ITPEC FE Morning October 2021 Question 73
Which of the following is an appropriate description of Initial Coin Offering (ICO)?
Explanation
A fundraising method used mainly by startups, through cryptocurrency — in an ICO the company issues its own digital tokens and sells them for cryptocurrency.
The issuer publishes a white paper describing its project, creates tokens on a blockchain and sells them to investors, usually in exchange for cryptocurrency such as bitcoin or ether. It lets an early-stage company raise funds without going through a stock exchange or a bank.
Answer (c)
Why not others:
- •(a) — backers funding an idea in return for rewards such as physical products is reward-based crowdfunding
- •(b) — raising funds from the public to expand an established, financially stable company is a public share offering; an ICO is typical of startups
- •(d) — offering shares of a private corporation to the public in a new stock issuance is the definition of an IPO (Initial Public Offering)
Key rule: Look at what the investor receives: shares is an IPO, products or rewards is crowdfunding, and digital tokens bought with cryptocurrency is an ICO.
Business Industry · AI-written, may contain errors
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