The Cryptocurrency Wave: ICO Explained in Detail
Cryptocurrency has developed considerably in recent times, which has led to a surge of interest in the field. As cryptocurrencies become more secure, widely used, and versatile, the interest in this form of currency grows. Everyone can see that cryptocurrencies have a future and many are willing to spend their money to invest it in. One such investment option is an ICO or Initial Coin Offering. This article explores what ICO means and how it works in detail. Don't follow the hype.
What is Cryptocurrency?
Cryptocurrency is a digital line of code that operates on solid mathematical principles. They’re obtained through mining or outright purchase with real-world currency. Right now, these currencies can only be used for a limited number of purposes and on select platforms.For more on Crypto, check out a few of our recent articles:Learn More About Cryptocurrency
What is an ICO (Initial Coin Offering)?
Over in the past few months, many investors have started to spend their money on ICOs. ICO acronym, as mentioned before, is an Initial Coin Offering, but most experts consider it somewhat of a misnomer. ICOs aren’t currency, but rather tokens with some value. Investors can purchase these tokens with real money or Bitcoin. Once the value of the token increases based on market conditions and speculations, the investor can sell it for profit. So, this system works similar to the stock market.
These currencies are new offerings rather than established digital coins like Bitcoin or Ethereum. An investor can trade the tokens but they can’t buy other products and services in the cryptocurrency market with these tokens. They’re contracts that appreciate in value over time. Unlike an IPO or stocks in the stock market, the ICO doesn’t give investors any ownership of the company, only the tokens. The token owner isn’t entitled to any dividends or share of profits. The only way they can gain profits from this investment is to sell the tokens after they’ve appreciated in value. Investing in cryptocurrency can be incredibly risky, which is why it’s important to understand the platform well and do your research before committing to the purchase. Once you understand the field, it’s easier to make decisions regarding the options available in the cryptocurrency ICO list.
Have There Been Successful ICOs?
One of the reasons why ICO is an attractive investment prospect to both industry insiders and seasoned venture capitalists is the fact that it has been successful several times in the past. Some of the most well-known examples of successful ICOs are:
- Mastercoin in 2013 with $5 million raised in funding.
- Ethereum established in 2014 raised over $18 million in funding.
- Waves established in 2016 and raised over $16 million.
There’s no guarantee for success and currencies without a solid foundation and a consistent blockchain system aren’t likely to survive long.
Initial Coin Offering List
Not every initial coin offering has the potential to be successful. Some have weak blockchain platforms while others don’t have the right networking and marketing strategies and therefore can’t create enough buzz in the market to succeed.Most blockchain platform websites will post a list of ICOs available for purchase. You can find ICOs listed in platforms like Waves, ICONOMI, and the Ethereum-based State of the Dapps. Sometimes ICOs will establish their own platform and sell the tokens from their website. This leads to limited exposure and that limited exposure can compromise the level of anticipation and speculation in the market.
How Does it Work?
The ICO system is relatively easy to understand. As mentioned before, it runs primarily on the speculative market and its value is determined by the customer’s trust in the token. Here’s an introduction to how it works:
The ICO launching company prepares a white paper with all the details regarding the coin and the blockchain platform written in it. Prospective investors can read all of this information and determine if the token is worth their money.
Once they’ve sufficiently marketed their tokens, they launch them into the market at a reasonable price. The cost of tokens is usually quite low, especially at the outset when the speculation and trust levels are low. When ICO Ethereum was launched, its tokens were priced at $0.3 to $0.4 per token. Eventually, the price of the token rose to $19.42. This allowed the company to raise the initial funding of $18 million.
The funding raised during the ICO allows companies to create the new currency and the blockchain if needed. When the currency is released into the market, it usually has a higher value and investors can sell them immediately or wait until the value appreciates a little more before selling them.
There two ways you can pay for an ICO – Bitcoin and US dollar. Investors can transfer the money to the digital wallet to make the purchase.All transactions are tracked via the blockchain, but there's still a risk.Make sure the company you invest in is reputable and equipped with an action plan before buying their tokens.