What is ICO?
A fundraising mechanism.
How does it work?
New projects sell their own cryptocoins in exchange for fiat or virtual currency. These coins (or tokens) are similar to shares of a company sold to investors in an IPO (Initial Public Offering) transaction.
Sounds quite similar to IPOs and crowdfunding?
Yes, they do share some similarities. However, while IPOs deal with investors, ICOs deal with supporters that are looking to invest in a new project much like a crowdfunding event. Yet ICOs differ from crowdfunding in the way that the backers of Initial Coin Offerings are motivated by a potential return in their investments, while the funds raised through crowdfunding campaigns are basically donations. For these reasons, ICOs are referred to as crowdsales.
How do I profit from investing in an ICO?
The answer here is really basic, if the ICO you invest in happens to become really successful your stake of the company becomes way more valuable. What is actually amazing about cryptocurrency world is that the coins you may have got for pennies by investing into a project can skyrocket in price in matter of months.
What happens if enough money is raised?
If the funds requirements are met within the specified period of time, the money raised is used to develop or complete the project.
What happens if projects don’t collect enough money?
Relax! If the money raised does not meet the minimum funds required by the firm, the money is returned to supporters and, unfortunately, the ICO is considered unsuccessful.
Should I invest into an ICO?
Any investment is risky so before investing make sure to check out these essential ICO
1. How does it differ from any other projects? Carefully read the Whitepaper of an ICO before putting your own money into it.
2. Are all of the team members experienced? Check ICO team descriptions and members’ LinkedIn profiles.
3. Is there going to be a market for the coin you’re willing to invest in? You should consider why people should want to own this coin and if it will have a liquid trading market.
If an ICO fulfils all of the mentioned qualities and you have a personal feeling that it will succeed, then the answer is yes, go ahead and make an investment!.