that can be collected are also not half-hearted, can reach millions of US Dollars in one ICO.


There must be a lot of questions that arise after hearing the term "ICO", what is ICO? How does this work? How do you get benefits from ICO? As well as various other questions regarding the ICO. Well, we will discuss it in this article.

What is ICO (Initial Coin Offering)?

Initial Coin Offering (ICO) is a concept that recently emerged with the aim of "CrowdFunding" or fundraising from the public in the crypto currency and blockchain industries. This concept abandoned the concept of traditional funds collection from banks and the government, so the possibility of the funds collected almost becoming unlimited.

ICO is an event, sometimes referred to as "CrowdSale", where developers or startup companies release their own type of crypto for funding purposes. Usually, the developer or startup company will release a number of crypto tokens and then sell the token to the intended target. ICO which is most often held to date uses Bitcoin and Ethereum.

Companies get capital to fund product development from investors who are attracted to their crypto token stocks. While investors have complete stock ownership.

ICO procedures

Before the ICO can be done, developers or startup companies are required to make a White Paper (Proposal) which sets out all the things about the project they will make. The White Paper contains all projects that will be made such as:

• What project will be made?
• How was the project created?
• For what purpose is the project implemented?
• Who will do and take full responsibility for the project?
• What is the minimum fund needed?
• How is the distribution of Rights and Obligations of Developers or Startup Companies and Investors?
• And there are still many other things that must be explained in the White Paper. In essence, the White Paper is a complete proposal about a project that will be created by a developer or startup company. The main goal is to get approval and public support so that the projects they work on can work.

In the ICO White Paper, there is also an agreement if the minimum funds are not obtained, the funds will be returned fully to the token buyer or investor. Whereas if the minimum fund is reached, the rights and obligations of both parties are also arranged in full.

Are Many ICOs Successful?

Actually ICO is not only done in 2017, but the first ICO was done in 2013 with the first coin released was Mastercoin or OMNI, which is a crypto currency and blockchain-based communication protocol. This first ICO successfully raised a lot of funds through the bitcointalk.org forum in July 2013. The total funds obtained by Mastercoin were $ 5 million for Bitcoin crypto.

In addition to Mastercoin, there are still many other ICOs that have succeeded in selling their own tokens such as Ethereum in 2014 which managed to get $ 18 million, and Waves in 2016 who raised more than $ 16 million.

At present, the highest ICO fundraising collection is held by the Tezos startup company which managed to raise more than $ 232 million from their ICO.

What are the benefits of ICO?

For Developers or Startup Companies, they will get enough funds to implement and accelerate the projects they develop. In addition, the ICO was also used as a promotional venue for new companies before they officially released the completed projects and were ready to be marketed.

Whereas the advantage for investors is that they will get crypto tokens which later can be traded freely in the market exchanger after the coins from the finished project are officially released. Usually, when a coin from a project has been officially released, the price will surge beyond 5x the ICO price. This is the main advantage that investors have from purchasing these ICO tokens.

What are the disadvantages of ICO?

Actually, in this ICO, the most likely losers are investors, because investors spend money to buy crypto tokens on third parties. Although the ICO White Paper has been explained in detail about the use of money, there is still the possibility that the money that has been given by investors is used with unclear objectives, or money laundering, usually we know it as SCAM.

How to detect possible SCAM in ICO?

There are several ICO signs that have the potential to become SCAMs, namely:

1. Developers or Startup Companies that hold ICOs are Anonymous (not known to anyone in the community), nor are they known but not reputable If the people behind the ICO do not consider their own reputation important, they tend to feel safe when doing SCAMMING.
2. There is no Escrow wallet for the contribution of crypto tokens. Escrow is a wallet (wallet) that is managed by a third party and has nothing to do with the ICO organizer. This means that funds provided by investors to ICO operators are then stored in separate wallets managed by other parties. This will prevent the emergence of money escapes, because the donation funds are not concentrated in the ICO organizers.
3. Unrealistic or unclear goals. If a project does not have a clear and realistic picture, that means the people behind the project do not know what they are doing.
4. Lack of Transparency. ICO organizers must show the stage of project work to investors, at least release code snippets or issue demo versions (beta) of their products.

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