ICO’s (Initial Coin Offerings)


What are ICOs?

In just a few words, an Initial coin offering is a way for startups to raise capital in order to create a new cryptocurrency. Think of it as the equivalent of an Initial Public Offering, when companies go public on Wall Street, allowing anyone to purchase stocks.

Typically, companies release a plan, called whitepaper, in which they describe what the project is all about, what novelty does it bring to the markets, and what needs it addresses. Other important information such as how much capital is required in order to start the project, how many tokens will the creators of the project keep for themselves, or how long the ICO campaign is set to run for also needs to be mentioned.

ICOs allow cryptocurrency startups to avoid having to go through the meticulous process of raising funds required by classical means of payment, such as banks. What they do, instead, is simply sell certain amounts of the cryptocurrency, most usually in exchange for Bitcoin, to those willing to buy in its early stages, before the official launch.

As with Kickstarter, for example, if during the ICO campaign the company is not able to raise enough capital in order to meet the minimum requirement, all the funds will be returned to those who backed the project. You could think of Initial Coin Offerings as crowdfunding for cryptocurrencies.

During an ICO campaign, investors have the opportunity to buy the coin at a presale price, which is considered to be lower than after the project launches. The backers are usually enthusiastic about the future of the new cryptocurrency, and are therefore motivated to buy the coin (and thus support the project), hoping to get a good return on their investment once the project starts.

From the most popular digital currencies out there, Ethereum would make for the best example of what an ICO is. The campaign started in July 2014, and in less than one year, they managed to raise $18 million for their launch, which took place in 2015. During the campaign, Ethereum was sold for as little as $0.20. Nowadays, the coin is trading for more than $1000.


How can you earn money investing in ICOs?

As with any other form of investment, it’s important to understand exactly what you are investing in. Do a proper research on the company first, try to get a feel of what they’re all about. Read the whitepaper, try to figure out if the novelty it’s bringing is authentic, and if it solves a real need. Ask yourself if you believe that there’s a gap in the market for that coin.

Does it has the possibility of going viral? Can it attract many people, and most importantly, can it keep the interest going? Are they trustworthy?

Another important factor you need to take into account is the technology that the company has. Nowadays, with so many coins coming up every day, in order to succeed, a startup needs to have very good technology and a passionate and dedicated developer team.

If you choose the right ICOs to invest in, you can earn lots of money from buying the coin at a presale price. If your prediction is correct and the coin does end up going viral, and thus increasing its value heavily over time, you can get ROIs of as much as 100x, 1000x, etc – You get the point. Sky is the limit.


How to choose the right ICOs?

What are the risks of investing in ICOs?

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