ICOS 101
The digital age has made gigantic leaps that have tremendous impact in our lives. Every minute, it is evolving and changing, which results in amazing discoveries. Automation, digitation, mobilization, robotification, and virtualization are just some of the mega-trendy terms that have now become familiar jargons even to the least techie among us. It is like living in a multi-dimensional space where anything and everything is possible with the right encryption.
Among the newest buzz in the digital world is the blockchain technology. There are mixed reactions about this new application software. Some see it as a threat to their businesses as it promotes disintermediation or the elimination of the middlemen in valid transactions. It allows peer-to-peer networking using irrefutable, distributed ledgers that are open to the public and do not require third party certification.
But some are ecstatic about it, and they have reasons to be. With the right strategies and perspective, this breakthrough technology can result in limitless opportunities especially for startups. In recent years, the blockchain technology made possible the emergence of digital currencies or cryptocurrencies, the most popular of which is Bitcoin. This spawned into several other business innovations that piggyback on this technology.
Initial Coin Offering (ICO)
In the corporate world, initial public offerings or IPOs are widely known. But in the digital world, initial coin offerings or ICOs have wormed their way into big time global cyberfinance. But what is this frenzy all about that even big-named celebrities and personalities are throwing their bitcoins and crypto tokens into it?
In an article in MarketWatch, it says that one startup attracted more than $150 million in just three hours and that so far this year, about $1.3 billion has reportedly been raised in ICOs. That’s a lot of incentive to attract business-minded individuals to make a plunge for it. The Smith + Crown, a consultancy firm, lists more than 200 ICOs on its website while the CoinSchedule calendar shows upcoming ICOs and crowdfunds looking into business potentials in sectors such as finance, governance, security/privacy, energy, utilities, entertainment, gaming, and many other fields of interest.
What is an ICO?
ICOs are somewhat like IPOs, which are basically company shares offered to the public to raise capital in order to finance growth and expansion activities. Shares are priced depending on varied factors and are restricted and regulated by the Securities and Exchange Commission (SEC), so that those who put in their investments are protected. With an ICO, prospective investors are offered a chance to participate in a startup cryptocurrency that often has a realistic business aspect or prospectus. However, unlike IPOs, ICOs are not covered or backed by the government and therefore are riskier. ICOs accept major cryptocurrencies (like Bitcoin or Ether), and in some cases, legal tender in exchange for “crypto-tokens” that basically function as shares in the company.
How Does an ICO Work?
There are three (3) major stages on how an ICO is offered to prospective investors. Let’s take a look at them.
First Stage: Proponents usually drum up hype on their projects through various mediums, usually via forums and social media. The information they put out would include most, if not all, of the following: an official website where investors can check out the ICO; the big guys behind the project i.e., the developers, researchers, and marketing teams, as well as their qualifications and expertise, a conceptual framework or road map, and a whitepaper detailing other information.
Second Stage: Once the desired publicity is reached, the ICOs are announced on a bitcoin forum. From there, they try to attract early investors who would be interested to know about the ICO timelines, the fraction of the crypto-coins they are selling in the ICO, how much they will keep for themselves, and how they plan to use the investments in development and marketing activities, as well as the currency (flat and/or virtual) that can be used to finance investments.
Third Stage: After the ICO is done, the project should get started. The token or crypto is now listed on major exchanges. At this point, the trading of currency by investors is allowed but not during the ICO. From here, the market cap of the currency will keep on fluctuating based on the demand and the people’s hope that the project takes off, becomes successful, and translates into an exponential increase in value from their value at purchase.
Who Can Participate in ICOs
Anyone can participate in an ICO. There are basically no restrictions. It is open for all. However, be sure to have at least a basic understanding and knowledge of it.
- Stay alert and updated by joining the bitcoin talk forum. You can also follow Dapps and cryptos in social media and check out the most popular news sites. Once you are familiar or have sufficient information about new blockchain projects that catch your interest, join their telegram channel or slack team and obtain more specific details.
- Choose your wallet by thoroughly scanning and reviewing all the details and technical requirements of your chosen ICO. Some have preferences on the wallet to be used (e.g., Ethereum blockchains require smart contract-enabled wallets).
- Top-up your wallet with the amount of the required currency you are willing and ready to invest, according to your speculative appetite and risk tolerance. Allow yourself enough time to do it. Be mindful that transactions may take less or longer time to process. You can top-up in a matter of minutes, but there are times when it takes hours or sometimes days, especially on blockchains that are heavily congested.
- Timing is of the essence. While location is not an issue, some ICOs list timing according to different time zones. Synchronize your time to ensure that you’re ready or available when it starts. Be quick and punctual, as some ICOs end in just a matter of minutes, and you may fail to grab your chance to participate.
Conclusion
As the saying goes, nothing ventured, nothing gained. Unless you put in line something of value and go for it, you will never realize what happens next. While you cannot predict the future, you can exert due diligence to lower and mitigate the risks in any endeavor that you decide to get involved in, such as ICOs. If it sounds too good to be true, you might as well stay away from it. Admittedly, there are ICOs that are not worth your time and investments; learn to spot them. Still, there are ICOs that can help you turn your investments into tangible profits and intangible achievements. Who knows? You might be funding a project that could result in breakthrough solutions in important and life-changing information technology infrastructure.
What is most important is to always keep an open mind. But don’t be blinded by quick fixes or get rich quick schemes. Weigh all your options and study your target ICO with prudence.
If you need assistance in learning about ICOs and the blockchain technology, visit our site at https://www.tokenlab.io/.
Sources
MarketWatch. (2017). What is an ICO? Retrieved from http://www.marketwatch.com/story/what-are-icos-and-why-is-the-sec-taking-steps-to-protect-investors-from-them-2017-07-27/
Investopedia. (2017) Initial Coin Offering (ICO). Retrieved from http://www.investopedia.com/terms/c/crowdfunding.asp
The Economist. (2017). What are initial coin offerings? Retrieved from https://www.economist.com/blogs/economist-explains/2017/08/economist-explains-17
Fortune.com (2017). Why start-ups are trading IPOs for ICOs? Retrieved from fortune.com/2017/05/05/ico-initial-coin-offering/
Gizmodo. (2017). Retrieved from http://gizmodo.com/what-are-icos-and-why-are-they-getting-banned-in-china-1800922340
Coinsutra. (2017). What are ICOs and why are they good for you? Retrieved from https://coinsutra.com/what-are-icos-initial-coin-offering/
