WHAT IS INITIAL COIN OFFERING – ICO?
If you are curious about the latest trend in digital currency now, then consider the Initial Coin Offering. This involves pre-selling coins from a cryptocurrency or a token of a blockchain project as a tool for raising funds for the new cryptocurrency project. Below is the overview of Initial Coin Offering – ICO.
What is an Initial Coin Offering?
ICO stands for Initial Coin Offering. This means that a group of developers offers certain units of a new digital currency or token to investors who will exchange those units for Ethereum or Bitcoin. This has been the recent way of funding a new cryptocurrency project since 2013. You can easily offer this pre-token on exchanges you have demand for them. The success of ICO in funding Ethereum has increased the awareness of others developers as a means to fund their own project also, by offering token, which can be old or reinvested into the new project. ICO hasn’t only changed the way we fund digital currency today, but change the entire financial system.
A brief history of Initial Coin Offering
Ripple cryptocurrency is one of the first digital currencies from ICO. In the year 2013, Ripple Labs came up with the system of payment called Ripple, offering about 100 trillion XRP tokens. These tokens were sold off for the development of Ripple platform. Later in that same year 2013, Mastercoin claim to offer a layer on Bitcoin, through what is called smart contract (this is a form of computer coded agreement and its documentation) with the recording of Bitcoin token transactions. The Mastercoin token was sold to Bitcoin by the developer who got about $ 1 million. Many other cryptocurrencies have been financed via this means. Lisk sold most their coin in 2016 for $ 5 million. One of the best projects financed with ICO is Ethereum. The Ethereum Foundation sold ETH to Bitcoin which earned them around $ 20 million, now knows has been the largest crowdfunding for funding a project. The use of smart contract by Ethereum now open a wide door for new digital currency thinking of using ICO to fund their projects.
Ethereum – Initial Coin Offering – ICO crowdfunding machine
The smart contract created by ETH was handled by Ethereum blockchain in contrast to the ether. This is standardized with ERC # 20. Another opportunity for Ethereum smart contract is DAO. The company is funded with ether of around $ 100 million. The investor will receive the token in exchange for their ether. But the company was later hacked which lead to the failure of the project. The new way of financing new digital currency now is the exchange of token for ether. This is because it’s easy to invest ether. All you will need to do is to send the EHER: and the token will be transferred to your account via the address. Below are the project that has been successfully funded by Initial Coin Offering: Augur, Singular DTV, First Blood, Digix DAO, Melonport, Golem, and ICONOMI. There hundreds of ICOs each month with new ideas offering you their token for investment. ICO is now the easiest way for developers to raise funds for their projects.
The benefits of an Initial Coin Offering
- Most people can participate
- They allow you to participate in your budget
- This is a very quick way to get your ROI
- The risk is extremely high, but you can bank big within a short period of time.
The disadvantages of an ICO
- Not all investor is looking for the success of the project but the profit involved
- You don’t have the guarantee that the coin will be listed on well know exchange like Binance. The success of most digital currency is dependent on this
- There are developers without no product or history to back their idea
- ICO has no regulation which increases the possibility of being scammed in the process
Prepare yourself for participation in an ICO
Do you want to invest in an Initial Coin Offering; you need to do a good research. This will give you more insight into the project and allow you to make a reasonable decision.
What Problem or Service can the Coin Solve?
The developer wants to raise money for their project, but is there actually a problem solved with the product or service they want to develop? The chances of the project success are slim id there is no actual value or problem solved.
The Community of the Project Online
Try and get the believer of this project on the internet. There are different channels to look into:
- Are the messages about the project positive?
- Do you see any announcement on bitcointalk.org or reddit.com and is their announcement positive?
- You can join their telegram group to ask their other potential investors
- Read the information on their website, and the information must include the problem solve with the potential of the project.
Who are the Developers of the Project?
The website of the project should include the team behind the big project. You should be able to connect them on LinkedIn. Once you spot a fake profile, stay away.
What is the duration of the project? Do they have goals set during that time? Is the project short time or long? This will help you to decide if it’s a project what investing into.
The website should have a clear blueprint on how they will spend the money you will be investing. Stay off if you cannot find an answer to this question.
This is the core of the ICO. You will need to read it to get the whole scope of the project. But you may need to write down questions on the whitepaper to get answers.
Should I Invest?
Even if you have examined everything and you are convinced of the success of the project, it is still advisable to trade with the money you can discount. You should be prepared to lose this money, but also your investment can also bring you a fortune. This is because the Blockchain technology is still new. You will be required to trade with your Bitcoin or Ethereum to be offered token. You can get your Bitcoin and Ethereum easily on Coinbase.