What's an ICO? Like an IPO But With Digital Coins

An IPO, or initial public offering, offers a chance to make big money quickly by getting in on the ground floor of the next new Google or Facebook. An ICO, or initial coin offering, offers a chance to make big money quickly by getting in on the next new money. It’s a formula that’s led to over $3 billion being raised so far this year for a range of startups issuing digital tokens, a faster pace than any other early-stage venture capital funding. The rise of ICOs has prompted the U.S. Securities and Exchange Commission to issue cautions to investors and startups. China has gone further, banning ICOs entirely.

It’s a way to raise money for new ventures trying to follow in the footsteps of digital currency pioneers bitcoin and ether. Despite controversies arising from fraud, theft and volatile speculation, they and their imitators have shown that it’s possible to develop communities of users willing to try unconventional forms of money. An ICO lets startups bypass the venture-capital process by turning to something comparable to a Kickstarter campaign. Those putting up the money get access to technology companies that are usually the realm of only institutional or high-income investors. Plus, there may not be a need for an investor to wait years to cash in (as is true with most IPOs), so long as they can find a buyer for the coins they’ve bought.