The past one decade is one that has seen significant life-changing revolutions in the world. No one ever thought that there would be a day when fiat currencies would be replaced by digital currencies such as bitcoins and other cryptocurrencies.
But now it’s happening. Not long ago cryptocurrencies such as bitcoins were blossoming, ridiculous and small units which no one believed in and were used in exchange for pizzas but now they are the in-thing.
They’ve seen rapid growth and expansion, and as more crypto’s continue to join the market, people continue to come up with innovative ideas such as the ICO’s. If it is your first time to hear about initial coin offering, then don’t beat yourself out about it because below is all that you need to know about this new trend.
What is an ICO?
An ICO means initial coin offering in full. It basically involves selling a new digital currency or what are referred to as tokens at a discount to investors. If you are still floating, don’t worry we got your back. Take this example; a renowned tech company has an excellent idea for cryptocurrency or in other words, it wants to create its crypto.
However, it lacks the capital to develop and market this new digital currency, but it still does not want to get venture capitalists because doing so would mean it gives up part of the company’s ownership. Here is where an ICO comes in.
The tech company will create a document known as a white paper and an attractive website. It will then go on and explains how the crypto it intends to develop will work, how profitable it will be upon completion, what type of currency is accepted, how much is needed to see its completion and how much of the tokens will the pioneer investors keep after it becomes a success. The company then runs an ICO campaign in which it urges investors to send money in exchange for the new crypto, and that is why it is called initial coin offering, because it involves giving out the first tokens of a new cryptocurrency in exchange for the existing ones such as Ethereum and bitcoin. In some cases, some tech companies ask for fiat currency. Once the crypto starts appreciating in value, then investors can make a profit by selling the amount of currency they got.
In other words, it is more like the digital form of crowdfunding, but in this one, the investors or buyers of the currency do not own any shares or have ownership rights in the company which they purchase the currency from. They only get to make a profit if the said cryptocurrency appreciates in value.
What is the government’s perspective on ICO?
In the recent years, the government has begun taking a stand on bitcoins and other digital currencies by taxing them uniquely. So it is essential you also take the time to understand the legal status of ICO’s to avoid trouble in future. ICO’s have been received with mixed feelings by different governments. For instance, China reacted by placing a blanket ban on ICO which means they are a no-go zone in China. However, in most countries of the west such as Estonia and America, no regulations have been put in place yet which means they are legal.
Who can launch an ICO?
As shown above, there are no regulations in place yet, in the American scope of ICO’s. That means even you can launch one if you think you have an excellent crypto idea cooking. All you need is ensure that you meet the tech requirements and get your ICO going by creating your whitepaper and running an ICO campaign to get funded.
How do I choose the best ICO and what are the risks?
There is really no telling because the world of cryptocurrencies can be quite unpredictable. As they become more mainstream, more people are now joining in the craze hence they are getting profitable by the day. Since their discovery, some of the most successful ICO’s include ripple, Ethereum, mastercoin among many others.
Nevertheless, you need to do your homework before you fund any ICO. Take the time to do a background check on the most eligible ones to avoid being scammed because as mentioned earlier, they are unregulated. Therefore, most cons might take this opportunity to con people who are unaware of their money and then disappear into thin air after you fund them with your hard earned crypto or fiat currency. Read reviews and use websites like coinshedule, Smith + crown or ICOrating and coinmarketcap which offer you recommendations of the best and also legit ICO’s.
How can you participate?
Now that you are aware of what it is, how you can launch yours, the risks involved and the best ones, it is time you know how to take part in funding an ICO so you can later enjoy the profits when the value appreciates. First of all, you will need currency accepted by the tech company offering ICO.
Most companies often accept bitcoin and Ethereum, so first identify the ICO you want to invest in and then find out the currency they take. If you don’t have any in your possession, then you need to register an account for online exchanges, establish your cryptocurrency wallet and now register in your chosen ICO whitelist before the sales launch date. Once you accomplish all these, then you are ready to wait for the afterward sale of the tokens you bought when the ICO appreciates in value in future.
Initial coin offering is not a new phenomenon. The trend began early 2013 when ripple labs developed a payment system with their currency and created 100 billion XRP tokens which it then offered for sale to help fund the payment platform. Most investors are cashing in big time, and you too could join this pool. However, you need to be careful because as mentioned earlier, these are risky grounds and you can easily find yourself in murky waters if you go funding any ICO that comes in your way.