ICO -INITIAL COIN OFFERING- is the instrument used to finance the development of new projects in the world of cryptocurrencies. In essence, it´s an event in which a project based on BlockChain offers a series of tokensto its first users in exchange for better-known cryptocurrencies, with the aim of obtaining financing among its participants.
An ICO is carried out to raise capital with the final purpose of developing a project, consequently, the value base of the token is the viability of the product, service or platform driven by the project.
Cryptocurrencies are the most recent form of digital money. The tokens represent an asset or utility, therefore, the main difference between both lies in its structure and purpose.
While cryptocurrencies are units of value that always have their own BlockChain, tokens generally operate ‘above' of another BlockChain and can basically represent any asset that is fungible and negotiable.
In today´s context, one of the elements that has been acquiring greater importance, both in the creation of companies and in the undertaking of projects, is the possibility of attracting investment through alternative means to the traditional ones.
In this context, BlockChain appears as a new model of business development based on the "tokenization" concept, and in this sense, ICOs emerge as an innovative, flexible and direct instrument.
Launching speed is a key factor. Comparatively, the terms for the launch of an ICO are significantly lower than those of, for instance, an IPO, basically because the regulatory procedures in many EU countries, for the time being, do not exist or are flexible.
The costs associated with the launch of an ICO are more accessible compared with other instruments -IPO for instance- fundamentally because it does not require legal or financial intermediation, even the interest of the received funds can be negotiated better in an ICO than in a banking entity.
However, for the raising of funds through an ICO to be effective, a series of actions and presentations are required that imply high disbursement, still inaccessible for many organizations that face this barrier.