ICOs are getting more powerful and it is no longer a trade secret. Started as an experiment, this fund-raising concept has shaped into a revolution. There are tremendous interest and adoption from a good number of start-ups and founders towards ICOs and the tokenized system. ICOs offer project transparency and decreases investor risk. It is posing to be the most effective financing tool that can offer better functionality and value for the community. To have a closer look at this fastest picking up ICO market, the rest of the article will walk you through several common questions that can help you understand, What is ICO? How does it work and how can you make money out of it?
1. What is an Initial Coin Offering (ICO)? Who is making the ICO?
ICO is a fundraising tool, in which new projects sell their crypto token in exchange for cryptocurrencies. Any blockchain development company, especially startups offer investors the opportunity to invest in their projects by purchasing a part of cryptocurrency in advance. Initial Coin Offerings generally take place in the early phases of a project. Developing and launching of the project takes place with the collected ICO funds.
Generally, the startup businesses who would find it crucial to gain fundings in the traditional lending sector tends to start the ICOs. Initial Coin Offerings is a method that creates an avenue which allows businesses to raise capital whilst avoiding accurate, regulated lending channel, and limit it within the formal financial sector.
A recent report from PwC highlights that around 537 ICOs have been registered since the beginning of the year, with a total volume of more than $13.7 billion, which is higher in comparison to 2017 where there were a total number of 552 ICOs with a volume of just over $7.0 billion. In 2018, the size of an ICO has almost increased from $12.8 million to over $25.5 million since last year. Have a look at the image below, to understand the whole statistics of monthly ICO numbers and its volume from June 2016 till July 2018.
2. How Is Initial Coin Offerings (ICOs) Different From Initial Public Offerings (IPOs)?
Initial Coin Offerings (ICOs)
|Initial Public Offerings (IPOs)|
|ICOs are for startups who want to enter the market to raise money for their new project ideas.||IPOs are for more mature businesses who want to grow and expand.|
|The duration of offering ICO is usually less than 1 month.||While IPOs can take up to 4-6 months.|
|Most of the ICO participants are retail investors.||IPO is only open to the institutional investors such as mutual funds or commercial banks.|
|ICO is the formation of digital tokens on a blockchain that is distributed through public ledger.||
While an IPO is the distribution of shareholdings to the public through investment banks.
3. What is a Token? And The Different Categories That ICO Tokens Fall Under
Initial Coin Offering is a mixture of both crowd-sale and an IPO. In simple terms, when you are curious about a specific project in the blockchain, you can acquire its access by approaching the developing team and sending them some amount of money, which is usually paid in Bitcoin or Ethereum, to get an equivalent amount of tokens in return. These tokens fall under three different categories.
- Utility Tokens: It provides the access of a product or service to its users.
- Equity Tokens: It represents a share in a company that has completed a token sale.
- Reward Tokens: These tokens signify the users present within the ecosystem. Users obtain these tokens based on their participation.
4. What Is Crowdfunding?
The method of crowdfunding is about financing a business by raising money from a large number of people generally through the internet. With the help of social media and crowdfunding websites, the entrepreneurs scan the pool of investors from whom they can raise capital. A short while ago, the World Bank Group predicted that the global investment in crowdfunding will strike the amount of $93 billion by 2025.
5. How Does An ICO Work?
The startups involved in cryptocurrencies want to raise capital and execute an ICO. For them to launch a new project using ICO campaign and make it work in the desired way, following are the most essential steps to look at.
- At the initial level, it is necessary to have a plan in the whitepaper, to present it in the campaign and set a roadmap.
- Whitepaper should classify proper details of how much money will be spent on the project and what type of currency will be accepted in purchasing of tokens.
- It is also important to set a time limit for running the ICO campaign.
- The investors support a startup projects by purchasing its tokens and will making an investment in the ICO launch.
- If the startup company is able to collect the right amount of money in the pre-defined time frame, it can initiate towards the next step that is product realization and can complete its ICO project.
6. How Safe Is It To Invest In Initial Coin Offerings?
Investing in ICOs can have two different outcomes, but if it’s drifting is well organized then making money out of it can be easy. ICO listing site like Bestcoins comes up with all the latest and innovative ICO list, which provides each and every detail about the ICO and the promoters to make sure that you invest in the best ICO. Investing in an ICO can be a great way of making a profit. Let us look at some essential steps that can help you make money with ICOs if followed accordingly.
Study the whitepaper
Whitepaper shows the thorough research of the ICO concept. Each and every company publishes a whitepaper about their cryptocurrency while introducing it. It has all the information you possibly want to know about the cryptocurrency. Therefore, to know about any ICO before investing in it, studying its whitepaper is a must. Following are the things that each whitepaper should have.
- Company Information
- Project Information
- Details about the team working behind the project
- Targeted Users
- Information about the token and its distribution
- Terms and Conditions
Know about the promoters
Awareness about the promoters of the project is vital before investing your money. Hunt for them online, find chatter about them on the cryptocurrency platforms and find out about all the details about their past projects. The reason behind the research is simple. The founder or developer of the project must be strong and they should not only build solid projects, but they should also create good press for the project going forward.
Look out for Pre-ICOs
Majority of the blockchain companies need the money to keep their platform booming. Therefore they are always looking for investors and they are ready to encourage them as much as possible during these initial stages. ICOs are usually anticipated by pre-ICOs, during this phase the company offers some great discounts to its earliest investors.
“ICO’s are also democratizing early-stage investing, allowing a wider pool of investors to participate.” – Jeff Tennery
Trading must be in installments
It is very difficult to envision how the cryptocurrency is going to do on the market. The main reason behind it is that the currency you get in the ICO offerings is really young and it needs time to make its presence felt. Therefore investors should always think about buffering all your investments.
Therefore make a sale of the tokens after contributing money at the ICO. Sell the 30% of the tokens from the total received. As one can recover some amount of invested money by selling it. Regular trading of tokens is a must, as it will provide some amount of profit every time you sell it.
Hold onto the investments
A proper study of the developments that impact investment is a must. One should always keep tracking bitcoin. As bitcoins pulls up, the value of another currency also goes up with it. By keeping an eye on the market you can make a sale when you see that there is a lot of conversation happening around the cryptocurrency you have invested in.
Fund Raised Via ICO in July 2018
Year by year the number of ICOs are increasing as companies are coming up with innovative project ideas and best ICOs. ICOs prove to be the most feasible methods for investing and raising money. Have a look at the below image which indicates the amounts of funds raised via ICO projects worldwide as of July 2018.
To Wrap It Up – The ICOs Are The Best Source To Make Money With innovative Project Ideas
The market for cryptocurrency will continually evolve as institutional capital keeps on participating. There will be a huge increase in the multiple underlying token technologies. As experienced investors will move into the market, ICOs will professionalize.
In 2017, former Mozilla CEO Brendan Eich founded a web browser maker Brave, that raised $35 million from its ICO in just 30 seconds. Almost one-quarter of all blockchain investment over past 2 years has come from ICOs, that’s $250 million.
If you are interested in investing in cryptocurrency startups and want to grab more information about it, then you can have look at one of the best cryptocurrency ICO listing site named Bestcoins. It is a leading platform initiated by OpenXcell that engages a community of people to participate in discussing the ICOs. You will find a segregated list of startups in different categories such as finance, payments, trading & investing, communications and many more on bestcoins.