What are ICOs and How are they Different from IPOs?

You may have heard of the term “IPO.” For those of you who haven’t, IPO is short for “initial public offering,” or the first sale of a certain company’s stock to the public. Before opening itself to the public, a company is private. Here, the shareholders are comprised of investors, such as the founders of the company and their friends. By going public with an IPO, companies raise a lot of money, which allows them to expand their business.

Ali Baba raised $25 million during its IPO

The explosion of blockchain-related projects has brought about a new trend: ICOs. “ICO” stands for “initial coin offering,” and it is the first sale of coins to the public. Before an initial coin offering happens, the team usually comes up with an idea and pitches their project to future investors. Early ICOs include Ethereum’s ICO, which raised over $18 million during its 2014 coin sale. Since the early days of blockchain, ICOs have been and continue to be a primary way of crowdfunding.

Both IPOs and ICOs are methods employed to raise money. They are alike in many ways, but their differences are worth mentioning. One difference I would like to take note of is the fact that investors who buy into IPOs hold shares of a company and expect a return in their investments. However, people who purchase coins are not buying shares of a company. They are contributing to a project that they believe has potential, and in return, they receive coins.

Although I didn’t go too deep in detail, I hope you learned what an ICO is through this post today. Keep studying, and invest wisely!

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