Everything you wanted to know about ICO but was too embarrassed to ask
Ok, so you’ve been hearing about bitcoin and cryptocurrency for a while. You have a basic understanding of how cryptocurrencies and blockchain work. You’ve been thinking of investing in some cryptocurrency as you hear your friends at AB-CHAIN are doing an ICO. I’m writing this to walk you through some of the questions you might have and how it all works in plain English. If you have a degree in finance or already work in fintech, this is probably too basic for you, you’re not my audience but I welcome your input!
Before I begin it’s worth stressing that cryptocurrencies can be a tad bewildering to newcomers, let alone seasoned professionals. Like any new technology, there are risks and challenges.
For complete newbies, I recommend taking a look at the writings over at bitcoin.org. Even if you aren’t a newbie, I still recommend reading through at least some of the info, it’ll feel a bit like a rabbit warren as you go from link to link, but that’s ok. If you’re more a verbal or visual learner, there are some excellent beginner YouTube videos such as 99bitcoins’ crash course.
Ready? Let’s get started…
What’s an ICO?
An ICO (Initial Coin Offering) is basically another version of crowdfunding. If you have visited sites like Kickstarter or Indiegogo, you would be familiar with the concept of crowdfunding: a company collects funds from individuals in exchange for receiving a future product. Typically the product (it may be an album, tech hardware or gadget for example) needs this funding in order to complete their product and get it out to market.
Like with Kickstarter, during the ICO campaign supporters of our company’s business proposition buy some of the distributed cryptocoins (called tokens) with fiat or virtual currency.
Why do I want to participate in an ICO? Can’t I just buy some bitcoin and be done with it?
Sure you can just buy some bitcoin. But the aim of an ICO is that you are effectively crowdfunding a company with the belief of their future success. The aim here is that the tokens (ours are called ABC coin) will increase in value and you can sell them in the future for a profit. Think of it a bit like if you were buying shares on the stock market.
How much will this cost?
The minimum investment in the AB-CHAIN ICO is 0.015BTC, about 30USD.
Which ICO should I opt for?
Instead of having a crowdfunding page, cryptocurrency companies create a white paper, essentially a detailed business plan. The one we have created for AB-CHAIN details for example:
- The problem they are trying to solve
- Financials
- Timelines
- Market value
- Competitors
- Team members and their experience etc
It’s an opportunity to really understand what a business is trying to achieve through the use of cryptocurrency. Take the time you need to ask questions, chat with our staff and experts and feel confident in your decision.
However, before you can participate in an ICO you need some cryptocurrency and somewhere to store it (a digital wallet).
For this article, I am going to refer to bitcoins. Bitcoins can be bought from various sources. WeUseCoins has written an excellent guide giving a pretty comprehensive rundown. As the guide explains, you can purchase them online using an exchange or brokerage service that will enable you to buy Bitcoin with a bank transfer using fiat currency, a credit card and from Bitcoin Teller Machines which are similar to cash ATMs that you find worldwide.
You need a digital wallet which is the files that contain encryption keys that allow you to transfer your bitcoins or another cryptocurrency to other people. There are several options. One is to store them yourself using one of the Bitcoin programs available for Mac, PC and mobile. Another option is to entrust them to a third-party Web site known as an “online wallet.” There are also paper wallets where you print everything out and store safely at home or work etc. Bear in mind with the latter that if you lose the printed information, it is not stored anywhere else so you’ve effectively lost your money.
You can read more about the different options in articles such those written by cryptocoinnews.
Like with financial institutions, there are loads of different digital wallets, each of which will claim they are the best. For your very first transaction, it can’t hurt to read some different opinions and ask people around you what they recommend. Ultimately you want somewhere secure and with relatively painless processes.
Signing up typically involves entering an email address, a hard to crack password, providing proof of identity and your bank details. Each wallet has step by step instructions on how to buy bitcoin, your first time you’ll probably transfer some funds from your bank. Easy peasy.
Ok, now you’re ready to buy some ab-chain ABC tokens! Here’s what you need to do:
- Go to AB-CHAIN website. Enter your email and click on Join Crowd Sale.
2) You’ll then receive an email instructing you to click AB-CHAIN’s investor’s personal office:
3) You need to decide how much you want to invest (a minimum of 0.015BTC is required), this is about 30USD. Take that link and put it into your bitcoin transfer-like you would add the details of the account you want to send money to in a normal banking transaction.
Specify the amount you want to invest. Don’t get all the zeros or decimal points mixed up like I did the first time! (oops).
4) You’ll receive confirmation once you’ve made your investment.
Congratulations! You’ve just invested in your first ICO!
What happens now?
Basically, you are waiting for the pre-sale to be completed. As with crowdfunding, you are exchanging money for goods that you will receive in the future, in this case, ABC tokens. You can expect to receive these a couple of weeks after the pre-sale assuming that the minimum financial target is reached.
What if the financial target is not reached?
In an ICO a percentage of cryptocurrency is sold to early backers of their project. Like with crowdfunding, a certain, predetermined amount (In our case $300,000) needs to be reached before the project goes ahead. If the money raised does not meet the minimum funds, the money is returned to the backers and the ICO is deemed to be unsuccessful.
