An Initial Coin Offering (ICO) is the methodology involving selling digital assets applying blockchain technology such as Ethereum for capital funding. Regarded as selling tokens, ICOs caused a tsunami in the crypto world, experiencing a boom between 2017 and 2018. Generally used to raise funds for new business projects, ICOs have generated much-needed funds for many crypto projects since they became popular in 2017. Its exponential growth played a significant part in Ethereum becoming a leading player in the crypto ecosystem. The ICO’s popularity sparked a massive influx of over $10 billion during its peak. Still, it also gave rise to several scams and dubious deals to come under the scrutiny of regulators increasingly.
When you want to know more details about the developments in the cryptocurrency market, it is essential to understand, observe and read news related to the industry.
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ICOs are now being increasingly traded on the Ethereum network, which was initially funded through a token sale in 2014, raising about $17.3 million.
There are striking similarities between an ICO and IPO (initial public offering). Those dealing in ICOs buy digital tokens hoping that their investment value will spike in the long term, just as IPOs deal with securities purchased on a stock exchange. However, a significant difference is that when you invest in ICOs, you are not entitled to dividends or expect ownership stakes in companies. Nonetheless, the terrific explosion in the popularity of ICOs positively impacted Ethereum to be widely accepted by the crypto community. So much so that Ethereum’s token ERC-20 became the yardstick to measure the industry standard.
In this article, let us see how investors will be able to participate in ICOs riding on Ethereum blockchain technology.
Central Body
To begin with, you have to possess cryptos such as Bitcoin or Ether. There is no central regulatory body to govern ICOs at the moment. Therefore, the organizer usually announces the token sale by advertising on its website. Investors can then convert their cryptocurrencies with newly acquired tokens. After buying the digital tokens, you immediately require an Ethereum Wallet to keep it safe.
Technical
Taking part in an initial coin offering is technically a simple process since it has been dramatically simplified and is not complicated as IPOs. However, it is essential to study the economic aspects of any ICO before you begin embarking on any project because there have been many instances of fraud in the past where scammers disappear after publishing fake whitepapers leaving investors in the lurch. For example, the founders of the cryptocurrency start-ups Pincoin and Ifan stole approximately $660 million from 32,000 investors in the biggest fraudulent ICO. Some popular cryptocurrencies have earned the trust of investors by now. But, you also have to realize that there are close to 20,000 cryptocurrencies in the world now. With no regulator or government control, investors can’t understand how many coins in the market are credible. Some operators of cryptocurrencies in the market intend to make some quick money by cheating new investors. With many new investors entering the industry without understanding the various pitfalls in the system, it is natural to make mistakes and fall into the trap of fraudsters.
Smart Contract
Token sales are usually implemented by drawing up a smart contract and carried out without the intervention of intermediaries. Since you cannot use fiat currency for transactions in ICOs, it is essential for you to buy cryptocurrencies first. Once you buy some cryptocurrencies like Bitcoin, you can use transactions for ICOs. As a next step, you have to register with a crypto exchange, and then only you will be able to remit funds from your conventional bank account to your crypto account. If you don’t like to use your original bank account for buying tokens, you can use other options, including buying them from other investors in cryptocurrencies.
Exchanges
You can send money from your bank account to the cryptocurrency exchange and thus can use the money to buy the cryptocurrencies that you like. It is also essential to store the cryptocurrencies you bought in an online wallet. But there are reports of people hacking into cryptocurrency accounts, especially online crypto exchanges. If such an attack or hacking occurs, it will also hurt your investments in cryptos. You can keep your cryptocurrencies securely under your custody as a security measure.
Wallet
If you want to use the Ethereum wallet while participating in an ICO, you can use some online stores. The most popular ones among investors are MetaMask and MyEtherWallet. Among the two, MetaMask gets a favorable rating from several investors, according to reports from various websites.
Agreement
Another significant point is that you should understand the general terms of the ICO and token purchase agreement before buying tokens. You also have to note that all ICOs will start at a scheduled time or a previously indicated block number. You will have to send ETH to the specific address mentioned by the team. Before starting the token sale, you will also have to set a proper gas limit controlled by the MetaMask interface.
Secure
When you receive tokens in your MetaMask or another wallet address, the next step is that you will have to send the tokens to a more secure wallet. It is good to have some extra ETH to store in your wallets to pay the transaction costs.
Initial Coin Offerings are an exciting way of finding finances in the corporate world. If you look to garner profits by utilizing a convincing ICO, you can look at all aspects of the trading. Like many investments, you have to take risks in making money with cryptocurrencies. The case of ICOs is not different either.
Understanding the Market
It is essential for all investors, whether in stock, forex, crypto or bond markets, to understand all the operations in various financial sectors. If you want to progress as an investor in cryptocurrencies, it is essential to read news and analyses. You can also talk to the experts in the field to understand all aspects of the sector. When you hear more about an upcoming ICO, you will get an idea by reading the analyses and reviews of its various elements. Then you can decide whether to invest your money in it.
