Please note that this material is not intended to provide investment advice and was prepared solely for educational purposes. If you're reading this because you're considering investing in an ICO, make sure you're aware of all the hazards before committing your funds.
An Introduction to Initial Coin Offerings (ICOs)
To begin, an initial coin offering (ICO) is a type of online crowdfunding event that uses cryptocurrency-related technologies. The procedure can take anywhere from a week to several months.
Because certain ICO concepts are a little technical, we'll start with a glossary of terms you'll need to know to completely grasp the notion of an ICO.
The phrases are provided in chronological sequence to provide you with a quick introduction of major crypto-world concepts, how they interact, and what an ICO is for.
Furthermore, meanings of words in bold are provided to link you to additional research, which is necessary to obtain a better grasp of the subject.
We've also added some links to ICO-related websites.
Let's get started!
Bitcoin is the sole word that comes to mind when you hear the term "cryptocurrency." Think of it as a decentralised network for sharing files with monetary value. Bitcoin is an electronic peer-to-peer payment system based on the blockchain technology.
Bitcoin is based on the blockchain technology. Cryptography is used to safeguard data on a digital ledger. As a result, cryptocurrency was born. The usage of blockchain technology is not restricted to Bitcoin. It powers various platforms as a stand-alone technology, allowing for decentralisation and security.
Ethereum is not only a money, but also a general-purpose blockchain-based environment that allows developers to create a wide range of decentralised apps. On the Ethereum network, you utilise Ether, the native coin, to do anything. If you construct an app on the Ethereum platform, you'll utilise a token, which is a currency unique to the app.
There are two types of tokens:
In their natural habitat, utility tokens are a type of cryptocurrency.
Work tokens grant you the same rights as a shareholder.
Ethereum's capacity to implement self-executing code is what sets it apart from other cryptocurrencies. Once predefined requirements have been met, a smart contract can execute automatic exchanges of anything of value.
Alternative cryptocurrency coins, altcoins, and coins are all words for coins created with an open-source blockchain protocol similar to Bitcoin, the most prominent and widely-used cryptocurrency. Since Bitcoin's birth, blockchain technology has been used to generate a slew of other unique coins.
ICO stands for Initial Coin Offering.
You're merely selling tokens that were pre-generated expressly for that project during an initial coin offering.
Assume I have a great idea but no money to pursue it. Consider the following procedures while starting an ICO to raise funds:
Begin by conceiving and developing a token, then advertising its intended sale in either cryptocurrency or fiat [dollars].
You then publicise your business concept ahead of your coin's launch.
You can also sell tokens if you've gained enough public attention.
The company is funded and seeks to build value and a positive ROI on the token once it has been adopted and understood by the broader public.
Although an ICO offers an opportunity to purchase a new coin, it does not necessarily imply that you must hold cryptocurrency to participate. Fiat [dollars] would still function, but you'd have a lot more options if you bought Bitcoin or Ether instead.
Initial Public Offering (IPO) vs. Initial Coin Offering (ICO)
We'll compare IPOs and ICOs because they have certain similarities aside from their similar-sounding names.
An initial public offering (IPO) is the process by which a private company becomes public by selling shares to the general public. Investment banks back initial public offerings (IPOs), which then list the shares on the stock exchange, allowing you to buy, sell, and trade them.
An initial coin offering, or ICO, is a type of stock that is sold as a cryptocurrency. An ICO allows for transparent data transfers without the use of middlemen. The chance to buy tokens directly from the seller at the company's birth, rather than on secondary markets like stock exchanges, is the most significant value an ICO provides.
Is Purchasing Tokens Equivalent to Purchasing Securities?
The quick answer is that it varies! While the procedure of receiving tokens is similar to that of purchasing stocks, this does not imply that they function in the same way.
Keep in mind that ICOs are currently unregulated and hence represent a higher risk - especially because you're typically investing in a concept rather than a company that is already profitable.
Furthermore, according to ICObench, the following are ICO country statistics:
A short tip: Switzerland has the finest ICO crypto-climate in 2018. Because statistics aren't everything in life.
What Coins Can I Buy Directly in an Easy ICO?
Any of them, in fact! In the absence of regulatory control and Bitcoin's success as the genesis of cryptocurrency, blockchain, and decentralised systems, the number of alt-coins and ICO coins is expanding by the day.
There are over 1000 coins in circulation in 2018, implying that there is already an ecosystem with its own set of laws, challenges, requirements, and needs.
To help you grasp the significance of what's being discussed, here's a graphic representation of the cryptocurrency, with the highest-value coins appearing first on the heatmap:
On April 2, 2018, a screenshot of a visual heatmap was obtained.
Tokens in Initial Coin Offerings
A token is what you obtain for your investment in an ICO, and it can be used as an access ticket to a specific environment/product/service. Coins, awards, land, tables, and/or seats are all examples of tradeable tokens.
Tokens are divided into three kinds in general:
Tokens of currency
They serve as money and are tied to another current currency.
Tokens for commodities
This sort of token is similar to a voucher, option [similar to a stock option but without an expiration date], or service receipt. The platform that provides the services issues these tokens, which may be exchanged like any other commodity.
Tokens of equity
These provide the right to possess a system and are further subdivided into:
Tokenized shares are ownership tokens.
The right to receive dividends is represented by revenue tokens.
Tokens of governance: the right to make decisions
According to Coinschedule, the amount of money raised through ICOs in 2017 went parabolic from the start to the conclusion of the year:
We've answered a handful of the most frequently asked questions below:
How Do I Know What a Specific Token Is If Tokens Are So Versatile?
A token can fulfil a variety of purposes depending on the project and the ecosystem's demands. To understand what is being presented, one must read the company's white paper, which is a document in which the project should be described in great detail.
The White Paper on the Initial Coin Offering
A white paper is a document that explains the idea behind a technology or initiative in detail.
The following information should be included in the white paper:
a painstakingly comprehensive description of the solution given technical details on the problem the initiative is aiming to tackle
Token economics/the use of tokens (VERY important)
Case studies and their explanations
Timeline/roadmap for the project's development
the creators' collective
KYC & ICO Whitelist
If you're ready to invest in an ICO right now, keep in mind that many of them demand registration ahead of time. This information can be obtained on a list known as a whitelist. KYC stands for 'Know Your Customer,' and it refers to the requirement to verify your identity, which may include scanning and uploading an identification document.
Final Thoughts Initial Coin Offerings (ICOs) have been around for 5 years. Despite fears about government regulation throughout 2017, 2018 ICO data show that there is still a voracious market for new ICOs:
Nonetheless, as of April 2018, the following ICO fundraising numbers speak for themselves:
An ICO is still a fast and efficient way to raise funds. It's a safe, quick, flexible, and transparent approach that allows everyone to invest. Despite the rapidly expanding business, there are still numerous concerns. Make careful to properly examine the business strategy for the ICO you're considering investing in to ensure that it's a legitimate business opportunity rather than wishful thinking.