ACCA SBL Syllabus G. Finance In Planning And Decision-Making - Initial Coin Offerings - Notes ^{3 / 11}

ICOs are a type of crowdfunding or crowd investing tool conducted entirely on the blockchain.

Originally, new projects were funded by pre-selling coins to investors.

Entrepreneurs present a whitepaper of the business model and the technical specifications of a project before the ICO.

They lay out a timeline for the project and set a target budget where they describe the future funds spending (marketing, R&D, etc.) as well as coin distribution (how many coins are they going to keep for themselves, token supply, etc.).

During the crowdfunding campaign, investors purchase coins/tokens with already established cryptocurrencies like Bitcoin and Ethereum.

As opposed to traditional crowdfunding where the investment is considered to be a donation or a pre-buy of a product, ICOs give the supporters the possibility of a return of investment when selling their coin later at a possibly higher price.

ICOs are similar to IPOs only if the token represents a stake in the project.

ICOs could be seen as a mix between a donation, investment or risk capital.