What is ICO and is it possible to earn on this?
The abbreviation ICO is deciphered as the Initial Coin Offering, that is, the primary placement of coins (tokens). During the ICO, the project team sells digital tokens for cryptocurrencies or fiat money among investors. Later, these coins can be used on the project platform as an internal currency or trade on exchanges. Also, instead of ICOs, the term “crowdsale” is often used (English. – Crowdsale).
For what purpose do projects conduct ICO?
Releasing their own tokens and exchanging them for popular cryptocurrencies (for example, bitcoin or Ethereum) or fiat currencies (dollars or euros), the project attracts funding necessary for launching or developing or developing.As a rule, ICOs are carried out in the early stages of the existence of projects, until the creation of their full -fledged infrastructure. The raised funds are used to finance the final stage of development, marketing or are sent to special development funds to support projects in the long term.
What is the legal status of ICO?
Now ICO cannot be called both a legal and illegal way to attract investments. Its legal status, the procedure for conducting and the requirements to companies that are going to attract funds in this way, are currently not determined in any country in the world.In addition, it is difficult to determine the legal nature of the relations arising during the ICO. Since it is difficult to name such a relationship in their classical understanding. At the same time, it is safe to say that the reputation of people standing behind a cryptocurrency startup and the trust of users (potential investors) is based on this process.
Is it possible to compare ICO with IPO?
When the company wants to offer its shares to the general public, it holds an IPO (Initial Public Offering – the primary placement of shares on the exchange).ICO can work on a similar principle: investors, investing funds, receive a “share” in the company in the form of cryptographic tokens. At the same time, ICO has common features with crowdfunding: funds are usually collected to implement a certain idea, that is, even at a stage when the project does not have a finished product.
At the same time, IPO is regulated by national legislation. For example, in the United States, for public placement of shares, the company must be incorporated as a joint -stock company, as well as registered in the SEC (securities and exchanges commission). All this makes the process of attracting investments in the project at an early stage of its development more complex, but provides certain guarantees to investors.
In the case of ICO, the process of attracting investments is much easier, but users are not insured in any way.
What attracts investors in ICO?
By purchasing tokens offered on ICO, investors are primarily calculated:
- Gain the benefit of their sale at a higher price in the future (the classic example is Ethereum, whose tokens during the ICO in the summer of 2014 cost less than one cent, and today their price increased to almost $ 400);
- Take advantage of the intended purpose tokens, having received the declared services at a lower price.
What are the risks with fate in ICO?
Perhaps the biggest risk can be called ordinary fraud when the creators of the project pursue only one goal: to collect users’ money.In addition, since the laws that would regulate cryptocurrency crowdsers currently do not exist, from the position of the investor this transaction is always based on trust. It cannot be ruled out that the project may not live to the stage of the appearance of the product or disappoint the investor with its implementation.
In addition, in its current form, ICO, as a rule, are held in one round, and the chances of getting additional funding are small for them. It can also be considered as a potential risk from the point of view of the long -term existence of the project.
What should you pay attention to before participating in ICO?
The abundance of various ICOs can confuse many inexperienced investors. Therefore, first of all, it is necessary to carefully study the Sale Agreement Agreement). When reading this document, curious details may come to the surface, which the organizers of the ICO may not have publicly declared.In addition, there are unspoken indicators of the conscientious intentions of the project:
- The presence of all the necessary agreements and rules published on the website as a public offer.
- Ready -made working prototype.
- Competently compiled Whitepaper and the rest of the documentation.
- The presence of Escrow (a special conventional account, which takes into account property, documents or cash before certain circumstances or the fulfillment of certain obligations).
- Incorporation (registration) of the company itself.
- The unsuccessful reputation of the people standing behind the project.
You can read more about the legal aspects of the ICO here.
What were examples of the most successful ICO?
ICO success is a rather conditional thing. However, the number of funds raised is considered a generally accepted indicator. In this regard, leadership at the moment (we are talking about dry statistics, discarding other controversial aspects of campaigns to the sides) belongs to the Bancor project, which in June 2017 has been gathered in less than three hours 396 720 ETH.An example of another rapid Croudsale was the Brave innovative browser campaign: in about 30 seconds, the project managed to achieve a financial goal and collect $ 35 million.
In May 2017, STORJ projects ($ 30 million in less than a week) and Aragon replenished the list of successful cryptocurrency kraudsyls – in just 15 minutes from the moment the ICO start, the project collected the planned 275,000 ETH (about $ 25 million).
You can also recall Mobilego projects ($ 53 million), GNOSIS ($ 12.5 million in 10 minutes), Blockchain Capital ($ 10 million in two hours), Aeternity (23.4 CHF) and, finally, led to a malfunction of the Ethereum network. Status (about $ 100 million).
Also, do not forget about the already part of the history of the cryptocurrency world, The Dao project, as a result of the collapse of which Ethereum Classic appeared in the summer of 2016.