S0 What Really is an ICO?
Initial Coin Offering popularly known as ICO is similar to Initial Public Offer (IPO) in traditional business. ICO is normally conducted in the same vein to raise capital to fund a new cryptocurrency or startup about to enter the market. Imagine ICO like this… You have a crypto coin or blockchain business you wish to embark upon but lack the financial capability to do so. ICO allows you to break the project into units and then sell a portion at a cheap rate per coin to willing investors. This way you will raise the capital to fully execute the project. ICOs are quite different from IPOs in the sense that tokens/coins generated during an ICO are different from (and should not be considered) corporate shares. At their core, they somewhat represent the idea behind the stock investment, but in the sense, they are bought by “investors” in search of profit and are issued by companies with capital needs. They are issued in form of units of the said coin and the profit or loss of such investors is solely dependent on the increase or decrease in prices of such coin when they are eventually listed and traded publicly. The ICO carried out by Vitalik Buterin’s Ethereum project in 2014 was the second most successful offering which was able to raise about 18 million USD in startup capital within 42days. Since then ICOs have become a thing of the day in the Crypto space, with almost every month with a new Initial Coin Offer giving room for shitcoins and scams to further penetrate the Crypto market. The whole ICO space operates in a largely non-regulated environment, which can be difficult to understand for traditional investors. By statistics, only 5% of all ICOs are launched successfully, which probably correlates to the number of serious and “valid” ICOs. Therefore, we advise that before joining any ICO, here are some things you should look out for before investing..
Firstly and most importantly,
Investors are advised to read through what is usually referred to as the WHITEPAPER. A whitepaper is the detailed roadmap plan of the ICO [before, during, and after]. A standard whitepaper should contain such details as;
• Name, nature and location of such company or project.
• Scheduled date, period and price of the coin during the ICO.
• Road plan for the development and deployment of the coin.
• Scheduled date of public listing of the coin after the ICO.
• Projected future performance of the coin after public listing and trading.
• Use cases of the coin or project.
• Coin supply during the ICO and the maximum coin supply.
Secondly, How Realistic is the Project
Investors should carefully consider and analyze the usability/use cases offered by the project e.g. Bitcoin [financial], Ethereum [multiple use cases], steem [social] etc. It is very important that a coin should have realistic and real-life use cases which are also in demand. This encourages the acceptability and adoption of such coin which would ultimately drive up the price.
Third, What is the Reputation os the Development Team?
Potential investors should try as much as possible to scrutinize the development team behind the coin. A well known, capable and reputable development team builds confidence in hearts of investors, traders, users and the general public. This goes a long way in promoting adoption of such Crypto coin which in the long run will be good for the future price.
Lastly, Seek Professional Advice
Before investing in any ICO, you should read and seek professional advice from cryptocurrency experts via various channels such as bitcointalk.com, coindesk.com, cointelegraph.com and so on. You can also get professional insight and advice by following professionals on Twitter. We have listed them for you in this article. Top 10 Bitcoin/Crypto Experts On Twitter You Need to Follow
While investing in ICOs can be a very good way of acquiring crypto coins using the “get them young “ investment model and making money in the Crypto community, it is also a very easy way to lose money and get scammed if you are not careful and properly educated. So when choosing an ICO to invest in, get properly educated, read the whitepaper carefully, consider other factors and never invest more than you can afford to lose.
A friend of mine (quite new to cryptocurrencies) contacted me last week on a coin he bought during the very many ICOs of 2017. He wanted to sell off to cash in on his investment. After a quick check on the coin, I discovered that my friends’ investment of over $500 was gone as the coin and its developers vanished into thin air about 3 months after the ICO ended in January. This was a sad news but I to summon the courage to tell my friend who was beyond tears at the news. This has prompted this article to educate thousands of Nigerians who constantly fall into my friends’ shoes.