An Initial Coin Offering or ICO is a new way of funding that uses cryptocurrencies. This cryptocurrency is sold in a form of tokens in exchange for other cryptocurrencies such as Bitcoin or Ethereum. Basically, ICO is a modern way to raise capital for all sorts of projects. In this text, we are going to break down ICO step by step for you, and also talk about the benefits of investing in ICO.
How does ICO exactly work? ICO is, in a way, an equivalent to IPO (Initial Public Offering) i.e. companies sell stocks on the market to raise funds. ICO is the same thing only in the virtual world, but the difference is that the ICO uses cryptocurrencies.
First of all, a company or a developer comes up with the idea for a new blockchain related project and presents it to the community. If that project gets support from the community, the developer draws up so-called white paper. A white paper is a document of about 2500 words which provides all information about the project. In a way it is a marketing tool because its main goal is to attract investors, but the document is formally written and it states all the features of the project, future plans, information about the developers and also how much money is needed to launch the certain project and also how long the ICO campaign is going to last.
Secondly, the developer creates their own tokens which they are going to exchange for Bitcoin or ETH. Creating a new token is easy and the company has to establish the price of each token, which is usually low at the beginning, as well as the limit to the number of tokens i.e. the amount of money the developer wants to collect.
The last thing the developer has to do is to promote its ICO on one of many platforms such as Waves or Token Market. If the ICO campaign is unsuccessful i.e. if the developer doesn’t collect the required amount of money, the tokens are returned to the investors. On the other hand, if the required amount of money is collected during a specific timeframe, the campaign is declared successful and the money is used for the development of a certain project.
If you are considering investing in ICO, check out this ICO list to find the best projects. Here are some benefits of investing in the ICO.
Clearly, the main benefit of investing money is ICO is the profit. When you invest in ICO, in reality, you are investing in the early stages of a certain project. For starters, you should invest the amount of money you can afford to lose. There is no guarantee that the ICO will be successful, so you shouldn’t invest a large amount of money. Once you invest money in a certain token, you can be sure that its value will increase once it hits the cryptocurrency market.
Secondly, the company in which ICO you’re investing will grant you certain discounts when it comes to their project or services. This is the main strategy of every company to attract new customers or in this case, investors who will provide them with the necessary funds to launch their project. In addition, by purchasing a certain token, you’re investing your money in the future. How? Well, you will buy a token for a low price, and the value of that token will increase in the future thus you’ll be able to sell it for a much larger amount of money.
We have presented with some basic feature and benefits of ICO. If you opt for this type of investment, make sure to investigate the ICO you want to invest in since this a fairly new way of rising funds and it is not yet regulated by law.