What is an ICO?
In order for a project related to cryptocurrency to develop – it must undergo the ICO procedure. What does ICO mean? ICO is an initial public offering of coins analogous to IPO in the world of cryptocurrencies. But let’s consider this topic briefly and in detail.
ICO: simply about complicated things
Essentially, an ICO is crowdfunding, where people invest their money in a blockchain startup. Tokens are a kind of digital stock. An ICO for blockchain startups is a kind of IPO for companies.
The real benefits of investing in an ICO
How does it work and how do you benefit from it? Here’s an analogy with a Binance exchange token listing. We have a coin with the fundamental potential of a crypto exchange and an entire ecosystem behind it. BNB token is used to pay commissions in Binance Smart Chain network and if we believe that the project will spin up, then their cryptocurrency after ICO will grow in value both in short term because of strong investor expectations and in long term when the project itself realizes its goals.
What is the difference between ICO and IPO?
The difference is in the legal regulation and the potential benefit. An ICO offering can be many times more profitable for investors than an IPO. This is primarily due to the fact that the blockchain industry itself is a venture capital topic. Small-cap IT companies can also be invested with the same features. The volatility is about the same, but with ICOs, capital can be raised without intermediaries in the form of investment banks. However, this also has its own disadvantages, which we will discuss in the course of the article.
The main thing you should know is that the two procedures are identical, only ICO tokens are digital shares of cryptocurrency startups.
ICO legality in the modern world
The legal status of ICO is still not clearly established in most countries of the world. This is due to the fact that technology is always developing many times faster than state regulation. States simply do not have time to get into such simple concepts, as what is really ICO, how exactly they are regulated and why a project is fraudulent. However, it should be understood that the situation may change soon. Bitcoin is attracting more and more attention and crypto-exchanges are coming out to IPOs. Therefore, regulators will soon come to the point of creating a sane right field for the crypto industry.
Where to find a profitable project?
Where is it possible to find a profitable project for investment? The most popular platform for ICOs is Coinlist. It is through it that there is an opportunity to exchange tokens for stablecoins after participating in an ICO. On the site you can also read the history of the project for its fundamental assessment.
Risks for ICO participants
Now what about the risks of an ICO. The main risks are getting involved with a fraudulent project. Small ICO regulation has two sides of the coin: 1. It is easier for projects without the bureaucracy to attract investment and it all simplifies the interaction with investors without intermediaries, 2. Absolutely any project can issue its token, and then hide with investors’ money. Therefore, it is extremely important to know what an ICO crypto is with all the details.
The project does not have to be a scam for investors to lose money on it. Not at all. It is worth bearing in mind that the project simply will not be able to spin up and pour on other exchanges, which can lead to problems with liquidity.
How to make money on the ICO – expert advice
There are several points to which you need to pay attention.
1. As already mentioned – study the history of the project, how it positions itself and why it is needed. It is important to be able to ask yourself critical important questions – “Is this project really economically viable? Often beautiful descriptions do not always make logical sense.
2. Study the white paper of the project. It is also important to pay attention to the public placement of coins and the percentage of the share allocated by the founders of the project. Often you can see that more than 50% of all available coins in circulation are thrown out to retail investors in the market and this is a bad signal, because of the large funds few people want to invest in this project. Such projects carry more risk.
3. Developer publicity. There are exceptions when a project is really valuable but developers keep their anonymity, but very often swindlers don’t try to show their faces to the public and with good reason because public faces can always be sued by collective actions while anonymous ones will be hard to find.
4. Transparency in issuance. In addition to the white paper and tokenomics of the project, it is important to look at the transparency of the distribution. How many coins are in circulation, where they are sent and for what. If the project hides this data, it’s a reason to think.
The most profitable ICOs in history
One of the most profitable ICOs is considered to be the Ethereum project, which subsequently led to a boom in other ICOs. Ethereum coins were worth less than a dollar, and the highs were above $4,000.
Blockchain Stratis is a British startup whose technology provides industry-specific blockchain solutions.
NXT is the exception project where the developer was anonymous, but the project has no reputation as a scam. Since the other criteria for investment were then met.
Now you know about what ICO means. However, you need to understand that in the crypto industry there is not only ICO, but also IEO, IDO and many other variations of the same procedure in its essence, but with its own unique features. Don’t be intimidated, with the right approach you will be able to learn them.
Remember the basic criteria for choosing a project to invest in. They are the same as in the ICO. They will come in handy for you in times of cryptocurrency hype, which happens regularly. New trends are being invented and along with that there is the possibility of both finding a unique diamond to invest in and stumbling upon scammers.
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