As soon as digital currencies entered our lives, we have been surrounded by various obscure definitions and terms, such as ICOs or automated trading. However, the ability to understand terminology and new technologies can help us make a solid profit.
In this article we will talk about how ICOs work and how to get good income by investing in digital currency projects.
ICO stands for Initial Coin Offering. The mysterious father of bitcoin Satoshi Nakamoto did not hide the code on the basis of which BTC was created. That is why every experienced developer can create their own digital currency based on bitcoin nowadays. Thus, hundreds of new cryptocurrencies were born. The industry is developing by leaps and bounds, and large banks, such as JPMorgan, and individual crypto enthusiasts are issuing new coins.
With the help of ICOs, startups draw public attention to their projects. At the initial stage, tokens are sold for a small price. Thus, startups acquire money, and investors get the opportunity to buy a promising token at a bargain value and subsequently earn a lot of money on it. An alternative term for ICO is the so-called crowd sale.
Investors seek to find a promising project and invest in it. As you know, money should make money - this is the most promising type of business. A successful investment can make a millionaire a billionaire.
At the very beginning, when a startup starts its business, an investor can buy tokens at the lowest possible cost, for example, Ethereum could once be bought for 50 cents. And now ETH is worth over $200! In general, the issue of tokens is an analogue of the procedure for selling shares on the exchange. With the help of shares, companies are able to raise external funds. So token holders can be considered digital shareholders.
Having invested in an ICO, you can earn not only on the growth of the coin price. Many projects provide their investors with various benefits and bonuses. Each specific startup has its own distinctive features, so you should carefully study the project before investing in it.
Some ICO projects have charitable purposes, sometimes sponsors support startups completely disinterestedly. In the latter case, crowd-sale is used as a way to raise money to help people, animals and nature.
Initial Public Offering (IPO) is largely similar to ICO and has existed for a very long time. The company, as we said above, issues shares and thus collects investments. Over time, the price of stocks can rise, and investors will profit by selling them.
So why conduct an ICO if there is an excellent IPO? The fact is that the issue of shares is a rather expensive procedure. For an IPO, a budget of 100-200 thousand US dollars is needed. Startups usually do not have such an amount, which is why an ICO, which requires only 20 thousand dollars at the first stage, is a more suitable option for raising funds.
Another difference between an IPO and an ICO is the rate of return on investment. It is believed that an ICO project can make a profit in a few years, while stocks are a game for a long period. You can get a substantial profit from the shares in 5-10 years. At the same time, you can earn as much as 300% in cryptocurrencies in just six months, which Bitcoin proved in 2019.
It’s true that investments in digital currencies are considered highly risky. That's why you cannot use the funds deferred to buy an apartment, car or spend on education for investing in cryptocurrency startups. Cryptocurrencies promise good profits, but can also bring disappointment, which overtook many investors in the second half of 2018. The digital currency market simply collapsed then, many ICO projects closed - investors lost their funds. Trading on cryptocurrency exchanges has become unprofitable.
Another problem of ICOs is the lack of control by national regulators. The stock market has long been tightly controlled by states, but anarchy still reigns in the cryptocurrency market. Although in 2019, certain progress is observed here. New cryptocurrency legislation is being developed in the United States and the EU. So, one can hope that in the future the digital currency industry will become more transparent and predictable. All sorts of scammers and crooks will cease to deceive investors.
Crowd-sale is not yet 100% legal operation in any country in the world. As wehave said above, lawmakers are still considering how to regulate the cryptocurrency industry. Nevertheless, the legal definition of “token”, “cryptocurrency” gradually appears in the legislation of different countries, so it can be expected that the ICO will gain its interpretation in the law.
After that, investors in digital currencies will be able to fully defend their rights in court. True, in some countries, such as China and India, ICO is simply prohibited. Many countries have not yet decided on how they treat the ICOs. In general, while the ICO does not have a clear legal status, investing in a cryptocurrency startup is risky.
You can usually buy new tokens on the startup website for fiat currencies. But it’s better to have your wallet with Bitcoins and Ethereum. Using popular cryptocurrencies, buying new coins is much easier.
You can find out about the launch of new cryptocurrency projects on the Internet. There are many sites on the network that publish information about ICO plans. You could use the following resources:
First of all, many ICOs are simply fraudulent projects due to the legal vacuum in the cryptocurrency industry. All kinds of crooks have long been using digital currencies for the banal theft of funds of gullible investors.
In 2018, such a large number of ICOs failed or turned out to be a fraud that now this area has shrunk dramatically. Only few investors dare to invest in cryptocurrency startups. After all, deceivers may not even be punished for their actions due to the lack of cryptocurrency legislation.
In general, an ICO can only work on the trust of people in the activities of a startup that collects money. It is important to comprehensively study the project, think and measure three times, and then invest honestly earned money in it.
Before investing in an ICO project, you should study it under a microscope. After all, profitable ICOs exist, you only need to distinguish a promising project from a scam or a pyramid.
At the first stage, you should read the agreement on the sale of cryptocurrency. The document should have a Token Sale Agreement section. There may be details that startup just hides. If possible, it is best to consult a lawyer, showing them the public offer and contract.
The next step is to study what startup is going to create a in general. Is it a technical novelty, technology, product, brand or charity? Usually, before the ICO, the team should have a working prototype ready. If there is nothing of the kind, but only dreams and plans, then you should think three times before investing your money.
You should read the white paper with a description of the technologies that will be used, evaluate the economic feasibility - after all, this is the most important thing! Whether the project will be profitable, that is the question!
Fraudsters often hide their real identities. That's why it can be useful to learn about startup management information. View developer profiles on social networks, read information about personalities on the Internet, etc.
Escrow can be considered an important advantage of the ICO project. What it is? ICO organizers give all collected funds for storage to intermediaries, who guarantee the safety of assets. Of course, in this case, you should also study the entire background of the intermediary. If this is a bank - everything is in order.
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