Steemit Crypto Academy Week 1 Homework task For @imagen and submitted By @deeni1 On ICO(Initial Coin Offering)

Hello Everyone!!!

It's a blessed day that I want to say a very big thank you to the crypto academy for bringing back such a wonderful homework task.
But before I proceed, I will like to say a very big thank you to professor @imagen for his wonderful lecture and the resources given by him. I must say that the resources were really helpful and aided me to do my homework diligently.

To set the ball rolling, I will like to explain to your understanding what an ICO is,

ICO

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The abbreviation ICO means an Initial Coin Offering. It is a form of cryptocurrency that is seen as a fundraising initiative that business entities use in order to raise capital.

It is an investment platform that provides the investor a crypto coin as a token in exchange for investment. The ICO could be described as a way of crowdfunding through the creation and sale of a digital token in order to sponsor the development of a particular project.

It is similar to an initial public offering (IPO). However, the clear difference between the ICO and IPO is the regulatory oversight. This is because the ICO requires the creation of a prospectus that represents a lawful declaration of its intention its shares to the public , and this must meet certain transparency standards.

On the other hand, the need for regulation requirements with ICOs becomes a necessity only when the ICOs are issued as security tokens rather than utility tokens. Mastercoin was the first ICO introduced in 2013 and it raised about the US $600,000 for a project to create a Bitcoin exchange platform for transactions.

HOW DO ICOs OPERATE

The operational structure of ICOs is outlined below

Firstly, there is the need for a pre-announcement to be made. This is described as the marketing stage of a future initiative through sites peculiar to investors of cryptocurrencies, with the provision of a white paper that provides vital investor presentation outlining the details of the initiative by the creators of such initiative.

This gives information to interested and potential investors and as well gives feedback on the responses and concerns of such investors to project creators to be addressed.

Also, there is the provision of ‘offering’ which is the approved version of the white paper. It outlines the terms of a contract for the benefit of the investors, made on behalf of the company entering into the ICO. Such an offer will outline details of the project, project timelines as well as the total amount of capital required.

It also provides the financial instrument to be sold during the ICO, usually tokens. Once this is done, the start date of the ICO is announced and the marketing campaign goes into overdrive.

Furthermore, the turning point of the ICO is the marketing campaign. This is because it plays a major role in the company’s quest to raise the needed capital.

Companies that are starting up are usually not known, and they need to bring marketing agencies into the system to make the necessary presentations.

When this is done, the buying and selling of tokens start, with the company having established an exchange for interested investors to acquire tokens.

THE DIFFERENCES BETWEEN ICO AND IEO

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The abbreviation IEO means an Initial Exchange Offering. It is a fundraising technique where a crypto exchange assumes the responsibility for evaluating the project attracting investors and as well managing the distribution of tokens.

It is run by crypto on behalf of the startup that aims to raise funds with its newly issued tokens. It is similar to ICO but the only difference comes from where the token is offered. The following are the differences between ICOs and IEOs

ICOs generally attract investment directly. On the other hand, the IEO usually induces the market to take part in the fundraising process, and this makes it a much qualified promising field for startups.

The trading mechanism of IEOs are very fast as compared to ICOs which is not as quick and fast to trade. This is why ICO Crypto traders observe this feature as the first part of the ICO.

The IEO acts as the intermediary to the decentralized fundraising platform. By this, participating investors are given security of investment and also confidence. This is not realized with the ICO which makes it prone to scam.

With respect to how tokens are created, ICOs mint their tokens whenever the funding completes. This could take several months and years. On the contrary, IEOs projects create tokens and simply make them available on the exchange platform for purposes of fundraising.

ADVANTAGES OF ICO

Liquidity: The ICO is a high liquidity platform that provides investors with high liquidity. A common barrier for people in search of new investment options is the lack of liquidity.

Lower Competition: A number of projects find it difficult to raise funding through traditional methods. This could be due to location or the type of offering, mostly associated with non-profits. ICOs have simple funding procedures that allow potential projects to receive funding.

Variation in Cost: Using ICOs to fund projects means tokens can vary from one startup to another. This increases the opportunity to make considerable profits and also reduces risk.

Decentralization: The ICOs are not restricted and could be open to anybody, especially when the ICO accepts cryptocurrencies. The needed requirement expected of investors is to transfer funds in time to purchase in most ICOs.

DISADVANTAGES OF ICO

A Potential Fraud: In the IC0 the investor is tasked to diligently observe the team members' profiles and be assured that they possess the requisite blockchain knowledge and experience to support claims in the whitepaper.
Unfortunately, not all investors are given the right information to a good ICO from a fraudulent or bad one.

May Lack Accountability: Some times ICOs are built from private companies that do not have adequate or existing funds to undertake their projects.
Investors may anticipate high returns of their investments within a period of time.
However, we cannot guarantee that such companies will be able to deliver what they promise. This could disappoint investors in the end.
Therefore, investors need to do thorough research when deciding on which ICO to invest in.

WHAT IS IOTA

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IOTA is an open-source distributed ledger created to pave a way for seamless value and data transfer. It was developed in 2015 and co-founded by Dominik Schiener, Serge Ivancheglo, Dr. Serguei Popov and David Sonstebo.

It is a designed peer-to-peer distributed ledger with the sole aim of democratizing and powering the Internet of Things, a designed network to exchange data and value between humans and machines without difficulties.

The IOTA network can power the Internet of Things without restrictions because it offers feeless transactions, tamper-proof data, as well as low resource demand. This network ensures the quality and validity of the exchanged data on the network and avoids all manner of tampering. IOTA denotes its Cryptocurrency token.

It has proposed Tangle as another data structure to store and manage numeric representations in a distinct manner. By this IOTA is able to overcome Bitcoin’s scalability issue by eliminating topographical hurdles encountered when using a blockchain.
IOTA still has a long way to go in terms of market recognition as a viable currency alternative compared to other established coins like Bitcoin.

BENEFITS OF IOTA

IOTA is a feeless transaction network
It is highly scalable because of the available distributed ledger Tangle
It is also a versatile technology
It is a decentralized platform that has no central authority control over its network.

CONCLUSION

ICO is a very good investment platform for investors. But it is not risk-free, and as such potential investors need to do thorough research before venturing into an ICO project. By doing the above, investors will not land into fraudulent projects.