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Know What is an ICO and How to Invest in an ICO

Key Takeaways
  • An Initial Coin Offering (ICO) is one of the most popular ways to raise capital for products and services usually related to cryptocurrency.
  • To participate in an ICO, one will usually need to first purchase a more established digital currency, along with having a basic understanding of cryptocurrency wallets and exchanges.
  • To pay, most ICOs require investors to pay using another cryptocurrency. Bitcoin and Ethereum are the two most common choices.
29-Nov-2023 By: Sudeep Saxena
Know What is an ICO and How to Invest in an ICO

ICO is the Most Popular Way To Raise Capital For Products

Are you seeking to start a new blockchain start-up? Or perhaps you want to create a new app, a new coin or a service but don’t have any funds to get started? Then look no more and turn to an ICO. What is an ICO you ask? Well, in simpler words, an Initial Coin Offerings (ICO) is one of the most popular ways to raise capital for products and services usually related to cryptocurrency.  

Though, similar to the raising of funds in an initial public offerings (IPOs), coins issued in an ICO, however also can possess utility for a software service or product.

How does an ICO work?

For most companies when they decide to have an ICO, the dates, rules, and buying process are announced in advance. On the date of the event, investors from all around can buy the new cryptocurrency.

To pay, most ICOs require investors to pay using another cryptocurrency. Bitcoin and Ethereum are the two most common choices. The purchase process usually involves sending money to a specified crypto wallet address. Investors will usually provide their recipient address to receive the crypto they buy.

Both the number of tokens sold during an ICO and the token price can be either fixed or variable. Because of the low barrier to entry, anyone can launch an ICO. 

How to participate or invest in an ICO?

To participate in an ICO, one will usually need to first purchase a more established digital currency, along with having a basic understanding of cryptocurrency wallets and exchanges.

The first step is ensuring that the company putting up the ICO is real and accountable, and see if they have experience creating successful businesses. 

Here are a few steps on how to buy ICO tokens:

  • Do lots of research first to decide which ICO tokens to purchase. Read the chosen project’s whitepaper and take a look at its roadmap and tokenomics.

  • If you are done choosing an ICO project that you find most suitable, the next step is to download a crypto wallet. Remember this is important as it is required to invest in ICOs. A popular option for beginners to go for is MetaMask. 

  • The third step is to obtain a crypto token that the ICO supports.

  • The last step requires you to visit the website and connect the MetaMask wallet. Then, choose the number of tokens to buy and confirm the investment. The tokens will then be deducted from the MetaMask wallet.

Benefits of ICO

Let’s look into why ICOs are so popular

  • One of the best things about ICO is that it only takes 100 lines of code to create an Ethereum-based token like ERC-20 and be distributed in a very short timeframe. In short, it's a fast, efficient way for start-ups to raise funds.

  • ICO offers high potential profits if one can determine which cryptocurrency is a good investment. Since buyers are usually early, prices are often lower. Some ICOs even offer tokens at discounted rates. 

  • Tokens in ICO are sold into a global market that operates 24/7.

  • ICOs are accessible to anyone. There isn’t any restrictions on who can invest.

  • Disclosure requirements and paperwork are minimal.

  • ICOs can raise capital directly from anyone with a crypto-wallet, anywhere in the world.

Disadvantages of ICOs:

Though it has several advantages, ICOs doesn’t come without its risks:

  • It is considered that any token sold via an ICO has a high-risk investment since investors have no protection if an ICO fails or turns out to be fraudulent. 

  • Since cryptocurrency projects are volatile, there is always the risk of the token losing value or ending up failing.

  • As mentioned earlier, the lack of regulation in ICO leads to several scams and mediocre projects. Thus, sorting through upcoming ICOs for a quality project ends up feeling like searching for a needle in a haystack.

  • Some knowledge of crypto wallets is essential to invest in ICOs, which may be troublesome for some beginners. 

Conclusion  

Though ICOs can be risky, the investment returns can also be significant. The reason behind this is that ICOs enable investors to buy newly launched tokens at the lowest price possible. Thereby, if the project is successful, it can yield sizable returns for early investors. 

Here are some examples of ICOs:

  • Bitcoin Minetrix: Considered one of the best ICOs around, it has raised more than $150k, with the ICO in stage 1 of 10 and tokens available for $0.011.

  • BTCMTX: Known to be the world’s first stake-to-mine token that also allows holders to mine BTC from just $10 as well as earn huge staking rewards.

Also Read:Understanding Crypto Wallets: A Beginner's Guide

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