Recently there has been a lot of attention on cryptocurrency ICOs. ICOs are initial coin offerings and have developed into a popular way for investors to buy into products at affordable prices. At the same time, project developers go out of their way to raise a lot of funds that will see them complete their projects. In this balanced ecosystem, many will remain confused regarding ICOs. Some of these concerns are addressed here.
What is ICO?
Buying into cryptocurrencies in anticipation for the long-term reward is similar to IPOs in various aspects. Unlike the old crowdfunding model, ICO cryptocurrency model avoids using credit cards or other traditional forms of payment. Most people prefer using Bitcoin or Ether, while others accept tokens or other currencies.
The Similarity Between ICO and Crowdfunding
ICOs are similar to crowdfunding in that the idea behind it is to invest as early as you possibly can. In the case of ICOs, the early investors received specific token percentages on top of their regular amounts. Early investors would get tokens on top of their proper value. The bonuses would be given after a particular duration or arrived at from the tokens on sale. Always be vigilant as ICOs offer a very limited buy-in window.
The similarities between ICOs and crowdfunding are just that, nothing more. With crowdfunding projects, backers are eligible for refunds if the project is unable to deliver. This might not be the same case with cryptocurrency ICOs. Unfortunately, most projects hold their funds in smart contracts. Operating this technology makes it easier to refund your investors.
The Cryptocurrency
During a cryptocurrency ICO, it would be essential to know the number of tokens that are generated. Do not go for the companies that issue out a billion tokens, which makes it impossible to realize any meaningful value appreciation. Most tokens are listed on the bitcoin exchanges guaranteeing liquidity.
Available Models
When using tokens, there are two models one can use. First being the static supply approach with predetermined values. This means a certain number of tokens get sold at a standard price. This evens out the playing field for both early and late investors. Unfortunately, speculators will not find this method too attractive as they are unable to purchase cheaper coins. Notwithstanding, these tokens appreciate in value just like the others.
Your second option is to operate on a static supply offering a dynamic funding goal. Distribution of currency ICOs is based on the amount of money you are willing to raise within a particular date. The more the amount borrowed, the higher the value increase of your token during the ICO. For a long time now Bitcoin has been the most reliable cryptocurrency with its market capitalization peaking at $70 billion just a few weeks ago. The rise of the Ethereum chain is another suitable way to operate through crypto-platforms when using ICOs. The narrative today has shifted to the entire cryptographic asset-pool.
A New Phenomenon
The forkable derivative nature of cryptocurrencies explains their entire ecosystem. A good part is market speculation while the other centers on its applications today. The practice behind the ICOs has been around for a while. The name initial coin offering seems to have gained popularity much recently.…