ICO - Initial Coin Offering
ICO (short for Initial Coin Offering) is a way for companies or projects to raise money. Crypto currency is swapped for a token that is issued by the entity that is raising cash.
The ICO is often compared to an IPO in the stock market.
In practice this is mostly Etherium that is swapped for a new token. The investor gets the new token that is being issued and the company gets the Etherium. Regular cash can in some cases also be used to buy the token directly from the issuer.
This newly issued token is similar to a crypto currency. The token can be traded on a blockchain.
The investor participating in an ICO is hoping that the project will be a success and that the token will be worth more in the future. This token is not real equity in the company. The token is just an unsecured traded liability the company can do as they please with. If the issuer is honest and trustworthy they will honor their token investors.
It is tempting to create ICO to raise cash for fraudulent projects that will never be realized. It is an unregulated market that attract many scammers that want to feed on uninformed people wanting to get some quick returns.
In the ICO market there have been stories of success and huge returns, but there are also many stories of scams and frauds.