en
Back to the list

What is ICO

17 August 2017 13:15, UTC

ICO (initial coin offering) – a term adopted in crypto-economics, formed around the emission of new cryptocurrencies.

The speed of development of the virtual coin offering is high, so the cases of initial investment in the created cryptocurrencies are widespread. In fact, nowadays ICO is the transfer of a certain amount of new coins in exchange for the relevant amount of bitcoins, ether or another type of cryptocurrency that have a high rate and demand.

One should know that investments in ICO project are high-risk transactions, which can cause a complete loss of funds, as it was, for example, with CrunchCoin.

The main idea and attractiveness of ICO

ICO is understood by experts of financial markets, as an unregulated offering of cryptocurrencies, tokens, which are issued via distributed ledger (blockchain). Tokens can be traded like shares in the stock market, but they don’t contain information about the owner. In the case of success of cryptocurrency in the virtual economy, investors expect to get profit.

The main attraction of ICO for investors is the increasing value of the first bought coins.  Transactions are based on large revenues from initial investments. The first ICO was launched for the release of the now popular cryptocurrency – etherium.

ICO is involved in the first stages of creating new virtual currencies in order to pay for marketing, technological support and project development in the long term. We can talk about the similarity of the ICO with the IPO (Initial Public Offering) and crowdfunding, which allows you to create a budget for the implementation of a particular project.

ICO difficulties

Alas, the lack of legislative regulation and any regulation in the field of virtual economy and cryptocurrency leads to the fact that many creators of new tokens turn ICO into a method of deception. So, for example, for the last year, three major deceptions in the field of cryptocurrency offering are known.

For the projects themselves, the risks of ICO are related to the fact that the funds are usually attracted only in one round. It’s difficult to attract investors to deal with such a risky enterprise as issuing a new cryptocurrency for the second time.

ICO success stories

Despite the high level of possible profit from investing in the initial coins offering, there are not so many success stories among the campaigns that attracted investment in new virtual currencies. One of the most famous is the etherium and in 2017 Stori also joined it.The capitalization in the first round was about 30 million USD.

One more example – Aragon with the capitalization of about 25 million USD in just the first 15 minutes of the existence of the project. Another project, which received a huge amount of investment, was mobileGo, which raised about 53 million US dollars.

How should the true ICO project look like?

If you are interested in the opportunity to become an investor of the new cryptocurrency, we recommend you to study the proposed project for the presence of the following mandatory elements that confirm its reliability (at least formally):

  • availability of a ready-made prototype;

  • whitepaper – the main document for cryptocurrency;

  • registration of a company that opens a project and presents a new virtual currency;

  • availability of a plan (medium-term, preferably long-term development of the open platform);

  • notification of the specific amount of money needed for the project.

Despite recent ICO trends, new crypto projects are still using this strategy to attract investments. Check out these Initial Coin Offering list on CryptoTotem.

Following at least these minimum verification rules, you will be able to invest with less risk of being deceived, as it happened to many cryptocurrency investors in the world over the last decade.