As technology and the internet progress, more and more means to circulate currencies become easier. It was never enough to digitalize magazines, communication, and even relationships. Money makes the world go round and sure enough, digitalizing money is now starting to be a norm.
When you think of digital money, it’s no longer just online banking. You can say that cryptocurrency has taken the world by storm, and this could be because of how easy it has made investing become. You’ve probably heard of ICOs (Initial Coin Offerings), and this is how some companies and businesses get investors.
What is an ICO?
An Initial Coin Offering is how a business or a company start to source their funds to make the actual business happen. This is basically an aspiring businessman selling you his ideas to make you invest and hope for the best.
Surely, as of today, an ICO isn’t the only way to invest your hard-earned money, so you’re probably wondering why people are actually biting into this offer. After all, the security of participating in an ICO is just scary.
The main reason why more and more people are participating in ICOs is mainly the success of how it has been for some businesses. True enough, Neo, another cryptocurrency similar to BitCoin, started selling their tokens for 33 cents each. Today, it amounts to $9.35 USD. At some point, it even reached up to $107.
Now, you may find that example a bit worrying because how can a $107 token fall back to $9.35? This is why you need to be smart when it comes to predicting how these tokens will cost in the future. What’s important here is that you invest when the token is still considered cheap.
So why not invest in stocks or invest outside the internet? The advantage of participating in an ICO is its rapid growth. The lack of bureaucracy is also enticing to some. It doesn’t give them the responsibility to decide on the company’s future. They just decide whether they want to keep their investment or pull out.
However, don’t expect that the value of tokens will always go up. You need to do your research and strengthen your assessment skills for this. Participating in an ISO is somehow the same as investing money in the stock market. You can win or lose.
How Does the ICO Differ to IPO and Venture Capital?
The ICO process will allow you to invest in promising businesses and projects that are still non-existent. These projects are still considered as proposals, and it’s up to you if you see this project possible and profitable. Of course, how ICOs sell their proposals plays a major part in this.
Meanwhile, Initial Public Offering or IPO will only let you invest in well-established and existing companies. These businesses can already prove their competitiveness and can show you actual statistics of how the business has performed in the course of months or years.
Venture Capital is not far off from these two. This is considered as the traditional way to invest in businesses or companies. You’ll need to attend meetings and contract signing to finalize your investment. This will also allow you to be a shareholder of the company.
Whether you choose to participate in the processes of ICO, IPO, or VC, risks are still high, but true enough, VC and IPOs are deemed to be more secure in different aspects. IPOs can promise bigger profits that may take time for you to get. VC can let you practice your decision making as part of the company’s board.
The bottom line here is that the ICO allows you to have more freedom when it comes to investing. Whether it is as secure or not like the other ways to invest, it’s always best to not completely rely on making your money grow in just one way.
How to Participate in an ICO?
Purchasing BitCoin and other cryptocurrencies like Etherium is a way to purchase tokens which are used to allow you to participate in an ICO.
These tokens could be anything that the business offers for you to actually buy them. A token could equate to the number of free hours you could get for whatever service they will offer, or it could be the services itself that you can get once they turn out to be an actual business.
Once you already have Bitcoins or Ethers, it’s best to keep them in a wallet while you’re looking for an ICO that you trust.
Speaking of which, never rush into buying tokens from different ICO platforms. Take your time and get to know the project better. Keep track of the different ICO news, know more about the people trying to fund their business, read through their white paper which is something that they should have, and know the credibility of the people behind the project.
These steps are important because the last thing you want is to get scammed. It’s crazy that ICOs that were even backed by celebrities turn out to be a scam. A perfect example would be CentraTech. Floyd Mayweather and DJ Khaled backed this project up, but it eventually turned out to be a scam worth $32 million USD.
The business should have the instructions as to how you can purchase their tokens. If you’ve already purchased a token, all you can really do is to wait for the ICO process to be done.
When the ICO process is done, you can then check if the token is already up for exchange, if you are aiming to sell them. This is when you’ll see the outcome value of your token through its BitCoin or Etherium rate.
Keep in mind that ICO tokens can be very valuable or just do not have any value at all in the future. It all depends on what the come out of an ICO is. Again, you either win or lose. Your purchase is either worth it or garbage.
Is the Process of ICO Legal?
The ICO process taught the jurisdiction a lot of things, and the most impactful lesson is how tax is really important in this business. When this process started, it only took a matter of time before tax authorities added in their value.
Now, it’s easy to kick start an ICO and because of this, scamming people has also become easier. With this, countries like South Korea and China already banned this process to lessen the trouble it can cause.
Some investors and ICOs even get legal mediators to make sure that they already address the legal issues of their ICOs, including what’s on their white paper and terms and agreements. This will also help ICOs strengthen their reputation and credibility.
Some countries simply allow this like the US, while some just do not have any jurisdiction about the matter. What’s important here is that you check on the project before you invest. Aside from that, you should also check the legality of this process in your area.
As of today, countries like Switzerland, USA, Singapore, and Scotland are leading when it comes to being in favor of this process through their jurisdiction.