- Why ICOs Are So Popular
- Why It Is Worth Investing in Tokens During ICO
- Okay, ICO is Another Form of Crowd Funding. How Do I Know I Am Not Cheated?
- How to Find an Investment Project and Take Part in ICO?
- How to Launch Your Own ICO?
- What Are Bounty Programs?
- The Biggest ICOs Completed Recently
ICO, or Initial Coin Offering, is emission of tokens by a project which are meant to be a means of payment on this platform, in a form of cryptocurrency.
Unlike IPO, the buyers don’t possess any share in the company and can’t influence on internal management decisions. Practically, ICO is a new form of crowd funding, when participants fund the company today to obtain some material benefits in the future.
For instance, Storj project tokens allow buying certain disk space in Storj or widening channel bandwidth. Also, tokens can be earned by renting out free disk space on your hard drive.
By issuing its own “money” and changing it to one of the most popular currencies (like Bitcoin or Ethereum), or even fiat money (USD, Euro), projects can raise funds needed for launch and development of the company. Besides, by issuing currency, projects can be developed at a faster pace (just in case the ancient society increased volume of trade) and at the same time solve the problem of monetization in the future.
Why ICOs Are So Popular
According to Smith + Crown, in 2017 ICOs have raised $180 mln – an amount which is greater than money obtained in the course of all 2016 ($101 mln). And we see how that sums are constantly getting bigger.
Some people call this a new economy while governments and central banks worry about control and anonymity (not surprisingly!). That being said, other people explicitly state many ICOs have turned to be scam.
An article on CNBC compares the cryptomarket boom and ICO with dotcom explosion in 1999 and dotcom IPOs. Partially, such a comparison is accurate: just as Internet, cryptocurrencies are just a tool. As in the case of Internet companies, many projects launching their ICO, only try to raise some money on the back of global hype surrounding this theme. However, others come up with interesting solutions which will probably change markets.
Why It Is Worth Investing in Tokens During ICO
By purchasing tokens issued by a project, investors want to:
- Benefit from selling the tokens at a higher price in the future (provided the tokens are in heavy demand);
- Cash in their tokens in the future by purchasing services at a lower price;
- Support an interesting and promising project.
Okay, ICO is Another Form of Crowd Funding. How Do I Know I Am Not Cheated?
There is no legislation governing ICOs. No country in the world has such legislation. On the part of the buyer, ICO is a trust-based deal. As in the case of crowd funding, the project can be closed way earlier before its project is launched. It can also come short of your expectations. Finally, some “quick guys”, in other words, swindlers, can just cheat you by conducting an ICO of a dummy project.
A crypto fan and the head of San-Francisco-based Runa Capital Nick Tomaino back in 2016 wrote in his blog about irrationality of many investors during ICOs. Project that have nothing but a website and a draft of business model have raised millions of dollars in just few hours or days, whereas numerous real project with cashflow and real clients can’t attract the same amount of money.
According to Tomaino, a conscientious project should:
- Prove validity of its ICO and validity of launching its own cryptocurrency;
- Disclose its plans for project development and talk to potential investors openly;
- Implement a test version of its own protocol prior to ICO.
- Make it possible to directly “mine” the currency to bring new users and provide the network with necessary resources for transaction processing;
- Understand clearly how much money to raise during the ICO;
- The development team should own 10% to 50% of all the tokens and must not exchange them during the first 3 years of project development.
Some projects coming to ICO engage a third party, that is, an arbiter, which can serve as a guarantor and mediator between the project and investors. Others form legal entities and impose limitations on spending funds acquired through ICO.
It is also a good practice to disclose personalities of the key project participants (as a rule, at least part of them should be active users in crypto society). Also, none of significant ICOs goes without a published idea, a business plan and publications of expert assessments.
The vast majority of projects complete ICO by saying holily “our project X is a decentralized Y!” At that, the potential buyers of tokens should ask themselves if there is an advantage of decentralization of this service and what this advantage is; will the company be able to compete with its centralized competitors etc.
How to Find an Investment Project and Take Part in ICO?
Many projects allow investing in them directly on their websites, though it is necessary to have a crypto wallet to pay for tokens with bitcoins, Ethereum or other cryptocurrency. Also, the investor should be able to make transactions. To open a wallet you can go to blockchain.info, for instance.
There are tons of resources where you can find projects coming to ICO. Among them smithandcrown.com, icoalert.com and others.
AngelList и Protocol Labs have recently launched a new platform, namely, coinlist.co. It is a specialized platform for launching ICO. They are working on a contract base for it. For a newbies in the crypto market, this will be a friendly and convenient solution for investments.
How to Launch Your Own ICO?
It is simple enough. For instance, you can go to walletbuilders.com. Yes, as simple as that. But before doing so, please make sure you really want your ICO!
If you are sure you do, chances that you will spend most part of your time on development and sales but not on preparation of your ICO. In addition, all “quick” methods involve creation of a currency which is similar to bitcoin which has certain limitations to be a “project” currency (in fact, bitcoin has a number of deficiencies which the development team hopes to eliminate).
If you want to launch a project with its own cryptocurrency, you need to have programming skills as bitcoin hardly can serve as a currency for your project.
We’d like to recommend a company dealing with ICO, ito.center. It offers the full range of services to launch an ICO, namely:
- smart contract development;
- token emission;
- full ICO maintenance;
- bounty programs;
- global PR;
- advertising on printed press;
- video marketing;
- virtual reality;
The company has major market participants as its partners. Any modern technology can be realized with the use of ITO Center. Just try them and you’ll see!
What Are Bounty Programs?
If you are really interested in earning money on cryptocurrencies but don’t have initial capital, bounty programs is your choice! When conducting ICOs, i.e. a preliminary fund raising, the developers need to advertize their project. They set aside some tokens as a reserve for paying out active members who advertize the company.
Bounty is a chance to receive a share of the total token supply without own funds. To get your tokens, you need to complete some simple actions to popularize the project.
For instance, if you had participated in Ethereum launch (2014) and earned 1000 ETH without investments from your side, you would have about 640 000 USD today (December 2017). Or you could open a trading account on a cryptocurrency and make money trading on it. By the way, in January 2017 Ethereum cost $10 a coin.
Okay, let’s get back to the subject. What is needed to get some tokens of a project?
Developers are often in need of the following:
- Advertisements on social media like Facebook and Twitter: reposts, retweets, subscriptions, comments etc.;
- Advertisements on dedicated forums, writing posts and comments;
- Emailing messages.
Projects also need some special actions which require certain skills and knowledge:
- Translation of texts into foreign languages;
- Logo design, landing page creation;
- Software development;
- Searching and detecting bugs.
Reposts and comments can be done by almost every average users. Such actions don’t require any special knowledge. As a rule, you won’t make much money doing such a job. However, if you are a high-ranked forum user, you can earn much more money thanks to your forum status. Also, your earnings will depend on the startup you choose. Besides peanuts, there are cases when people earn tons of money. But you need to work hard for that and choose a right project to invest your time in. You can also work on several projects as well.
The Biggest ICOs Completed Recently
Now, let’s say some words about the biggest ICOs and how much money they attracted. For instance, when Ethereum was launched in 2014, one of the most popular cryptocurrencies was introduced, namely, ETH. During its ICO Ethereum cost $0.3-$0.4 a coin. By July 2015 its price had spiked to $20; currently (December 2017) its price is holding near $640 a coin. By market capitalization Ethereum has only one competitor ahead, namely, bitcoin.
The first ICO ever was Mastercoin which launched its tokens in 2013. Mastercoin is a company dealing with financial services on bitcoin. In 2014 another project, MaidSafe, attracted almost $6 mln. This project dealt with a decentralized Internet protected from hacking and government bans.
In May 2016 the DAO (Decentralized Autonomus Organization), a decentralized investment fund built on Ethereum technology, received over $150 mln during its ICO. After that, hackers were able to exploit vulnerability in the DAO code and steal about one third of the organization’s money (about $40 mln).
The group of programmers which worked on Ethereum project, stepped in and gave back the most part of the funds stolen by hackers. However, a group of users who didn’t agree to such intervention, went out of the project and created a new Ethereum-based currency, Ethereum Classic.
That being said, many projects failed to develop after their ICO. Dogecoin can’t restore its reputation and return back to its previous highs since Alex Green, the founder of the crypto exchange Moolah, stole the clients’ funds and disappeared.
Joshua Garza, who launched PayCoin, a platform promised to be a “new word in the cryptomarket”, was giving promises again and again to develop the platform but failed to fulfill his commitments. Eventually, the police started chasing him, and he had to leave USA. On 1 June 2017, Garza admitted guilt. Now, chances he will spend the next 20 years in prison.