Initial coin offering – ICO is a fundrising model using cryptocurrencies. Blockchain technology has completely revolutionized the way we exchange money. Today several digital currencies or the cryptocurrencies are immensely popular for a number of reasons but the most prominent being that in the year 2017 the soaring prices of the popular cryptocurrencies like Bitcoin, Ethereum etc. attracted a big number of investors as they provided them with some quick and incredible returns. However, it was not the popular cryptocurrencies alone that offered huge returns on investments but also the “ICOs” of popular blockchain projects developing their own crypto tokens provided the investors with great returns. As Blockchain technology is evolving and its applications are finding use in a range of business processes, more and more Blockchain projects are coming up with their own private cryptocurrencies. The development of Cryptocurrency involves a very important process called ICO which stands for Initial Coin Offering. In this article, we will take you through the basics of ICO explaining what it is and how one can take part in aninitial coin offering.
Initial coin offering – what is it ?
For any blockchain project, one of the most important requirements is the funds to support the project and develop the platform or the solution it aims to offer. The Blockchain projects develop their own cryptocurrencies and to develop it they need investors who put in the funds to initiate or shape up the project. The process of collecting or getting investors to contribute to a particular blockchain project is called “Initial Coin Offering” and this investment is made against the newly developed tokens. The investors get a fixed number of tokens for making an investment and often there are Bonuses for early investors and also the tokens are made available at a discounted rate for the early investors. Thus, Initial Coin Offering can also be understood as a fundraising mechanism of a Blockchain Project to get the much-needed resources and funds to develop the project. In return, the investors are not offered any partnership or share but the newly mined tokens which though not necessarily but is mostly transferable and can be traded on popular crypto exchanges.
How Can one participate in an ICO altcoin?
To take part in an initial coin offering one has to visit the ICO websites of upcoming Blockchain projects as they can participate directly through the ICO websites of such projects. But it is important to note here that the ICO is mostly launched and administered in two phases. The pre-sale or private sale and the main ICO, crowd sale or token sale where it is open to the public. The private sale is the very first time the token is made available to the investors but it is limited. Only the invited members often big investors are allowed to participate in a private sale and they are given the best bonuses and other benefits attached. Thereafter there is a publicinitial coin offering or crowd sale in which the tokens are made available to the general public. In the crowd sale, though there are Bonuses and benefits it is not as much as that one gets in a private sale. Also, during a crowdsale, the minimum investment amount is less and depending on the ICO it could be as low as $10. This means during a crowd sale one can participate in an ICO even with a minimum of $10 but in a presale or private sale the minimum investments amounts are are high and it could be as high as $50,000. The ICOs generally last for a month during which one can purchase the tokens from the initial coin offering website. Also, here it is important to note that many ICOs don’t accept fiat currencies like Euros or Dollars. The tokens can be purchased only against the popular cryptocurrency of equivalent value. The most accepted cryptocurrencies are Bitcoin and Ethereum.
What to do before investing in an initial cryptocurrency offering?
It is always advisable that one should be responsible for their investments. Therefore before committing yourself to any ICO, you should be doing your due diligence to avoid getting into any kind of scam whatsoever.
So here are 3 simple things that you should do before you decide to participate in an ICO:
- Read the Whitepaper – Make sure that the Blockchain project you’re about to invest in has a whitepaper detailing the project published on their website. Also, see that the whitepaper doesn’t make unrealistic claims such as 300% returns in one month. If they are making such claims which sound too good to be true, it is most likely to be a scam.
- The team – It is also advised that you should check what kind of people are behind the ICO. What are their credentials and if they have done successful blockchain projects in the past? It is important that you know who are the people behind the project you’re investing with.
- The payment address – Always send any payment to the actual ICO address and for this, you should not participate in an ICO from any other web portal apart from the official ICO website of that Blockchain project.
ICO is a unique opportunity but watch out for Ponzi scheme like onecoin
The Blockchain projects raise funds through ICOs and it is fast replacing the traditional IPOs as most new startups and business ventures are launching their own cryptocurrencies. ICOs are simple and they are not regulated or controlled by any business authority. While they are a great way to purchase new cryptocurrencies one should do his own research before participating in any ICO.