ICO, or Initial Coin Offering, is a crowdfunding project, when speaking in general words, when a company releases crypto–tokens with the funding purpose. Then those tokens are sold. As a result of this campaign the company gets the sources for funding its development, and the investors get tokens, or crypto shares.
Successful ICOs? – Plenty of Them!
Mastercoin, the first ICO project, managed to raise 5 mln USD in bitcoin after having sold its tokens. Ethereum, Waves are two more companies about which you, probably, have heard. They followed the same example and managed to raise 18 and 16 mln USD correspondingly.
Crypto projects founders very often use ICO idea to get money for the start, if the product enjoys popularity and developers work with it properly.
ICO Tokens Are Used For…
Storjcoin is a successful example of what an ICO can be used. Storjcoins were released by Storj.co, at times when it was a startup. This is a cloud computing company, so, later, its users could buy storage space in the cloud. Moreover, trading options were also available, as in case with any other coins.
One more famous example is Ethereum, a platform. There, you can build decentralized apps of different kinds. Ethers are the tokens of Ethereum and users use them to maintain the apps and to buy the space in the platform.
Hence, ICO tokens can be applied for practically everything, any product, depending on the project.
My ICO – What It Is?
ICO investing has numerous advantages. First of all, you help the company to start its business, in future, if this business is successful, you can benefit greatly from your tokens.
You buy tokens of the company that is interesting for you and can bring profit in future. Hence, before investing, make sure that it has chances.
In major cases, the company sells its tokens at a fixed price, normally, the price is denominated either in bitcoins, or in US dollars. Token is not backed by any assets or funds, you just believe that once the company will become profitable and you will be able to benefit from that. When the company releases the product, the token becomes being secured by real product.
There are certain risks in investing in ICO, as the product may have success or may not, the profits and their sums are not guaranteed. Hence, if you have decided to take part in a campaign, you shall consider that as well.
Where to Find ICOs?
There are platforms where you can find the companies that are launching their ICOs and where you can even buy them. The places are:
– ICO Bazaar
– ICO Calendar
Many companies though do not use these platforms, they are selling their ICOs in the own websites. Though like this, there are less chances to attract people to project. There are platforms that help advertising ICOs for non-blockchain projects, such as Kickstarter, Indiegogo. Some of them got funding from their own ICOs, like Dapps (Ethereum based project).
May Project Owners Escape with Money?
There are no guarantees that the project owner will start the project and will not escape with the money received from ICOs sales. Though in most cases such companies create significant restrictions for themselves to provide trust for those who are ready to buy ICOs. First, ICO projects were very improvised, so that the Blockchain developers realized that they have to do something if they want this practice continue. This led to a number of restrictions, such as:
– Escrow wallets: to get access to them, the owner has to provide some private keys. One of the keys is stored by a trusted third party that doesn’t deal with the project;
– A company shall be a legal entity with a set of documents regulating the ICO.
Humaniq is an example of a very well planned and organized campaign. All documentation with clearly defined targets are provided. Developers are not anonymous. All these signs are showing that the company owners take their business seriously.
ICO Scams – How to Detect Them
Potentially fraudulent ICOs are not so easy to identify though some signs there are. Here are those to which you shall pay a special attention:
– No escrow wallet, all funds go directly to the owner`s account;
– Project owners and developers are anonymous. If those who ask you to invest your money are not wiling to show their identity, that is a clear sign of possible scam;
– Unclear or unrealistic goals. If the company doesn’t have clear goals or their goals are too ambitious, it means that either the owners do not know what they are dealing with, or they do not really care;
– Transparency lack. No beta-versions of projects, explanation videos, reports on the progress, then it may be that they do not have what to show at all.
Even if the company has 1-2 of these signs, buying its tokens is very risky. If you discover though that all 4 sings are present, keep your money with you: the project is a scam.