If you are into crypto-currencies, you may have heard about “ICO (Initial Coin Offering)” or token sale. Let’s see what are these Initial Coin Offering (ICO) / token sale.
What is an ICO – ICO is a new way to raise capital by blockchain based companies. The concept is similar to crowdfunding or IPO where companies raise capital and give the investors a cryptocoin (also known as token). However, this is different than issuing shares and securities that is regulated. ICOs are currently not regulated by any regulator. Recently, US regulator SEC has issued warning against ICO investments.
Purpose of ICO – Earlier companies were issuing ICOs to create new cryptocurrency. But now companies are issuing ICOs for any project based on the blockchain technology.
Process of issuing or investing in ICO: Now-a-days, companies just creates a plan on a whitepaper, provide details of project concept, the business need it solves, amount of money needed and that’s it. Based on the paper plan, they asks investors to invest in the ICO. The investment amount is either in fiat currency (USD, EUR etc) or crypto-currency (BitCoin, Etherum etc). They issue tokens to the investors.
- PreSale Offer: The company will market the ICO through various websites, facebook, Google, Cryptocurrency forums etc. As part of pre-sale, they will publish whitepaper, their concept, number of tokens issued, price etc.
- Discount: To entice early investors, they will also offer some discount or bonus to first few investors.
- Minimum threshold: If the money raised does not meet the minimum funds required by the firm, the money is returned to the backers and the ICO is deemed to be unsuccessful.
- Payment: Investors are required to make payments in cryptocurrency (Bitcoin, Ether etc) or fiat currency (USD etc). In most cases, the payment is required in cryptocurrency.
Why people invest in ICOs – Investors invest in these IPOs in the hope that the project will be successful and they can get handsome returns. An example of a successful ICO project that was profitable to early investors is the smart contracts platform called Ethereum which has Ethers as its coin tokens. In 2014, Ethereum project was announced and its ICO raised $18 million in Bitcoins or $0.40 per Ether. Today, Ether value is $200 per token, a massive jump in prices. But, beware not all ICOs will give such returns and many fails to give any returns to investors. It is a big gamble without any security, or regulatory oversight.
Is Investing in ICO secure: Not exactly, the investment is ICO is not secure and there is no regulatory oversight. There are 100 of ICO being launched every month and not all are successful and profitable. You need to choose ICO carefully. Recently, US regulator SEC has issued warning against ICO investments.
On our website, we post reviews of latest ICOs. See the list of latest ICOs and reviews.
What returns can you expect from ICOs: It depends on each ICO, you might be lucky to get handsome returns or lose your money.
How can I invest in ICO- Each ICO will have a different set of requirements for investing. But ultimately you will get tokens upon payment by cryptocurrency. These token will then be tradeable on specific crypto currency exchanges or websites.
If you understand the risks of investing in ICO, then you can see the latest ICOs that are currently open for investment. Here we also post reviews for latest ICOs.