An initial coin offering (ICO) is a popular innovative option for start-ups to collect funding for the development of services usually associated with cryptocurrecies or blockchain-based offers. It allows stakeholders to acquire newly-issued tokens. They may feature some usefulness associated with the products or services that the business is delivering, or they may just present a project share.
Snapshot of ICO
- A broadly-used way to collect money for services generally associated with the issuance of cryptoassets, apps, or other products and services.
- Some ICOs have gathered enormous gains for investors, while a bunch of others have come to be a scam or have been carried out extremely badly.
- To become a participant in an ICO, you have to first buy cryptocoins and possess certain knowledge of crypto wallets, etc.
- As for now, ICOs are not legally overseen, so participants must be cautious when contributing to such projects.
- ICOs do not require 3rd party participation in the capital-raising process and create direct links between the business and project participants.
Types of ICO
There are two divisions of ICO: private and public. Let’s determine the dissimilarities between them.
- Private ICO
In private ICO, only a bounded number of selected members can take part in the process. As a rule, only professional participants (financial companies or high net-worth persons) can become participants in private ICOs, and a company can decide on establishing a minimum investment amount for them.
- Public ICO
This is a category of crowdfunding that is open to the public. It applies rather democratic approaches to raising capital, offering practically everyone an opportunity to become an investor. However, it is often the case that in light of regulative concerns, private ICOs are becoming a more viable variant in comparison with public offerings.
What to pay attention to before investing in ICO
ICO activities started to decline to a certain extent in 2019; the issue – not being covered by the law and accordingly, not having any guarantees. So, participants can do their analyses and consider projects to contribute to.
ICOs can make some buzz, and there are various platforms where stakeholders talk about new projects. Given the fact that they are practically unsupervised, it is wise to be cautious when contributing funds.
There are no warranties that a participant won’t be out of their funds when contributing to a project. To help bypass scam projects, you can do the following:
- Efficient ICOs, as a rule, have transparent, comprehensive whitepapers with a clear description of what the project is. Ensure the project has 100% clarity from the company behind an ICO.
- Get acquainted with the ICO’s rights and obligations. Provided that authorities do not yet supervise this domain, the whole liability is on investors in case of loss of money.
- Check that project money is kept in an escrοw wallet. This mechanism grants better security against fraud projects.
ICO examples
- Ethereum’s ICO in 2014 is a pioneering ICO example. It collected USD 18 million in 1,5 months.
- In 2015, a 2-phase ICO was set up for the Αntshares project, which then changed its name to Neo. Both phases lasted for about one year and resulted in approx. USD 4.5 million raised.
- In 2018, DragonCoin collected nearly USD 320 million in one month.
- In the same year, the developers of the EOS project pooled USD 4 billion during a one-year-long ICO.
It is often the case that ICOs with tremendous returns on investments are not the projects that collect the most money, and vice versa. The sums collected by ICOs were the highest in 2017 and 2018, however, over the year have declined. But in terms of assessing the success of a project, you can take into account both the sum of money contributed in the ICO and the gains produced on contributions.
Please contact us to get more information.
You can see our current offers in the categories “Cryptocoins and licensing of cryptocurrency operations”, “Ready-made companies”, “Banks for sale” and “Licenses for sale”.