Introduction
With the recent news about ICO’s ban in China (See: Reference 1), and all the fake coin offerings going around I thought I’d write a few personal thoughts and ICOs reviews.
I will review some ICOs I see advertised on social media, and others I read on more reliable sources and comment on whether I think they are valid or not based on the features advertised and their underlying blockchain technology
Definition of 'Initial Coin Offering (ICO)' Why are ICOs so popular among investors?
So firstly, what is an ICO? ICO is an unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by start-ups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin or Ethereum.
Why are ICOs so popular among investors?
There are many reasons why ICOs are so popular among investors; one of which is the ability to buy Tokens/Coins for a cheap rate to then resell them later for a profit. As soon as the ICO is finished, often if the project was popular and valid, exchanges will recognise it (or have already) and list it. By this is meant that people will be able to trade if for USD$, bitcoin and other cryptocurrencies; hence, sell back their token/coin to the market and make a profit.
Once a coin/token is listed its price will raise, resulting in good profits for early investors; however, it could also result in a dump, where early investors are selling off their tokens/coin to lock in their profit.
However, as many projects that are not funded on solid foundation and/or are Ponzi schemes, some end up making investors lose money and profit scammers.
There are a few sites to keep track of upcoming ICOs, but make sure to do your own research before investing in any of them.
Example of an ICO
This image shows the ICO for 0x, a blockchain platform where future tokens can be listed and traded.
Some essential things to remember:
- ICOs should have a whitepaper to describe what the funds raised are for and how the company intends to spend them
- ICO’s sites should always list the amount of tokens available in total (total supply) and how they intend to divide the token’s sale (e.g. x amount for company employees and % to be sold)
- ICO’s site should list the team and the company’s that backs/funds them (not necessary but useful for credibility)
These are just some of the points to remember; personally I see ICOs as a good opportunity to invest cheaply in good projects and maybe even profit; but remember to always do you own research.
NEXT: Some ICO's analyse; details on how to join/take part in ICOs.
Matthew Poole
Disclaimer: Everything I write is my personal opinion, expressed for informative purpose only; I do not encourage investing nor advise in my posts.
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