ICOs Guide for Beginners and what is an ICO? ICO is the acronym for "Initial Coin Offering". Learn more about an ICO in this guide for interested parties that want to raise fund with this crowdfunding model.
September 18, 2018 | AtoZ Markets – The ICO procedure is an essential step in the development of an encrypted currency, its success will decide the fate of the currency and indicate whether the currency has reasons to exist. This is a term gets mentioned regularly in the world of cryptocurrency. Which is sometimes associated with stories of fraudulent management and fraud. Here is in detail what an ICO is.
The Reasons Behind its Existence
As explained, ICO is a campaign for selling token. Usually start-ups launch an ICO, to go around the complications owners of banks. Or capitals impose on those who apply for funding their projects. In such campaigns, digital currencies are sold to investors. Then the campaign sells the tokens in exchange for cryptos- often Bitcoins or Ether, against Dollars or Euros. And that is why sometimes such events are called “token sales” as well.
Before launching its ICO, the organisation that issues the new encrypted currency publishes a "whitepaper". A whitepaper is a document explaining in detail how its system will work. Accompanied with a new and attractive website that will serve as a showcase to convince investors. Which explains in detail the interest of the currency. Once this step is completed, the ICO can be started. Essentially, it is a matter of convincing investors. And investors to send money in exchange for the new currency.
ICOs Guide for Beginners: 4 Stages You Should Know
The editors of 7marketz.com shared earlier this year, a step by step ICO fund raising guide. Even though this guide is applicable for someone who is planning to host an ICO, it does provide insights into the mechanism and stages of an ICO. The fist step to any ICO deals with the idea stage and deals with identifying goals. Drafting a business plan or whitepaper, developing a website and setting up on smart contracts.
After the idea stage, an ICO moves into private sale, where the firm will build strong partnerships and raise funds from private investors. In the third stage, an ICO will launch a pre-sale and offer a limited amount of tokens at a discounted price for investors. Hereafter, an ICO moves to the final stage of main-sale. Whilst offering its tokens to the public until the hard cap is reached.
Why Invest in an ICO?
Upon launching the currency in the market, tokens can be resold and purchased on trading platforms. The value of these tokens will depend on supply and demand. Also, it depends on one of their noted features; being very liquid and it can easily be exchanged for other encrypted currencies.
It is important to differentiate an initial public offering (IPO) from an ICO. An IPO is an investment made in exchange for shares and ownership shares of the company for which the investment is made. At an ICO, the investor acquires units of value that will be usable in the universe developed by the company. The ICO is a bet, that the currently worthless currency will see this value increase and reap benefits to its investors. The value of a token will therefore depend on the service ultimately provided by the organisation in charge of the ICO.
Keep in mind that the ICO fundraising method lacks regulation. This mean that as an investor, you can lose your investment. Currently, each nation has set their own ICOs regulations and rules. A good example, is when the Lithuanian ministry of finance revealed the new ICO guidelines in June 2018. Having different regulations can be confusing for investors. Since there is no mass agreement among financial bodies all over the world, that this new system should be standardised in regulation.
The politicians has been following this case intensively and are no longer staying on the background. The European Parliament members held a meeting in September 2018. The EU Parliament members discussed a proposal that intends to create new regulations on initial coin offerings (ICOs).
ICOs Guide for Beginners: How to Evaluate an ICO?
Thousands of ICOs are booming in the crypto sphere. Looking for financial support from investors. But budding investors can run into difficulties in picking a winning ICOs due to the number of scams and lack of regulations. Hence, our editors have researched the market and compiled a Top 10 ICO investment evaluation tips for every crypto investor in the market. This concludes AtoZMarkets' ICOs Guide for Beginners. But there are more relevant items and we welcome you to suggest any topic for us to research.