An ICO, which stands for Initial Coin Offering, is a way to raise money from investors for the development of a project by creating a new cryptocurrency or token that is publicly available. Investors can invest in the project with cryptocurrencies like Bitcoin and Ethereum, and trade their new digital coin on any exchange where it is featured. It can be easier to understand ICOs by comparing them to IPOs (Initial Public Offering). With IPOs, a company offers shares to the public to raise money for further development and growth.
When you invest in an IPO you get a share that you can exchange on the stock market.
The reason to invest in both is the same- the potential for huge returns on investment. If the ICO succeeds, the value of the token or currency you purchased can increase significantly. Also, you can hit returns much faster by investing in an ICO than waiting for Bitcoin fluctuations. Higher risks often mean higher rewards and an ICO investment can pay off in days or even minutes.
A new ICO will usually create a whitepaper, which is similar to a new company offering a business plan. The whitepaper will lay out key factors in the project such as what it is about, the required investment amount, what percentage of tokens are available for investors and what percentage will remain in the company, what currencies will be accepted and the duration of the launch.