ICO: a new way to raise funds & a new revolutionary business model
In the past, when a business wanted to raise money for a project or simply wanted to set up a business, potential sponsors were reached out to, the invited to speak out whatever the desired money from their sponsorship is for. However, times have changed and therefore, methods for securing capital have changed too. For example, many companies have decided to go with ICO’s because they serve two purposes. For starters, before describing what an ICO does, here’s a definition of IPO. An IPO also known as initial public offering provides funds for a company that they may be trying to shake it off the ground. Although ICO’s are new to the community of blockchain and cryptocurrency, they are quite common.
Meet the ICO. Crowdfunding without the complications?
An ICO, also known as initial coin offering, means a fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for Ethereum or Bitcoin. The sale of these tokens can be used to fund startup projects as an alternative to fiat-based crowdfunding platforms but can also be used a method of purchasing a product still under development. On example includes ERC tokens.
ERC tokens represent interoperability within the blockchain of Ethereum: as Ethereum houses a variety of tokens that can be issued in addition to its blockchain of origin without creating an independent infrastructure.
However, despite factors such as increasing interoperability and other advances in the blockchain technology underpinning ICOs, this form of crowdfunding is not without its complications: with full decentralisation comes a lack of compliance to the regulatory frameworks designed for fiat crowdfunding projects. On the one hand, although this may create an attractive entry-point for the first-time investor seeking to escape from the bureaucracy of fiat crowdfunding platforms, this added volatility could still benefit from an additional companion to compensate: could this call for an intelligent platform at least improves trading decisions before they are made?
Crowdfunding simplified and ready for the masses
Yes, by default, this cryptocurrency-approach to crowdfunding may not be without its complications. However, despite this added risk and volatility, this crowdfunding alternative does bring investing and crowdfunding to those who would otherwise unable to access a fiat-based platform:
The participation process entails opening your wallet to become an active participant in the ICO. Having your own wallet does not mean the wallet you use for everyday purchases but rather your wallet registered with your account and used within the service/product offered. For most ICOs, you will need to complete your KYC by sending your ID documents. After creating your account and verified your identity, you can purchase tokens either directly in FIAT or via other cryptocurrencies depending on the possibilities offered by ICOs. Once the payment is made, the purchased tokens will be blocked on your account and sent at the end of the fundraising (this can take several weeks)
When all this is ready, you want to go ahead and follow all of the ICO instructions that lead you to the next and final step of the process. The final step of the exchange includes, you guessed it, trading! If you have a strong feeling about a trade, it’s best to hold your coins for the medium trade so that you get more for your money. Also, if you just want to go ahead and flip the change, wait until it reaches the price of the ICO. On the other hand, if you missed out on the sale, just wait for the next ICO.
However, with this risk comes the questions of risk mitigation: yes, trading without investing experience as a new token buyer may by-default require expertise and research in your chosen market. But with tools such as Daneel, this process is automated, minimising the risk for the vulnerable token buyer.
But don’t forget the data
Ultimately, data matters. Daneel is designed to make life easier by automating the market analysis that only a trained expert would otherwise be able to do. Data to be taken into account before investing in a project:
- the proof of concept behind the project
- the potential market
- the team (seniority, legitimacy…)
- the token economy (total supply, circulating supply, economic design)
- partners (what value will they bring?)
- the project stage (any MVP / product showcase?)
- the community that supports the project (size, activity…)
Do you require assistance with information before exploring an ICO? Daneel’s job is just that: helping in decision making process before the trade is made, and therefore maximising returns for the participating party. For instance, Daneel scans data from rich social online platforms to curate information that will contribute to the decision. Likewise, Daneel will provide you with a scoring about the ICO and will inform you about the project activity (team, social medias, forums, github…).
Whether shifts in regulation, changes in the business model behind the ICO, or even the threat of ‘fake news’ that could wrongly sway your purchase power in the other direction: data-driven suggestions could be make-or-break for your new ICO experience.
Conclusion
With rising maturity of platforms, both on the web and from underlying blockchain technology, ICOs may present a window into a future crowdfunding finally accessible to the masses: without the barriers and bureaucracy that have long-limited fiat-based funds and crowdfunding projects, full decentralisation may appear a dream come true.
However, with little-to-no regulation governing ICOs and distinction between utility and security tokens, both users and operators are driven by sentiment over statistics: with volatile trading behaviour mirroring this volatile state of the token market, one way to reframe the circumstance is to re-consider how trading decisions are made.
With Daneel, the negative consequences of misinformation in a highly emotion-driven market are not only mitigated; trading decisions are also enhanced, making the ‘revolution’ in the platform behind the trade when the ICO leaves users behind.
Stay tuned:
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