If you don’t already know, blockchain is the technology that started it all. The ICO, the cryptocurrency, crypto exchange, smart contracts, everything started with the blockchain. So, what it is and why it became so popular so fast. Let’s find out more about the various terms of the blockchain world.

ICO (Initial Coin Offering)

An ICO is a crowdfunding mechanism followed mainly by blockchain startups which raise funds in exchange for new cryptocurrencies. ICO is loosely inspired by IPO (Initial Public Offering), which is a traditional method of fundraising in which a company sells some of the company shares in exchange for funds. However, ICO is quite different from IPO. For one, ICOs do not offer any sharing or rights in the company against funds contributed by their investors. Also, ICOs are not regulated like IPOs.

In other terms, ICO is a token sale organised by a blockchain startup to accept funds from potential investors in exchange for new tokens.

ICO Hard Cap

The maximum goal for a particular ICO fundraise, or the maximum funding an ICO is going to allow.

ICO Soft Cap

The minimum goal for an ICO fundraise, or the minimum funding an ICO aims to achieve.

Cryptocurrency

A digital currency that is created using a code and works on the blockchain technology.

Token

The cryptocurrency that a blockchain company launches to provide a mean for exchange during the ICO and also sometimes to be used for other real-world applications. Tokens are of many types such as utility tokens, security token, currency tokens, asset tokens, etc.

ICO Whitepaper

The official document stating the various aspects of the particular ICO and the project, such as the idea, the problem and how the new product can solve it, token, the target market, technical aspects, the project team, roadmap and future plans, etc.

Pre-ICO

It is a special crowdfunding sale event that is run before the main crowdsale, mainly with the aim to create a buzz in the industry and give early investors an opportunity to get started big. The fundraising goal for pre-sale is usually lower than the main sale.

ICO is the main sale event of a blockchain company’s tokens during which buyers and investors can purchase tokens in exchange for other cryptocurrencies and fiat currencies like dollars.

Trading

The process of selling or buying crypto tokens in exchange for other cryptocurrencies or fiat currencies, usually for a profit.

Crypto Exchange

A digital exchange platform that allows the trading of cryptocurrencies.

Blockchain

Blockchain is a digital ledger that stores transactions in blocks that are interconnected with strings of random characters. In other words, blockchain is an interconnected network of nodes where each transaction is updated in a decentralized ledger, a copy of which is maintained by each node in the network.

Ethereum

Ethereum is an open-source blockchain software program that allows users to build new decentralized applications (DApps) based on the blockchain technology. The Ethereum blockchain now supports thousands of DApps and new ICO projects out there.

Ether

Ether is the official cryptocurrency of the Ethereum platform. It works as the fuel for various operations on the platform. The clients of the platform pay in Ether for transactions to the machines which execute their operations. In the words of ethereum.org, “ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources).”

Utility token

A token that is meant to be utilized as a payment or access coupon to a particular decentralized app or product that the company is going to launch at a later date. Thes tokens can be traded on the exchange but do not provide any ownership in the project or company. Security token: These tokens are essentially registered to be used as securities and not for transactions. However, security ICO tokens are not very common because of the involved regulatory mandates.

ERC20

ERC20 is an Ethereum standard for cryptocurrencies. It is a set of rules defined for new cryptocurrencies that are developed on the Ethereum blockchain. All these tokens have to follow the same rules. This makes it easy to trade ERC20 tokens with each other. ERC20 stands for Ethereum Request for Comment. These tokens are easy to create as the source code is already there. You just have to modify your tokens to follow the new standards.

EOS

EOS is another popular blockchain which is now fastly replacing the ETH blockchain for the development of new cryptocurrencies and projects. A practical example of the EOS project is the Medipedia platform which is a decentralized healthcare search and delivery system. EOS is faster than ETH and can perform more transactions every second. It is also more affordable as the transaction fee is almost zero.

Smart contracts

These are blockchain based digital contracts that auto-execute when a particular condition is fulfilled and validated. These contracts are written in computer code which also contains the associated condition. These are mostly used for validating a financial transaction in which the transacting asset goes to the receiver only if a particular condition is met. Smart contracts are secure and free of third-parties.

KYC and AML for ICO

You must have heard about KYC or AML verification by ICO projects. KYC stands for Know Your Customer, which is a verification process followed by most of the legitimate ICOs out there to verify the identities and legitimacy of an investor or new user. The main purpose of KYC/AML verification is to protect the project, the platform and those who are participating in the project. This prevents illegal parties from laundering their dirty money through ICOs.

So, these are most of, if not all, the terms you should get yourself familiar with if you are planning to start/invest in the ICO industry. ICO, or blockchain, is a pretty vast industry, and you will get the hang of things as you move ahead. For now, these terms and definitions should be more than enough to get you kick-started in this industry. Be wise in your investments and research properly before choosing an ICO.