The cryptocurrency market is increasing every day. One of the real ways to make money on it is the launch of an ICO by companies. In this article, we will cover everything you need to know about ICOs.
The cryptocurrency market would be much less interesting without an ICO. These crowdfunding mechanisms have allowed countless new cryptocurrencies to get funding for their projects and get their idea off the ground. Moreover, ever since their major breakthrough in 2017, ICOs have been a pivotal tool for investors to find upcoming projects.
In the past years, we have seen a huge number of ICOs take place, injecting millions of dollars into the crypto market. Investors are always on the lookout for the next big blockchain project that could multiply their initial investment.
What Is ICO?
ICO is short for Initial Coin Offering — a blockchain projects crowdfunding mechanism that became popular in 2017. In the previous bull market, the implementation of smart contracts within the Ethereum network popularized ICOs. Since anyone could create ERC-20 tokens on Ethereum, this gave blockchain teams a new opportunity to fund the development of their projects.
An ICO consists of a team releasing its tokens to the public through a public sale. Usually, a certain percentage of the total supply is sold to investors, at a fixed price, in exchange for established cryptocurrencies (Bitcoin, Ethereum) or legal tender. This is done prior to the listing of said tokens on any trading platform, giving investors the advantage of being early birds on the project.
While ICOs come with their fair share of controversies, it’s undeniable that they are a great instrument for receiving funding. Blockchain teams can sell a certain number of their proprietary tokens to the public and receive capital to cover the development costs. Moreover, when done right, ICOs contribute to the decentralization of the platform tokens.
Compared to an IPO (Initial Public Offering), where a company goes public and offers equity, an ICO doesn’t need any central governing body. IPOs are regulated, and companies need to go through deep scrutiny before they get listed by a stock exchange.
An ICO consists of several stages, which we discuss in detail below.
- Preliminary Acquaintance
The first step is when the team behind the project announces their ICO and makes their project known to the public. This “preliminary acquaintance“ has a goal to convey the general idea of the project and provide a proof of concept to the aspiring investors.
The pre-sale part is an “ICO before the ICO.” A small number of tokens are sold to a relatively narrow array of investors. This move is meant to provide initial funding for some projects that have no capital whatsoever.
Then comes the time for the ICO offer. The team announces the fundamentals of their coin. The listing of the ICO needs to regroup some crucial data, such as the maximum supply of tokens, the number of pre-mined tokens. Specific to the ICO, the team needs to reveal the percentage of the maximum supply that will be offered through the crowd sale, as well as the price per token.
- Marketing Company
During this step, the team behind the project markets their company. This includes creating a website and reaching out to the crypto community. An essential tool to draw investors in is the creation of the white paper for the project, with all the details regarding the token – economics, goals, and predicted milestones.
- Start of Token Sales (or Crowdsale)
All of this culminates with the token sale, where investors can purchase a limited number of tokens during a short time window. This is the major source of funding for the project and determines whether the ICO has been successful or not.
Pros and Cons of ICO
ICOs have a wide number of advantages but carry their own share of risks as well. Let’s begin with the benefits:
- Anyone can participate in an ICO, both businesses and individuals.
- The participation threshold is very low, and even modest investors can take part.
- In most cases, investors can remain completely anonymous.
- Unlike IPOs, they don’t require tons of tedious administrative costs.
- There’s the chance of being early on a project that rises exponentially in value.
With that in mind, there are a few drawbacks as well:
- Risks of getting scammed. Not all projects are legit and you need to do some thorough research before investing.
- When buying ICO tokens, investors do not own equity of the company, unlike with IPOs.
- Cryptocurrency tokens do not pay out dividends as stock shares do.
Next, let’s have a look at some of the most successful ICOs in recent days.
What Are the Most High-Profile ICOs That Have Taken Place Recently?
Below are some of the latest high-profile ICOs:
Quarashi is an ICO on the Binance Smart Chain with the goal to fund the development of a non-custodial multi-chain wallet. The wallet will have integrated airdrops, decentralized exchanges, a blockchain explorer and a private chat module — all in one.
- Veritise (VTS)
Veritise provides an ongoing ICO of tokens for the funding of a blockchain that provides data-collection and analysis services for companies and individuals. The project aims to provide easy verification of various documents and provide anti-counterfeiting measures for enterprise use.
- Dhabicoin (DBC)
Dhabicoin is a blockchain project that aims to become the go-to smart contract solution for Dubai investors and blockchain managers. It integrates trading solutions backed by the DhabiCoin cryptocurrency.
Coinjoss is an Indonesian crypto exchange that provides swap services for bitcoin for the Indonesian rupiah. It also provides a proprietary bitcoin wallet, and the Coinjoss cryptocurrency will be used for trade discounts.
NerveFlux ICO was meant to support an ecosystem for buying property without people having to convert their assets to fiat. The goal is to allow crypto holders to easily purchase real estate with their crypto holdings.
While ICOs have been quite controversial in the past (the US outright banned its citizens from participating in them), they have helped many projects come to fruition. Some of the top cryptocurrencies on the market today have been released through ICOs, including Binance Coin, Solana and EOS, just to name a few.
Governments are still struggling to find common ground about ICOs when it comes to regulation. In the future, we might see ICOs be heavily regulated to avoid investors from being scammed.
Also Read – 5 Reasons to Buy Crypto