Cryptocurrency ICO: What Are They? Everything You Need To Know!

Cryptocurrency ICO: What Are They? Everything You Need To Know!

  With the startup ecosystem booming across the world, startup founders and investors have started to adjust their fundraising and investment strategies. The blockchain technology has made something called Initial Coin Offering (ICOs), which is the newest way for startups to raise capital and an attractive option for individual investors as well.

Cryptocurrency ICO started as a way for technology that doesn’t have an underlying business model to raise funding. A perfect example of a technology like this is a protocol. The Cryptocurrency ICOs trend started to skyrocket in June, earlier this year.

What is ICO?

An initial coin offering (ICOs) is a kind of funding with the help of cryptocurrencies. While it is still new too many, blockchain is a topic people love to learn about because something big is about to happen.

An ICO is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. ICOs act as fundraisers, for a company looking to create a new coin or app or service launches in ICO. Next, interested investors buy into the offering, either with Fiat currency or with pre-existing digital tokens like Ether. In exchange for the support, investors receive a new cryptocurrency token specific to the ICO.

Investors hope that the token will perform exceptionally well into the future, providing them with the Stellar return on investment. The company holding the ICO uses the investor’s fund as a means for further expand its goals. This system is just like the initial public offering in the share market.

Benefits of Initial Coin Offering (ICOs)

In an IPO, an investor receives shares of stock in a company in exchange for her investment. Similarly, in ICOs there are no shares to speak of. Instead, companies raising funds provide a blockchain equivalent to a share, a cryptocurrency token. In most cases, investors pay in a popular existing token like Bitcoin or Ether and receive a commensurate number of new token in exchange.

Early investors in ICOs operation are usually motivated to buy Crypto coins in the hope that the plan becomes successful after it launches. If this comes to pass, the value of the token they purchase during the ICOs will climb above the price set during the ICO itself and they will achieve overall gains.

Signs of a good Initial Coin Offering (ICOs)

  • The white paper is present and it’s accurate, good-structured and easy to learn.
  • A good hype in the crypto community, that the ICO is scalable in future. If not all but most people in the community will predict its future positively.
  • Index showing the available supply and active presence on the social media platform.
  • The team inside the company offering ICO is strong and capable to strengthen the defined product.
  • The product is real and a problem-solving tool. If the product is really good you can predict the future and the return of investment.

Sign Of Bad Initial Coin Offering (ICO)

  • If the goal of the company is an achievable and the market cap is huge.
  • Unclear description and unstructured white paper.
  • If the product is not a problem solving one in your opinion. In case you have any doubt and on the capabilities of the company, then don’t go for that ICO.
  • The team is an experienced an undefined. If you think that the team is not well prepared enough to face the market then you should surely avoid that ICO.
  • In absence of trust and transparency and improper team token handling.

Although initial coin offering (ICO) seems very promising it has some major drawbacks. There is a possibility of a scam if you don’t research well before buying an initial coin offering. Hence, you must have a clear stand on the future of the company before buying tokens.

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Trey Warsame

About the Author: Trey Warsame