What is an ICO?
In this article we are going to learn about ICOs, its purpose, advantages and disadvantages.
But before start, let us talk about a practice of the stock market, which refers to the origin of our theme.
When a company, in the stock market, opens its capital to public for the first time, we name it IPO, or “Initial public offering”. In this model, it is offered to investors shares of the company in IPO, making each investor become a kind of owner, even if on a small scale. By participating in the IPO of promising companies, the investor has in mind that he will receive dividends if the shares increase in value.
In the cryptocurrencies world, an ICO (Initial Coin offering), is a model which has some similarities with an IPO, but also has great differences that are very important to be known to those who want to participate in one.
For companies, it’s less bureaucratic to make an ICO than an IPO. This is an advantage, but the user needs to be careful: because of the ease, the investor should check the company’s suitability and names involved in the process. Participating in an Initial Coin offering is an act of trust and belief in the viability and success of a project.
Therefore, if you think about participating in ICOs, take time to read project planning, such as actions and proposals (whitepaper), Schedule of activities (roadmap) and all specific documentation.
Another difference to be taken into account in an ICO, in relation to the IPO, is that the virtual business model will not always give you a percentage in the company’s profit. Generally, you will receive tokens, which may have very diverse and specific purposes and functions.
For example: The tokens of an ICO can give you discount on services and service tariffs offered, or it can be transformed into a currency unit, which can be negotiated in exchanges in the future; Or who knows you can have access to a premium service with an ICO token. There is a lot of very distant and distinct possibilities, thus it is interesting to keep in mind what you are paying for, and what is the promise of return on the investment request.
The last few years have been especially positive for ICOs around the world, raising values of the millions of dollars in projects such as exchanges, gambling platforms, banks and financial services based on blockchain, financing of pools of Mining of BTC and other alts, in addition to more liberal ideas such as drug payment system such as marijuana, for countries where their use is allowed for leisure.
Although it is a fascinating world and an opportunity for enormous appreciation, don’t let your ambition lead you to obscure ways. Just as many interesting and lucrative projects have appeared in recent years, others have been shown to be fraudulent, taking the investment of many people, or not complying with Fidelity as promised during the capitalization of resources.
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