A blockchain is a piece of technology that’s perfect for storing data securely. That might not sound like much, but it has enabled instantaneous, free money transfer internationally. It also gives us a new way to store websites. It even makes data unchangeable - totally immune to hacking.
Blockchain is a database. It is decentralised, meaning that no one entity controls it. Blocks that contain information or records are added to the database, these are time stamped and have a link to the previous block. The whole network must agree on the addition of a block, once added, it cannot be removed unless the whole network agrees, which is very rare.
To add a block to a blockchain, a series of criteria must be adhered to according to the blockchain. A smart contract is used to verify the criteria. A smart contract is a computer program that verifies the criteria, once the smart contract is executed no form of contractual distain can occur. Hence the security of the system.
A company can create their own blockchain through which to conduct their first ICO. More frequently, companies use existing blockchains that offer services for ICOs. Ethereum and NEO are two examples of established blockchains that offer ICO technology to new startups. NEO has performed several dozen ICOs, while Ethereum has performed hundreds.
In the period preceding the ICO, the company will communicate with its investors-to-be. They’ll exchange wallet addresses, so that the ICO can get paid, and the investor can receive their coins at the specified time. When the ICO begins, the company simply has to act according to plan. Because ICOs are so common, best practices and high quality ICO platforms make the process fairly seamless for most.
So how are blockchains used for ICOs? Any kind of application can be stored and operated from a blockchain. Blockchain developers have created applications that let people release their own blockchains and cryptocurrencies. Some blockchains, like Ethereum, are specialized for this purpose. When a coin is released this way, the process is called an ICO, or Initial Coin Offering.
Ethereum is a blockchain frequently used for ICOs. Other blockchains like NEO and EOS also support ICOs. From the investor’s perspective, it doesn’t matter which blockchain is used for an ICO. From the ICO’s perspective, each blockchain has different rules for its ICOs. In the end, though, a variety of established blockchains can be used for this same purpose.
Continue Learning with our educational articles