What is an Initial Coin Offering in the World of Digital Currency?
Initial coin offerings or ICOs have been at the top of many’s financial charts for quite sometime now with companies raising money in the amount of billions of dollars. Various celebrities such as Floyd Mayweather or Paris Hilton have helped to hype the ICOs up in the recent times, but many are wondering, what is an ICO?
Since the acronym is incredibly similar to the more widely known IPO, what do the two have in common? For starters, instead of a company offering shares, they offer a digital asset which is known as a “token.”
The tokens work in a similar way to a crowdfunding campaign where the technology from Bitcoin can be used to ensure verification on transactions. Since the tokens can be used as an actual currency, or traded for one, they can be built to offer other digital services such as cloud storage space.
With Bitcoin being undoubtedly the most popular player in the space, it should be known that it runs on technology known as blockchain. Blockchains are ledgers that are cryptographic and compile a transparent list of every transaction that is carried out. These blockchains go through various internet connected computers wherein each transaction is verified. Some of these computers are used for mining which is where the computer completes a difficult computational problem and is rewarded in currency for their time. This is how the complete blockchain works.
Many are arguing that the power of this blockchain technology can help to not only create new currencies, but eliminate the need for a central authority altogether. Traditionally there is a mediator between customers and their payees, but with blockchain technology, that has become obsolete. Hopefully digital currency can become the future of the financial world in the years to come.