Everything You Need to Know About ICOs.
Yes… ICOs are still a thing in 2022!
Initial Coin Offering, ICO, is a funding process for companies in the blockchain space. If you are a beginner it is another way to earn from cryptocurrency. Yet, there are arrays of information you need to keep through before investing in ICO.
ICO is an investment opportunity that has its pros and cons. In the course of this piece, we will touch down each of the factors, positive and negative sides of ICO.
What is an ICO
An ICO, also known as Initial Coin Offering, is a fundraising method for companies where cryptocurrency tokens are sold for money Over time, the token gains value and investors can sell back for a profit, hold for a long time or even use it as a stakeholder in the company.
On the other hand, there is always an alpha to an ICO whose major aim is to raise funds. These are project teams looking to build a project around cryptocurrency but will need to raise funds. In turn, they launch their project based on the ICO return, that’s investment money.
Nevertheless, there have been a lot of dreadful scams in ICOs. Companies or project teams come up with a fake token, which will only be pumped and dumped. Hence, investors lose their money.
This will take us into the next heading
How Does an ICO work?
A cryptocurrency project looking to fund its project via ICO will go through a few detailed steps. At least to build trust and credibility which plays a major role in the success of the ICO.
Firstly, the project team must determine how they will structure their ICO. The structure of an ICO plays a major role in the final results too. Moreover, the token price and volume of tokens sold in an ICO can either be fixed or variable. Below are the way to structure an ICO project:
- Fixed supply and fixed price: In this situation, the project team plans an ICO where the token price and the supply of the token are fixed. That is each token in the ICO has a preset price which is the same for all coupled with a fixed supply of the token.
- Fixed Price and Variable Supply: For these, there is no limit to the number of tokens that can be sold out but at a static price. The company sells at a fixed price until the ICO ends because there is no supply limitation.
- Variable Price and Fixed Supply: The price too can vary based on the funding received on the token, it can increase or decrease. However, the supply remains fixed as well.
After that, the company announces the date, rules and buying process for the token. This will be outlined in a legalised project Whitepaper which will contain all the protocols of a particular ICO.
From there, investors start paying for the token. The means of exchange is usually one of the Blockchain cryptocurrencies such as Bitcoin or Ethereum. Alternatively, some ICO projects accept FIAT currency to invest in their token.
ICO has not regulated under the US and UK law at the time of writing this post. Only a few countries such as North Korea and North Korea have regulations on ICO. This means that there are a lot of ICO that will be flaming up from this region. Unfortunately, a lot of them are scams or are against the main goal of ICO. Well, they are free since they are not regulated by the law. Identifying a few properties of companies that launch ICO is what we are explaining next.
Who can launch an ICO
Once you have a smart idea or project around blockchain or cryptocurrency and you have a team of techie individuals, you can launch your own ICO.
Since there are no regulations too, you can easily launch your ICO and even fund a project that will benefit your investors sooner or later.
Unfortunately, there are scams in ICO and it is very difficult to identify one. The lack of regulation gives a lot of power to mediocre and selfish individuals to organise an ICO for a pump and dump token. So, this is one of the top reasons many investors do not want to put their money into any token project.
There are situations where celebrities are used as the face of an ICO. They serve as the brand ambassador for the ICO and a lot of people run into buying the token because of their favourite celebrities. Yet, the project will still end up being an absurd hoax.
All in all, as an investor, make sure you understand the subconscious behind a certain project. Then make sure you follow through with any updates about the ICO you are investing in. Also, look at the products or project leads history on the blockchain.
My advice to any company looking to establish a blockchain project is to make sure they can withstand the pressure. Then, they should be transparent, accountable, credible and honest. ICO funding is for your business and not your
Do you think your business needs ICO funding now? Let’s delve into a simple guide on how to start.
How do I start my own ICO
There is nothing like an ICO without investors. Before investors can turn to projects or mean they are interpreted. Hence, the first step to starting your own ICO is to do proper market research about the interest of potential investors.
Then, you can proceed to setting up your website, setting a date, creating your token, writing your whitepaper, and hhighlightingting the token protocols and ICO rules.
Then you develop a short term plan, a long term plan and an alternative plan for your company. At least this will save you from an unplanned fall.
Your ICO needs marketing just like any other business. This will bring your project to potential investors who might not know about your business initially. Run a marketing campaign, create a social media presence and create an avenue for people to trust you.
Examples of an initial coin offering (ICO)
ICO didn’t start today, top companies emerged from these methods of funding. Some of which include Dragon coins and Tezos raising $320 million in 2018 and $232 in 2017 million respectively. Etherereum raised $18.4 million in 2014 from ICO and now we have it to be the second-largest cryptocurrency. Probably these are the companies you should model and look out for too.
ICO vs. IPO
Initial Public Offering (IPO) is a regulated method by which companies can raise funds from stocks and securities belonging to a private company. They are regulated under the law since they deal with the stock exchange market.
Compared to ICO, IPOs have stricter regulations and need to be registered under the law. For now, ICO doesn’t have any formal requirements under the law.
If you are probably looking to invest your money in a less risky project, then an IPO might be the best for you. ICO are too risky, even difficult to differentiate between one and the other.
Pros and Con of ICOs
- It is very easy to start an ICO. A developer can easily modify a certain blockchain to create an ICO.
- Tokens from ICO can serve as utility or a stake in the company.
- The price of tokens initially is usually very cheap and affordable.
- ICO are fast ways for investors to raise funds.
- ICO tokens have a good tendency for very high returns.
Cons of ICOs
- ICOs is not regulated by SEO or other recognised law. Hence, funds lost to scams might not be refunded.
- The token might lose value at the end of the day. Remember, cryptocurrencies are very volatile.
ICO can be the generative method a company needs today if they’re going to attach their product to the interest of crypto investors. This post should be a guide for both the companies and the potential investors.