Are you the one looking for something big in cryptocurrencies today? Then, a closer look at the Initial Coin Offering (ICO) can be the best to start with.
Basically, the idea of presale coins or tokens of blockchain project created a crazy successful instrument. Hence raising the funds for the development of the new application. The amount of money that ICOs raised in the previous year is quite astonishing. In the year 2018, there were 1258 ICOs that originated raising funds of $7,852,477,041
And now is the time to get you through a detailed journey about the ICOs….
What is ICO?
ICOs abbreviated as Initial Coin Offering, is a means of crowdfunding system that accepts cryptocurrencies or tokens for funding project development. The developer collects the funds invested by investors to launch the project. Basically, the white paper and some important people of the crypto community support the project.
Today, most token sales run on Ethereum blockchain via a smart contract. These smart contracts collect Ethereum tokens and automatically exchange them for new tokens owned by a start-up company. Basically, this is a P2P system that does not require any exchange or broker as middlemen.
At the time of writing, there were 2,136 cryptocurrencies listed on the website Coinmarketcap. Of which more than 1,000 coins are now available on various exchanges and many more in the process of listing. Notably, not all cryptocurrencies pursue their own blockchain rather they’re issued on top of another blockchain.
History Of ICOs
Some projects used a crowd sale model for funding their development work in 2013. Initially, Ripple pre-mined 1 billion XRP tokens and sold them to investors for fiat currencies or bitcoin. In early 2014, Ethereum raised over $18 million, one of the largest Initial Coin Offering completed during that period.
DAO was the first attempt at fundraising for a new token on Ethereum. Actually, it promised to create a decentralized organization for funding other blockchain projects. It was unique as the token holders themselves take the governance decisions.
DAO was successful in raising money over $150 million. But, an unknown attacker drained millions from the organization due to technical vulnerabilities. Because of which the Ethereum Foundation decided to move forward with a hard fork. Hence, allowing them to tear back stolen funds.
Even though the first attempt to fund a token failed, the blockchain developers realized that using Ethereum to launch a token was much easier as compared to pursuing seed rounds through the usual venture capital model. The ERC20 standard eases the developers in creating their own cryptographic tokens on Ethereum blockchain.
How Does Initial Coin Offering Work?
Prior to raising capital to your startup, it is always necessary to know the work process of the Initial Coin Offerings. Here you go with the basic steps which help in making the token sale a huge success.
- Initially, a blockchain project is proposed, wherein the funds are raised through Initial Coin Offering.
- Further, a whitepaper is presented, describing the technical details, business models and roadmap for the company.
- The working prototype for the projects will not be known.
- Create a social awareness of the project. Specifically through marketing campaigns via social media and search engines.
- This mainly specifies the amount of token available for selling. It also specifies the amount to be raised for their project.
- Eventually, ICO token sale begins wherein the investors start buying tokens in exchange for cryptocurrencies.
- After the completion of the event, the tokens are available for exchange.
How To Participate In ICOs?
Basically, there are various steps involved in the participation in ICOs.
Step 1: A Thorough Research On The Upcoming ICOs Is Preferable
It is always necessary to research on the resources or outlets featuring the latest ICOs. Having a clear picture of the upcoming Initial Coin Offering enables you to plan ahead, specifically for ICOs having a whitelist.
In a whitelist Initial Coin Offering, you have to make an advanced registration for participating in ICOs. Preferably, these are the hallmarks of popular Initial Coin Offerings offering a limited number of coins. Here is the Initial Coin Offering List:
There are also few community sources/forums that feature ICO discussions like:
It is also necessary to perform your own research to ensure if the Initial Coin Offering is a good project. Basically, there are few reviews and analysis done by others for the verification of ICO. Some good review listing sites include Crush Crypto and Reddit.
Step 2: ICO Participation Process
Open An Exchange Account: After you have done proper research and willing to participate in the ICO, the next step is to create an exchange account. Even here, there are thousands of exchanges allowing trading. Always ensure that whatever account you use, it has to be fiat-accepting cryptocurrency exchange account wherein you can convert fiat currency to your favorite cryptocurrency and vice-versa.
Own A Wallet: A wallet is a place where your currencies are safe. There are a huge number of wallet types available to users. Basically, all the exchange accounts have their own wallets for storing the currencies. But it is always better not to use them because they may have a potential threat to your funds.
Ultimately, the reason behind this is the vulnerability to theft. Notably,
Initial Coin Offering accepts Bitcoin or Ethereum from your private wallet. If you send coins from third-party wallets, you may not get a token as the exchange’s wallet is not yours.
ICO Instructions: Always there is a step-by-step guide for participating in ICOs. Make sure you join their official communication channels like Slack or Telegram for receiving the latest updates. These platforms also allow you to ask questions directly to the developing team.
ICO Business Model
Basically, an ICO business model consists of goals, timelines, and roadmaps that the organization aims for. Its assessment is necessary because the investors get a clear idea of how the Initial Coin Offering develops and if it is worthy enough to invest in.
No doubt the business model of Initial Coin Offering is always trustworthy as it is regularly checked by high-esteemed, organizations, universities, etc. Suppose if it appears on your site, then it is definitely genuine and on-point.
A white paper is an official document issued by new blockchain projects before the ICO informs the reader about the new technology, methodology, product or service is launched.
Notably, white papers are sales and marketing documents that convince potential clients to learn about a product before purchasing its services, technology or strategy. White papers aim to be utilized as a marketing device before the sale. You can easily find everything related to ICOs, on the
Initial Coin Offering white paper in conformation to the legislation.
It is quite necessary for most ICOs to have partners to succeed in their projects. Eventually, they invest a huge amount of money in the ICO’s idea, share infrastructure providing their own communities, with the aim of promoting the ICO. Having partnerships in Initial Coin Offerings boosts up the trustworthiness of an ICO, making more and more people invest in it sharing the same idea.
Comparatively, ICOs has more pros as compared to IPOs. Basically, ICOs use token for its crowd sale, the users are now moving from crypto coins towards tokens. Let’s dive deeper into the benefits of ICOs.
- The token offering facility of ICOs makes them more unique. However, the Initial Coin Offering issuers provide tokens or sell their tokens to investors for fundraising. The tokens have complete details about the ICO process.
- ICO requires some time for planning, white paper writing, token creation, and fund collection. When compared to Initial Public Offerings, ICO requires less time. While in IPO it is not possible to find all interested investors, in Initial Coin Offering we can cover all the interested investors making ICO successful.
- When considering ICO, the status at each time is written on the Blockchain. The blockchain is a distributed ledger that provides all investors with knowledge about the daily Initial Coin Offering process. Eventually, this decentralization prevents issuer’s fraudulence activities over investors.
Evaluating An ICO
It is always necessary to evaluate every single aspect of the project and cutting it down to its precise execution strategy. Keep these following points in mind while evaluating an ICO.
- Initially focus on the strong points and weak links of business models. Enquire from people who understand the technology, to get detailed information.
- Look for ICOs having teams with a proven track record in the crypto-asset as well as blockchain industry.
- Always visit the Reddit, Twitter or Facebook pages of the projects. Also, be aware of paid reviews or bounty posts that pay participants to spread positive information about the project.
- Involving a big crypto Venture Capital (VC) is a positive sign. See if the company has VC support or it would be better if they have a VC on board.
- Research on various other businesses of the same industry also matches their fundamentals with what the company works on.
Different countries have different ways to deal with cryptocurrency regulations. From an administrative perspective, there are two primary sorts of cryptocurrencies namely utility tokens and asset-backed tokens.
- Utility Tokens: It is a digital token of cryptocurrency that is issued in order to fund development of the cryptocurrency which is later used to purchase goods or service offered by the issuer of the cryptocurrency as a method of fundraising for the start-up.These tokens have value as they enable the holder to trade the token for good service, for example, Bitcoin.
- Asset-Backed Tokens: Asset-backed tokens are one of the best applications of blockchain technology to traditional financial instruments, bringing liquidity and price discovery to illiquid markets, with the potential to free up trillions in economic value. The Asset-backed tokens have value in light of the fact that there is an underlying asset that the token can ascribe value to.
Currently, Initial Coin Offerings are legal in most of the countries. Also, there are some countries having clear legislation about them such as North Korea, China and the majority of Asia.
Future Of ICOs
Till now the ICO market has seen only success and also there some fundamentally strong projects where a correction is due in time. There was one factor that was fueling the Initial Coin Offering frenzy but even that is changing gradually. Some sort of red taping is expected around ICOs in the near future.
Having a strict framework will always help in separating good projects from bad ones and potential scams. When it comes to a regular investor, it is necessary to weigh the benefits, risks and potential legal upswings of ICO landscape before investing.
Analyzing all these points covered, will definitely lead investors on the path of making smarter investments. Eventually, choosing the right ICOs is to believe in. At any point, if you feel like something isn’t right, it is better to follow your instincts and look for other companies to invest in. As there are a huge number of choices available in the market.