Cryptocurrency’s phenomenon was the dominant discussion in the finance last year. However, there’s a new word that is coming from everyone’s lips, and it has been getting some serious attention, and that would be ICOs.
If you believe you have the next billion-dollar idea or you want to raise funds for your dream business or research, just like Kickstarter, ICO is the latest crowdfunding trend.
Initial coin offering or more commonly called as ICOs is a new way for startups to fund their Blockchain based projects. By creating a token that will be sold to early investors in exchange for cryptocurrencies, usually Bitcoin or Ether; before it is listed in a wider marketplace; such as exchanges.
Tokens are closely similar to vouchers which can be later used for exchange of goods or services. Investors gamble in the token that it will eventually worth into something in the future. Then sell it for profit. It is a high-risk investment and very speculative.
ICO is somewhat similar to the concept of IPO or Initial Public Offering, where the public is funding your company. Although, unlike IPO, it won’t result into having an ownership stake in the company you’re giving money to. ICO lets you have full control of your company.
PROs
Due to this concept, startups have been more enthused in raising funds by creating an ICO, because it lets them skip the rigorous amount of paper works and processes with venture capitalists and banks. Also, they can offer it on a global scale and with no minimum amount to participate. This is why even everyday people are very supportive of ICOs because it gives them an opportunity to invest into the most innovative blockchain projects yet to be discovered, and who wouldn’t want to be a part of that?
Investing in an ICO had manifested great returns as seen in stories such as Ethereum and Neo who’s investors are now looking at 200% returns. Even the messaging platform Telegram has reportedly raised $1.7Billion for it’s yet to be built blockchain-based platform.
CONs
The fundamental issue with ICOs is it is not yet clearly regulated in the US, and other countries and most are pre-products. Hence, sales accumulated cannot be controlled. Moreover, anyone, literally, anyone can create their own ICO. Thus, little protection to its investors and a higher potential for scams and manipulations. In fact, a study has reported that 80% of ICOs are scams.
Then came companies like Ifan and Pincoins that managed to raise over $660 Million all together. Ponzi schemes that promised very high returns. These “strike it rich” strategy has attracted many investors but also drew the attention of the SEC. Since then, they have become more determined to put an end to these scams; creating a cyber unit to investigate misconducts.
On the bright side, this has brought awareness to investors to be more cautious with ICOs that are making outrageous claims. Now, new ICOs are more focused on promoting the utility of their projects.
To sum it all up, ICOs are for really high returns but also comes with very high risks. Extensive research is a must, before investing. Also, as an investor, it is our responsibility to research with our due diligence and never be reluctant about other people’s opinion. Rely on facts and know where you put your money at.
WHERE TO GET ICOS?
Here are some credible websites that talks about recommended ICOs and bust the fishy ones. You may check them below:
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Sources: https://techcrunch.com/2018/04/13/exit-scammers-run-off-with-660-million-in-ico-earnings/
https://www.forbes.com/sites/steveolenski/2018/05/08/the-good-and-bad-of-ico-marketing/#7be5990a69d3
