All You need To Know About Initial Coin Offering (ICO)
An Initial coin offering
(ICO), is the cryptocurrency version of an
Initial Public Offering or (IPO). During an IPO. cryptocurrency
ICO is a method to raise funds instead of going to a bank or venture
capitalists.
Digital coupons/tokens/currencies, or as you like to call
them, are issued from a decentralized accounting book, known as blockchain.
Tokens are easily operated on the blockchain platform but differ from the
actions of the companies because they do not have property rights.
The final point that we should highlight about ICOs is that
they are not regulated. This has its advantages - companies can move faster,
but also their disadvantages - the emergence of fraudulent ICO.
The ICO, as the world of cryptocurrency in general, has
exploded in 2017. According to Coindesk, between 2014 and the end of 2016, $
295 million have been raised through the ICO. In 2017, we have seen that number
multiply by 7, in more than $ 2 billion collected this year.
What are investors excited about?
Before delving into why enthusiasm for ICOs, we need to
cover the fact that there are two different types of ICO:
·
It is based on the creation
of a digital currency similar to Bitcoin. With the intention of being able to
buy products and services with it, this solves the initial problem of the
distribution of the coins.
·
The second is to finance a
project or piece of technology that requires the transfer of cryptocurrencies
through a blockchain. This is called "crowdfunder", and like any
company in its infancy, it often requires an investment to advance your
project. Investing in these ICOs is similar to owning the shares of a company
in which you see longevity and a clear escalation.
How does an ICO crowdfund work?
Before obtaining currency for a new project or
cryptocurrency, you need a platform in order to receive these currencies.
A project or a new cryptocurrency, or develop your own
blockchain or, which is what happens more and more, new currencies and
companies are using the Ethereum platform. This platform allows any programmer
to add applications to it, and are called blockchains in the margin. If
programmers believe that the Ethereum platform can cover all their needs, that
means that development is faster and integration with other currencies is
easier. Once the currency has been distributed and the token
sales end, it will be more likely to be available in well-known
exchanges and easier to operate with other cryptocurrencies.
Disadvantages of the ICO
ICOs have a lot of advantages, to name a few:
·
Anyone can participate in
an ICO.
·
The more investors, the
more decentralized the cryptocurrency will be.
·
Tokens can be purchased at
a low price.
·
An efficient way to
increase capital.
·
It allows ICOs to move
quickly.
But it also has its
disadvantages. The main one is fraud. Scammers can take advantage of
deregulated industry. They can develop a totally credible currency skirt,
dragging investors. Take the Ether or Bitcoin inverted and not produce any
currency once the ICO has finished and then disappear.
Another risk is that criminals can "hack" an ICO
project and change the addresses of the portfolio, resulting in the sending of
the currency to hackers.
Research of the ICO
There are ways in which you can reduce the risk in the crypto projects to invest in. The main one is to
be especially alert about the ICO in which you will invest. Often, knowing who
advises the projects will give you a good ICO Alert
about whether it is worth it or not.
As you have seen, there is certainly a risk when it comes to
getting involved in
Ico offers, but there is
also a huge upside potential.
As long as I do not risk more than I can afford, then I dare
to suggest that on a small scale, it is worth the risk.
