The ICOs Are Coming

Seth DeGroot
Jul 21, 2017 · 3 min read

ICO stands for Initial Coin offering. It is a fundraising mechanism blockchain companies (building apps on a Ethereum or Bitcoin blockchain) use to raise money and value the tokens used within their services/apps. Instead of shares, investors acquire tokens that can be used to interact with and utilize the application itself.

Similar to an IPO process, companies carefully organize their pre-ICO process, marketing and listing in private exchanges well in advance. The ICO starts at a fix date and time, communicated well in advance, and available for a limited amount of time where a certain amount of tokens will be sold. As part of the pre-ICO process, the company will present a ‘whitepaper’: a document explaining in detail the company and platform, going as far as to describe the company’s proprietary technology. [Example: Status ICO Whitepaper]

Some recent ICO success stories include:

  • Bancor — $150m USD (in a few hours)
  • Brave — $34m USD (in 30 seconds)
  • Aragon — $25m USD (in 20 minutes)
  • Gnosis $12.5m USD (in 12 minutes)

Post-ICO, tokens are listed on private exchanges, providing a liquid market to investors. A few tokens have experienced spectacular value appreciation, providing significant ROI to the lucky ICO investors. Check Icostats to get an idea of token valuation trends relative to recent ICOs. The ROI data on the success stories is staggering.

If you want to participate in an ICO, you’ll need to do the following:

  1. Buy BTC/ETH. You can’t acquire tokens using fiat currencies.
  2. Put your BTC/ETH on a wallet that will be compatible with the ICO. Compatible wallets are usually identified in the company’s pre-ICO marketing materials.
  3. Be available at the at the exact date/time of the ICO, and buy your tokens. ICOs happen in matter of minutes.
  4. when the ICO closes, the tokens you acquired will be sent to your wallet.
  5. If you wish to sell immediately, list your tokens on a public exchange. If you wish to hold your tokens, simply leave them in your wallet.

Reddit and TokenMarket are good spots to learn about upcoming ICOs. Companies preparing ICOs will be usually public about it early on. Picking a great ICO is a combination of art, and science — due diligence remains more important than ever, especially when investing into such a “Wild West” like security (or lack of security?). There is no clear cut formula for ICO investing; it’s a matter of making informed and educated decisions. If investors are able to pick winners, the rewards are immense. If investors are not qualified to conduct proper diligence, and make uninformed investing decisions, ICOs are a fast way to lose a lot of money.

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