A Beginner’s Guide to Initial Coin Offerings (ICOs)

If you’re acquainted with initial public offerings (IPOs) in the real world, you should have no trouble grasping the concept of an initial coin offering (ICOs). The initial coin offering is a complex method requiring a full grasp of technology and digital finance. A company or a team of developers launches an initial coin offering to raise digital funds to create a new cryptocurrency, blockchain app, or transaction service. Investors who participate in an ICO receive a cryptocurrency token that either provides value or represents a share in the firm or project.

What are ICO Tokens?

Companies that intend to raise digital funds create tokens built on another blockchain. These tokens are sold to investors in exchange for cryptocurrencies or paper money. Some ICOs create their custom blockchains and cryptocurrencies, while others create tokens on other blockchains.

Releasing a White Paper

The team or company that offers an ICO first prepares a white paper that encompasses exhaustive detail of the project. This may include the main idea, project description, the problem that the project will address, the project’s lifecycle, details about tokens, and how and where the fund will be consumed.

Always Ensure Authenticity of the Project

If you’re determined to invest in a new ICO, the first step is to ensure that the company putting up the ICO is genuine and accountable. Research and review the project leaders’ experience with cryptocurrency and blockchain. If you find the experience irrelevant or the project team’s information is not verifiable, it may signal a possible scam.

Buying into an ICO

ICOs usually happen at a set date and time, and investors already know the essentials of the project through the white paper and the ICO date through popular ICO websites. Marketing techniques greatly contribute to how fast an ICO sells out. When the company launches its ICO, investors try to gain on each other to buy tokens. If a company succeeds in selling all its tokens or raising all the required funds, the project becomes viable. However, if the company fails to raise enough capital, it is bound to return all the investment to the investors, and the project is deemed a failure.

Find Out More about Cryptocurrency and ICOs

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