Today I will talk about very hot topic related to cryptocurrency, what is an ICO?
As all we know that the first cryptocurrency was launched in 2009 named as Bitcoin.
At that time cryptocurrency was not popular, but now the digital currency market has well established with market cap of $296,010,257,459. Moreover 1695 cryptocurrencies have been introduced till now. This is right time to enter in market. There are different ways to enter in crypto market. For example to participate in ICO, trading through crypto exchange, to invest in mining, to join different platforms (faucet, bet, crypto games etc). I will cover all subjects but I will start from ICO.
ICO is abbreviation of Initial Coin Offerings and is medium to enter in crypto market. I will help you to understand the basics of ICOs, their history, advantages, risks, evaluation and trading tips. There is no doubt that the ICO market has a lot of success stories with some fundamentally strong projects in the market, but before investment it is necessary to understand the risks involved in ICO especially lack of regulations, but gradually, that is changing. The first ICO was launched by Mastercoin in 2013 and raised approximately 5,000 bitcoins. Since the first ICO in 2013, there has been a thousand of ICOs with a new ICO launching every other day. In 2016 alone, 54 major ICOs raised close to $103 million dollars. The 2017, around $1.25 billion has been raised in 92 ICOs. For the regular investor, it is important to weigh the benefits, risks and potential legal upswings of the ICO landscape before investing.
The ICO starts with announcement of the project and followed by the publication of a white paper having all requisite detail about the project, its business model, road map, the team behind it, and how it benefits the community.
The first you require to participate in an ICO is to have the cryptocurrency, which is acceptable for that ICO ( in most cases Bitcoin and Etherium). Then you need to register yourself with Company. You have to agree all term and conditions of the company. A careful analysis of ICOs could help investors get the right startup. Most of the ICOs price their tokens at low to allowing even small investors to participate in the sale.
Now I will talk about the risks involved in ICO investment. First one is the absence of regulations, ICOs is not following any regulatory requirements. ICOs hardly go through professional for vetting. In the financial industry, due diligence is the first step taken before making any investments at all. It helps investors understand the investment risks, offers a comprehensive view of the company's financial condition, and analysis the business model of the company. ICOs, on the other hand, have an equivalent of an investment prospectus in the form of a website or whitepaper. Most ICO projects do not have a proven business model and in most of the cases and not even a ready product. ICOs are not restricted by geographical borders, in this case, if the issuer absconds with the money, there is almost no chance for investor to retrieve their funds. If you have plans to invest in ICOs, understand that these are high risk investments with no guarantees.
How to prevent from scam? ICOs happening every day, it’s imperative to be able to differentiate between a good opportunity and a scam. If an ICO doesn’t provide social profiles of the team members, it’s quite likely to be a scam. Absence of an escrow account is the biggest alarming sign. Similarly, if an escrow releases 100% funds to the project team after ICO, it’s a bad escrow, and should be considered as a red flag. If an ICO promises to disrupt an established industry without providing any technical or operational details, it qualifies as a scam. Good whitepapers have charts, calculations, specifications etc. If an ICO makes claims a lot, it is best to avoid investing. If the company is unwilling to release its code to public repositories, avoid that ICO.
To evaluate an ICO, you have to undergo every single aspect of the project. You should consider these points. Identify the strong and weak points of the business model. Enquire from people who understand the technology and discuss these points with them. Find out detail about the development team and the advisory board. Look for ICOs that have teams with proven track record in the crypto asset and blockchain industry. ICOs are announced on community forums. Check the community feedback for the project and how the project team responds to it. Visit the Reddit, Twitter or Facebook pages of the projects. Be aware of paid reviews or bounty posts that pay participants to spread positive information about the project. Moreover, find out the current project stage and whether the development team is on schedule or not. The involvement of a big crypto VC is a positive sign. Find out if the company has VC support or better if they have a VC on board. Research on any previous businesses working in the same industry, and match their fundamentals with what the company is working on.
Most of the ICOs are based on blockchain technology, which is relatively new, so ample research and understand what you are investing into is very important. Unlike the current regulatory environment surrounding ICOs, government agencies might scrutinize ICOs in future and ICOs may not be conducted the same way as is currently done. It is advisable to choose ICOs that follow the government’s regulatory guidelines. It is very important that Invest only what you could afford to lose. Start with a small amount and move gradually forward. Get technical knowledge and enhance your crypto wisdom.