DEFINITION of 'Initial Community Offering'

An initial community offering refers to a new initiative under which a financial security, like a municipal bond, is divided into smaller chunks, like micro-bonds, and then sold as tokens or cryptocoins whose transactions are recorded on a blockchain.

BREAKING DOWN 'Initial Community Offering'

Fighting with the problem of reduced federal funding and low investments in the municipal bonds that come in high denominations, a Berkeley, California, city council has teamed up with investment startup Neighborly to launch an initial community offering.

Breaking up the high-value municipal bonds into lesser-value virtual tokens allows more participation from investors who otherwise stay away from directly purchasing the high-value bonds.

The whole transaction process is performed on the open, transparent blockchain that reduces the costs. The low denomination tokens will be backed by the bond and will carry the same risk profile. The interest will be paid out proportionally.

The first initial community offering is expected in May 2018. It will be initiated for smaller ventures, like buying an ambulance or a fire-engine, and will eventually aim at funding larger projects like affordable housing. (See also: Public vs Private Blockchains: Challenges and Gaps.)

RELATED TERMS
  1. Tokenized Equity

    Blockchain-based tokenized equity offers the advantages of a ...
  2. Municipal Bond Fund

    A municipal bond fund is a fund that invests in municipal bonds.
  3. ICON Cryptocurrency (ICX)

    ICON is a South Korea-based blockchain technology supported through ...
  4. Public Purpose Bond

    A public purpose bond is used by municipalities to finance public ...
  5. Dollar Bond

    A dollar bond is a U.S. denominated bond that trades outside ...
  6. Double Barreled

    A double barreled bond is a municipal bond in which the interest ...
Related Articles
  1. Investing

    VC Fund Blockchain Capital Launching Initial Coin Offering

    Blockchain Capital will be the latest firm to launch a token for public sale via an ICO.
  2. Investing

    Why Muni Bonds and Bond Funds are Perfect Together

    Municipal bonds and bond funds differ in several ways, which is partly why they complement each other well.
  3. Investing

    A Look at the Pros and Cons of Muni Bonds

    Considering muni bonds? Here's a look at their pros and cons.
  4. Financial Advisor

    How to Find the Best Bets in Muni Bonds

    Approach investing in municipal bonds the same as you would investing in stocks.
  5. Investing

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
  6. Investing

    The Top 5 Municipal Bond Funds for 2016

    Understand how the addition of municipal bond mutual funds can enhance a portfolio, and learn the top-rated municipal bond funds to consider for 2016.
  7. Investing

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  8. Investing

    The Top 5 Municipal Bond ETFs for 2016

    Learn about exchange-traded funds that invest in municipal bonds issued by local U.S. municipalities with returns on bonds exempted from federal tax.
  9. Investing

    Taxation Rules for Bond Investors

    To sum-up there are three types of bonds: government bonds, municipal bonds, and corporate bonds. Find out how each of these bonds are taxed and what you can do as an investor.
  10. Tech

    How Blockchain Technology is Changing Real Estate

    Blockchain technology will disrupt real estate as well.
RELATED FAQS
  1. How are municipal bonds taxed?

    Discover information about the various tax implications for municipal bonds and zero-coupon municipal bonds at the state ... Read Answer >>
Trading Center