Initial Coin Offering

A financial scheme used as a way to fund start-ups using the technology behind bitcoin. Instead of buying stock in a company like with an IPO, investors receive virtual coins. Depending on the offering, the digital coins can be used to buy the company’s future products or services, or will entitle the owner to royalties down the road. Investors can also buy or sell the coins on exchanges.

These token sales are a little like a crowdfunding campaign, except they use blockchains to verify transactions. Blockchains are encrypted ledgers powered by a decentralized network of computers all over the world, whose operators, known as miners, receive bitcoin or other cryptocurrencies as payment in exchange for their work.

Historical perspective: In 2017 hotel heiress Paris Hilton joined billionaire Mark Cuban and boxer Floyd Mayweather in hyping a new finance fad called initial coin offerings (ICOs). The ICO market boomed with sales reaching nearly $2 billion in 2017, up from $256 million in 2016.

NetLingo Classification: Online Business