The Step-by-Step Guide to Participating in Cryptocurrency Crowdsales
Remember, it’s not safe to store a large amount of coins or tokens in your wallet
Crowdsales. You’ve heard the term. And I’m sure you’ve also heard Token Distribution Event, Initial Coin Offering (ICO), and token sale thrown around.
Let’s make this simple — they’re all referring to the same thing!
For some reason, people in the industry like to make cryptocurrency crowdsales more difficult than they need to be by using an excessive amount of jargon, technical terminology, and abbreviations, but we’re not going to do that here.
Well, we might a little bit, but when we do, we’ll define what we’re talking about. So, let’s move onto the big question: How do you participate in a crowdsale?
1. Purchase Ether, Bitcoin, or an Accepted Altcoin
Bitcoin and Ether are the go-to standards, they are the blue chips of the industry, which means they are the most widely accepted cryptocurrencies. But before you purchase any coins, you need to identify what variety of contributions the crowdsale accepts.
Most crowdsales accept Bitcoin and/or Ether exclusively, but an ever-increasing number of crowdsales are moving away from exclusivity and accepting trusted Altcoins. The moral here? Check first, then buy.
So how do you purchase cryptocurrency? Well, that requires an exchange. There are two types of exchanges you need to be familiar with: fiat exchanges and cryptocurrency-to-cryptocurrency exchanges.
A fiat exchange is an exchange that facilitates the direct transfer of US dollars (and most government-backed currencies) into cryptocurrency, and a cryptocurrency-to-cryptocurrency exchange is exactly what it sounds like, an exchange that allows cryptocurrencies to be traded with one another. More often than not, you’ll need to use both types of exchanges when participating in a crowdsale.
Quick Tips:
- Make sure you’ve completed your exchange well in advance. Exchanges are not instantaneous and it can take up to a week for some transactions to clear.
- Once you’ve completed your transaction, your cryptocurrency will be “stored” in an exchange wallet. Before you can participate in a crowdsale, you’ll need to move your coins into a personal wallet.
- Do your research and purchase cryptocurrency from a reputable exchange. Find out what the exchange fees are and how many payment options you have.
2. Move Currency From an Exchange Wallet to a Cryptocurrency Wallet
Before you can participate in a crowdsale, you have to transfer your coins to a user-controlled wallet. You can’t participate in a crowdsale if your coins are stored in an exchange wallet. And what happens if you try? Good question, which is attached to an especially important answer: You permanently lose your coins — that’s right, permanently. As in, they cannot be recovered. End of the road. You get the picture. But all of this is easily avoided by setting up and using a cryptocurrency wallet to transfer your coins.
So, what is a cryptocurrency wallet (also known as a digital, personal, or user-controlled wallet) and what do you need to do?
First off, it’s good to understand how they work. Digital wallets are essentially software programs that “store your public and private keys and interface with various blockchain so users can monitor their balance, send money, and conduct other operations.” The transaction is completed, a record is added to the blockchain, and the balance in your wallet changes. Easy enough.
Now let’s throw in the twist: there are three types of wallets — software (desktop, mobile, and online), hardware, and paper. Breaking down each of these wallets is a topic in its own, but each type has its own level of security, so each variation should be reviewed and considered.
When you choose a wallet, make sure to set up a multi-currency wallet if you’re planning to deal with several currencies. This keeps things simple rather than having multiple wallets for different currencies.
Quick Tips:
- The security of your wallet depends on what wallet you choose and the service provider.
- Remember, you cannot reverse a transaction, so if you send money to an unreliable source, there is no fail-safe.
- Online wallets can be hacked because they function off of web servers. Security is always increasing, but web servers are not the most secure option.
- Offline wallets can’t be hacked.
- Protect your private key. If you lose your key, you can lose your money — even if you have an offline wallet.
- Secure your wallet with regular backups, multiple security layers, and the latest updates.
3. Transfer Cryptocurrency to the ICO Address and Receive Tokens
If you’re worried about scammers, this is where you’re going to want to pay attention. The smart contract that governs the crowdsale has a specific address, and you need to make sure you send your funds to the correct address or you will lose your money. Not the address that is e-mailed to you, tweeted out, or shared on any social platform. This could very well be a ploy to scam you out of your crypto.
To find the most credible information, go to the company’s website. Social platforms are easy to hack and scammers often pose as a company’s employee and send messages out to potential investors. Carefully review whether communications are coming from an official company channel, for the most part, trust the website, and ignore the other noise.
Once you send your coins, you’ll receive the company’s token in return. Most of these tokens will be compatible with your wallet if they follow the ERC-20 standard and you can store them in your wallet.
But remember, it’s not safe to store a large amount of coins or tokens in your wallet, so back it up! If for some reason the coins aren’t compatible, go to the company’s website — there should be directions on how to transfer your tokens there.
You can visit etherparty.com for more information on Rocket, Etherparty’s all-in-one, end-to-end solution for crypto-crowdfunding. Also, stay plugged in to exclusive content, updates, and announcements by signing up for our company newsletter, and by following us on Telegram.
