## What is an ICO that Crypto investors need to understand clearly

**ICO (Initial Coin Offering) is what kind of fundraising system**

Claiming that ICO is just a token sale is not entirely accurate. What actually happens is that a project development team uses blockchain technology to create digital coins and then offers them for sale to investors worldwide in exchange for funding.

The process uses documents in the form of a smart contract (Smart Contract) to ensure that both parties (investors and project owners) clearly agree on the benefits investors will receive, whether it’s revenue sharing, access to exclusive services, or other rights as agreed.

## The ICO process you should understand

The first step is for startups to issue new tokens on a blockchain network (a secure ledger system with encryption technology). The next step is to distribute the tokens to investors who purchase them.

These tokens can be traded on digital currency exchanges or converted into cash. Some tokens have additional functions, such as granting access to special platform features or providing dividends. Generally, tokens are divided into two types: Utility Token (tokens that grant service access) and Security Token (tokens representing a share of assets).

The most popular fundraising format today is **ICO Launchpad**, where platforms carefully select projects that meet strict criteria and qualifications. Once approved, the platform supports marketing, technical assistance, and fundraising efforts.

## Examples of interesting ICO investments

### Ethereum, the coin that became Top 2 despite past issues

Ethereum was designed to address Bitcoin’s limitations by adding smart contract capabilities (Smart Contract). In 2014, it successfully conducted its first ICO, raising an impressive $18.4 million in just 42 days.

This success elevated Ethereum to the second-largest digital currency in the market today, proving that a well-conceived ICO can create sustainable value.

### Tezos, learning from failure

Tezos is a platform that promotes Onchain Governance (an open and transparent management system on the blockchain). This proposal attracted significant investor interest, raising up to $232 million in July 2017.

However, the story did not end well. There was a significant delay in distributing tokens to investors, leading to class-action lawsuits. Ultimately, Tezos admitted fault and paid a settlement of $25 million in 2020.

This Tezos case serves as an important lesson: raising a large amount of funds is not the key; what matters is how the project is managed.

## Pros and cons of investing in ICOs to be aware of

### Clear advantages

- **Fast fundraising** Startups do not need to seek bank loans or sell shares to institutional investors, reducing approval steps significantly.

- **High profit potential** Buyers of tokens during ICOs get the lowest prices. When tokens are listed on exchanges, prices often surge, allowing early investors to realize excellent gains.

- **Transparency and security** Everything is recorded on the blockchain and can be verified via smart contracts. No secret dealings.

### Risks to watch out for

- **Extreme price volatility** ICO tokens from companies without stable revenue are highly volatile. Prices can fluctuate unpredictably, and investors may incur losses.

- **Lack of legal protection** Cross-border ICOs are not yet regulated by international laws, creating gaps that can be exploited for scams and dishonest activities.

- **Operational risks** Even after raising funds from investors, it does not guarantee that the team will deliver as promised. For example, Tezos failed to distribute tokens properly.

## Summary: ICOs and careful crypto investment

**ICO (Initial Coin Offering)** is an effective tool for startups to raise funds and develop projects quickly. However, for investors, the key to making profits depends on choosing the right projects.

Whether it’s Ethereum, which achieved great success, or Tezos, which faced challenges, both cases teach us that the success of an ICO depends on the management team, not just the amount of money raised.

Any investors considering participating in ICOs should thoroughly study the information, review the sale plan, project development, and team background to avoid making decisions based solely on hope.

This article is for informational purposes only and does not constitute an investment recommendation.