The Layman’s Guide to the Blockchain Chapter 3: Fantastic ICO’s and where to find them
This one’s a long one, so strap in.
The FOMO (fear of missing out) train is real. The number of times I’ve heard “I missed the boat,” “or if only I’d gotten in on bitcoin 2016 I’d be rich,” is probably equatable to the total circulating supply of XRP.
But what if I told you that wasn’t the only boat? What if I told you there were about 300 of those crypto-boats leaving every week? Well, it’s real, they’re called ICO’s, and if you think Crypto, in general, is the wild west, then ICO’s Are Mad Max.
The Basics
An ICO is what’s referred to as an “Initial Coin Offering,” or sometimes a “Token Generation Event.” It’s a new model of fundraising where a project raises capital by releasing a blockchain token intended to act as either a security or as a utility for people to use, hold or trade on their DApps (decentralized apps) or cryptocurrency exchanges. These tokens are purchased with Bitcoin or Ethereum, and the purchasers become the first individuals to access these tokens. Often, you don’t need to be an accredited investor, and so it becomes an exciting way for the average individual to participate in investments that could experience incredible gains.
While the ICO market is still evolving, some companies have already seen incredible success with this model, raising over 257 million USD and presently over 300 ICO’s are launching every week. In its earliest days, ICO’s were easy, you just needed a half-baked idea, a white paper and people would throw money at you, but that environment is changing rapidly. Regulatory bodies from around the world have taken very different approaches and levels of adoption. The SEC and the IRS over the summer have begun to crack down on many projects. Meanwhile, China has banned ICO’s altogether for the time being.
While many amateur crypto investors lament the influx of regulation, ultimately they are there to protect people, and trust me scams are all over the place.
Do your Homework
Despite the risks, ICO’s remain a great way to raise substantial funds for a legitimate project. That said as with most investments, there’s no guarantee of return, and the last thing you want is to be caught with your pants down. Which is why the first thing I always recommend is research.
When looking at any project or investment, it’s important to look at all the pieces. ICO’s are no different. Here’s a list of some great questions to be asking as you do your research:
- Who are the people involved in this project? What are their backgrounds
- Does their product have a clear purpose or problem that it’s solving?
- Who is backing or advising this project?
- Why are they raising the amount of funds they’re raising?
- How do they intend to distribute the capital for the project?
- Do they have an MVP or beta?
There are so many coins claiming to be “the next big thing,” all of them claiming to be “the next stage in-.” doing your research will save some major headaches. Be wary as well of influencers and other media entities, you have to ask, “what’s their stake in this?” In many circumstances, these bloggers and contributors could be participants in bounty campaigns, orchestrated to pump the coins. Not that affiliate marketing is terrible, but transparency in motives is essential. Bad affiliates end up looking like this
So, basically, don’t be Shitcoin™. If the coin can’t even explicitly address what it does, then it’s most likely not worth investing in.
So where do you find these coins? There are many calendars and sites dedicated to the aggregation of ICO’s, here are a couple of my favourites
Skin in the Game
Alright, so let’s say you’ve found the next Bitcoin and you want in on the action. How do you claim your piece of the pie?
Usually, the process of an ICO works in a couple of phases. The first step is a Pre-Sale or private sale, this is generally offered up to accredited investors or high net worth individuals, the expectation is that these individuals will make more significant purchases and so, they receive these coins at a discounted price.
The second stage is the Public sale; this is when non-accredited investors or crypto enthusiast can participate. In most circumstances, there is a registration process you’ll need to walk through to accommodate KYC and AML (know your client and anti-money laundering) requirements.
Training wheels
Step 1: To participate, you’ll need to purchase some Bitcoin or Ether first and use that for the payment to do that hop over to our old friends Coinbase or Binance (or wherever you make your purchases of ETH).
Step2: Then you’ll need to move those funds to a user-controlled wallet such as MyEthereum (Mew for short). Create a new wallet, back up your keys.
Step 3: Once you’ve got your funds in the appropriate wallet, head over to the website of the ICO you’d like to participate in, and scan the page for a contribute button, registration etc. Once found, there should be provided the Contract address you’ll need to send your ETH to receive the token.
Step 4: Copy this contract address, then go to your ether wallet, hit send ether & tokens and unlock it.
Step 5: Enter the contract address from the ICO and set the GAS for the transaction (What is Gas?) and generate the transaction.
Step 6: Follow the pending transaction like a hawk by taking the provided hash and loading it in Etherscan.io. when the transaction reads success the you are ready for the final step.
Step 7: Open up your ether wallet again, and on the bottom right you’ll find the option to show tokens. To add a custom token go back to etherscan.io and look up the name of the token, along with its affiliated contract address and decimals, load those into the Ether wallet, and then your tokens should display themselves! Congrats!
Finally, there is usually a period where the tokens are not available to trade (vesting period) until exchanges begin hosting them. From that point on you’re free to trade or “Hodl” them to your heart’s content.
~ referral links:
- Start buying Crypto: Coinbase
- Get a hardware wallet to keep your digital assets safe from hacks: Ledger
- Popular altcoin exchange: Binance
- ERC20 Compliant wallet: MyEtherWallet
~ More Chapters
Laymans Guide to the Blockchain: Chapter 1
Laymans Guide to the Blockchain: Chapter 2
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