ICO Basics

Modern people come across the words cryptocurrency and bitcoin quite often, whether in the news feed or on social networks. Cryptocurrencies have become a sensation since their inception. The world has slowly started to accept currencies for transactions.

Cryptocurrency financing is one of the innovative ideas that came to people after the advent of digital currency. This type is gaining popularity not only among young people, but also among the older generation.

Understanding Tokens

ICO is a form of crowdfunding tool used by businesses to raise capital. However, some tokens provide a person with rights in the company, such as the right to vote on a particular financial decision.

Is there a difference between coins and tokens?

One important difference to keep in mind is that tokens are not a currency in any sense. The token issuance process does not involve the creation of new blockchains. For example, Ethereum (blockchain) is used for exactly this.

Types of tokens

Utility tokens are the most common and popular. They are similar to the tokens you can purchase at amusement parks to buy snacks or redeem to enjoy your ride. Promotional (equity) tokens. In this scenario, ICO and IPO are almost similar. Token stocks are usually issued by startups when they do not require crypto technology. Token holders are entitled to receive dividends or fixed commissions and participate in the company’s decision-making process – an honor given to them for supporting the project since its inception.
Credit tokens are a loan that the token owner gives to a startup. They are an alternative way to raise money to finance a business. A person invests a certain amount to receive it and interest in return.
Combined tokens. Combo tokens combine the characteristics and properties of more than one type of token. Famous examples of this are SIA and DIGIX, which are both tokens and shares.

Is it possible to trade tokens?

The answer is yes, and the process is very similar to coin trading. You should be aware of the terms and conditions of transactions as they can be very complex.
The simplest security recommendations: developers must not be anonymous, they must ensure that there is a legal connection between the buyer and the sellers, and ICO funds must be stored in a special escrow wallet.

Bottom line

The world is rapidly moving towards the digitization of currencies. Initial coin offerings (ICOs) and their token system are prime examples of how innovation can be realized through cryptocurrencies.