Commonly known as ICOs, initial coin offerings are the talk of the town these days because of the huge profits they bring to investors. But they can be a risky investment, especially if you don’t know how to select the right one. In order to help you understand what the world of ICOs entails, we are going to go into details, looking at what exactly an ICO is, how to buy tokens (both on ICO and Pre-ICO), and, of course, a few tips that you should keep in mind. It’s time you got enlightened!
So, what’s an ICO?
Traditionally, start-ups that wanted to raise capital for their projects and businesses had to rely on initial public offerings, specific investors, and their own pockets. The game is different these days. We have smart contracts that are hosted on the blockchain network, which have led to the appearance of ICOs.
Simply put, initial coin offering is a kind of crowdfunding in which organizations create tokens and sell them for the purpose of raising money to drive their projects. It’s kind of a combination between initial public offering and kick-starter projects using the new technology, as every investor gets to enjoy advantages of both with some monetary rewards at the end of the day.
Buying Tokens on Pre-ICO and ICO
The first step towards participating in an ICO is purchasing the tokens. For people without any prior knowledge, it could be a nightmare figuring out where to start or how to go about the whole process. Here’s a quick brief on what you should do:
Step 1: Create an Ethereum Wallet
Most ICOs out there are Ethereum-based, so the first thing is setting up your wallet. Remember that there are many applications out there, but only a few supports the ERC-20 tokens, which is compatible with tokens. Some of the great options you can use include MyEther Wallet, MetaMask, Jaxx Wallet, and Ethereum Wallet.
Step 2: Purchase Ether
Your set up is done; now it’s time to buy some Ethereum to enable you acquire the tokens you intend to buy. At this point, you will need to login into a cryptocurrency exchange such as Bittrex, Bitfinex, Kraken and Coinbase, and purchase your ether from there. You can trade your fiat currency (euros or dollars) for Ethereum directly.
Step 3: Send Ether to the ICO or Pre-ICO
Have the Ether? Well, you are ready to participate now. The next step is visiting the pre-ICO or ICO website, where you read through their terms and accept. The websites usually have an Ether address and the minimum amount you can contribute (for some ICOs). Now, select the entire string of the address, copy and paste it in your Ether wallet, where there’s an option of sending Ether and tokens. Send the transaction and the click “Add Custom Token” where you input the symbol of the token and a decimal ‘18’ (information indicted on the ICO website).
Although Ethereum is the most commonly used platform for smart contracts, there are more out there that help companies launch their ICOs. These include Confideal, ChainLink, EtherParty, and BlockCAT.
Tips for Choosing the Right ICO
So, how can you spot a good ICO that will likely guarantee you good returns? Here are tips to keep in mind!
1. Get to know the team behind the project
It’s not worthy putting your money on a project that is driven by unqualified people, so do some research and learn about all the people behind the project. Although most ICOs are launched by new companies, you will find that the men and women behind the idea are well known professions in their respective fields.
2. Understand about the token and its long-term use
That’s right. Don’t just buy a token because it’s sold for the purpose of raising money, no! Tokens that are not just value based and can be used in a project will likely give you more returns in the long run, so go for those that represent disruptive concepts. Remember, the price of the tokens will not increase considerably if you are not able to trade them for profits.
3. Nitpick all the details in the whitepaper
Each ICO has a whitepaper where the company presents information to pitch any potential investor. The information should provide compelling arguments and be clear enough as to why you should trust the venture. The whitepaper will also give you a better insight if the people behind the project are really industry experts.
4. Roadmap to the future plans
Companies that share a realistic and well-developed roadmap are always a better choice. Being an investor, it’s only wise to understand when the project started and of course how far it’s expected to go. Are there long-term profits for you? Will there be any further investments? Get answers to these questions and you won’t regret.
Initial coin offerings could be the real deal, but only if you understand how to go about it. It’s a risky venture investing in pre-ICOs and ICOs, so you will need to be sure that you are putting your money where you will get returns. Keep these tips in mind as you get your feet into this lucrative industry and your investment might turn out to be your lifetime deal!