Beginner's Guide to ICO: What You Need to Know?
Posted: Mar 25, 2019
If you are new to the world of cryptocurrency, the term ICO may be unfamiliar to you. Even if you are not, you probably have little or no knowledge of ICO. This guide was written to demystify the concept of the ICO and highlight its benefits.
First of all, ICO simply means Initial Coin Offering. This is a handy fundraising technique for a new project, business or cryptocurrency project. Otherwise known as the Initial Public Coin Offering, it is an unregulated means of crowdfunding through the use of a cryptocurrency.
While conducting an ICO, a company or start-up can easily acquire funds for continuing a project or launching a new one by selling tokens of a cryptocurrency. During an ICO, a small percentage of a newly issued cryptocurrency is sold to potential cryptocurrency investors for money or another legal tender.
Many companies use the possibilities of an ICO for fundraising because of its appealing features. ICOs offer simpler fundraising techniques and are unregulated. They are also free of the restrictions that are the hallmark of capitalists and banks.
Another important feature of ICOs is their time limit. They are designed for a few days or weeks. Many companies have completed their ICO in minutes or hours, while others have taken several weeks. In rare cases, ICOs may persist over a period of about a month.
Keep this in mind if you are seriously interested in an ICO you should stay away from ICOs that last for weeks or even months. This is a red flag and a signal that something is wrong with the ICO. ICOs should raise funds for a specific project or purpose and should have a deadline.
In an ideal situation, when a large amount of money is needed, the company may decide to fundraise in stages, with each phase having a well-defined goal that is strictly adhered to. If an ICO is said to be used to raise hundreds of millions or billions of dollars at a time, it could signal that investors are cheating. Please do not become an unsuspecting victim of cyber fraud.
There are as always a few exceptions. You need to take the time to perform due diligence and distinguish between a scam and a legitimate ICO operator. Since ICOs are not regulated by a credible body such as the Securities Exchange Commission (SEC), monies can be lost during an ICO with no chance of recovery.
There are some handy tips that can help you confirm that a legitimate company is behind an ICO. Such a company is expected to set up a website where the white paper will be made available to the public and, in particular, potential investors.
This white paper should contain some valuable information, ICO review, ICO rating and ICO analyze these will make the ICO trustworthy. These include the purpose of the project, the duration of the fundraising, the amount to be collected and the number of tokens sold in exchange for legal tender.
Additional information includes the cost of each of the tokens offered in exchange for the token - a cryptocurrency or fiat money; as well as the team behind the planned project.
During the ICO campaign, both Initiative supporters and enthusiasts will buy some of the available digital coins in virtual or fiat currency. These currencies are called tokens. They are similar to the shares of a company to buy.
During the campaign, the ICO's ability to raise the desired funds determines the success of the ICO campaign. If the projected funds are collected within the designated time, the campaign will be considered successful and the generated money will be used to fund the proposed project. If the ICO is considered failed, the lenders get their money back.
If you take some time to look critically, you will see some signals that indicate whether you should continue your investment or stay away from a project.
If you want to increase your chances of making the right decision, you need to know some key facts about ICOs.
Teacher-turned online blogger, Shirley is a full-time backyard homesteader based in Virginia. When she doesn't have her face buried in a book or striding in her garden, she's busy blogging about simple life hacks of the daily life.