The word “ICO” stands for initial coin offering. It is the cryptocurrency equivalent of an Initial Public Offering (IPO). In an ICO, tokens are distributed to early investors in the project. In many cases, there are bonuses and free tokens and advantages for being among the earliest investors.
An initial coin offering is essentially a fundraising mechanism where the project sells off its coins to investors much like in any company. Not all cryptocurrencies have ICOs, and the first cryptocurrency, Bitcoin, had no ICO.
ICOs have really taken off in the last couple of years as investors are keen to get in on new blockchain technology which has the potential to change the world. Generally, the quicker you can get in on a scheme the more profit you will make in the long term.
But there are many pitfalls associated with ICOs and there is no such thing as easy money. Some could even say the bubble has burst to a degree.
ICOs raised a staggering $5.6 billion in 2017 and are now the standard investment model for cryptocurrency. These ICOs have no doubt made certain individuals very, very rich. But the sector has more than its fair share of scandals, scams and hacks, and others have lost fortunes.
How to Register With an ICO
Most people are aware that the quicker you can find out about a new product or cryptocurrency, the quicker you can make money. This is because even if the product does not ultimately deliver its intended aim, if enough people buy into the market the price of your token will still go up.
The cryptocurrency industry is filled with speculative investments. This is not to say that there is no value in the industry, because there most certainly is.
However, it will take years of integration and adoption for correct valuations to be established.
ICOs are still the best way to make money quickly in the cryptocurrency industry. If you want to register with an ICO in its infancy you really need to be in the loop and keep up to date with what is going on in the cryptocurrency community.
The best thing to do is to go to icoalert.com or icohotlist.com. These sites list all the up-and-coming ICO’s. Click on the website associated with the ICO and you can simply follow the instructions as regards to how to invest.
Most initial coin offerings can be invested in using Ethereum smart contracts, so you will need to download a wallet that supports Ethereum tokens such as MyEtherWallet (MEW) or Mist and deposit some Ethereum.
MyEtherWallet (MEW) can be slightly challenging to use at first since you create a passport instead of a username and download the Keystone file, otherwise known as a private key. From there, MyEtherWallet creates a public address for your wallet, yet the only way to access it is through the generated private key.
Ethereum can be purchased through a large variety of trading platforms and is nearly as ubiquitous as Bitcoin, having half of its market capitalization right now.
Good places to exchange fiat currency for cryptocurrency include Local Ethereum, GDAX, Coinbase, Kraken, ShapeShift, Changelly, Bitfinix, Bittrex, CEX, Litebit and countless others.
The ICO website will invariably have the whitepaper listed along with an email subscription form, as well as some pages explaining how the process works. You exchange your Ethereum for the particular token associated with the ICO and then hope it goes up in value.
Remember, the aim of these ICOs is essentially to have a token that will be so useful that it will actually replace money in many ways. Your token could be used as a form of currency on real estate, loan, bond, luxury goods, insurance and other markets, so hopefully, there will be no need to trade your cryptocurrency back to fiat money and profit that way.
You might still want to convert your cryptocurrency, such as your Bitcoin, Ethereum, Litecoin, and Bitcoin Cash, back into fiat money in order to cash in—it all depends on acceptance and the levels of adoption.
Other Ways to Invest in an ICO
One of the quickest and easiest ways to invest in an ICO is through two new Asian exchanges, Binance and Kucoin. These two exchanges have distinct advantages which set them apart from the majority of their competitors.
Both of them have their own coins which can go up (and have gone up) in value and also offer discounts on trades through the platforms. The fees available are the lowest on offer and because these exchanges are small and innovative, they list ICO tokens far before the other exchanges such as Kraken and Bitfinix.
If you want to invest in ICO tokens, they will most likely hit Kucoin and Binance months and possibly years before they hit Kraken, Poloniex and the like. This is because the larger exchanges are only interested in proven coins with high trade volumes.
The Kucoin token is the Kucoin Share (KCS) and the Binance token is called Binance Coin (BNB). By buying these coins you are essentially investing in the exchanges themselves. Binance has already skyrocketed and has shut its doors as customer support cannot handle more new users.
Kucoin is still open for business and has a huge upside. It is still accepting new users and if its volume and users reach a fraction of the levels reached by Binance then the price of the KCS will grow massively.
Additionally, the KCS pays dividends to shareholders in the form of a basket of cryptocurrencies, some of which are newly listed ICO tokens. It is a fantastic way to gain passive exposure to ICO coins.
These exchanges have the added advantage that you do not need to verify your identity unless you are withdrawing over 2 BTC per day, which is quite a large amount. You can have your ICO token by the end of the day.
Bear in mind that you will need to purchase some cryptocurrency first. These exchanges do not accept fiat so you need to deposit cryptocurrencies such as Bitcoin or Ethereum and then exchange them for ICO tokens.
There are some alternatives to these Asian exchanges. Cryptopia is a P2P exchange that lists nearly 600 cryptocurrency tokens, far more than any other exchange. If you can’t find your ICO token on Binance or Kucoin, it may well be listed on Cryptopia or other P2P sites.
The Dangers of ICOs
With the rise of Bitcoin mania, it seems that many investors have been flocking to ICOs. The dominant viewpoint seems to be that there is no more money to be made in the world of cryptocurrency, which is a flawed assumption for various reasons as the industry is still in its infancy.
Investors have stampeded into these ICOs in the hopes of making their fortunes. Many ICOs have been incredibly successful, raising enormous amounts of money in record time. But it remains to be seen if the money invested will pay off.
While some of the earlier ICOs were hugely successful, recent ICOs have been much more controversial. Many projects do not have an actual demonstrable product to show, just a whitepaper and a theory about what they could achieve when they are up and running. This seems to be all that is needed to raise tens of millions of dollars within days.
The Tezos ICO is the starkest and most recent example of an ICO gone wrong. Tezos raised over $230 million thought its ICO in one month. This is the kind of money that these ICOs have been raising, though Tezos is definitely one of the bigger projects.
The product launched without a clear business model or a product. It basically put forward the idea that people who held tokens would be able to vote on anything produced on the Blockchain platform in a decentralized model.
The Tezos project is a complete catastrophe, primarily due to a rotten egg within the company, Swiss banker Johann Gevers. Gevers is accused of pressuring other members into giving him tokens and failing to do anything that he was supposed to do, including hiring and paying staff and performing basic functions.
The infighting between initial founders Kathleen and Arthur Brietman and Tezos Foundation president Gevers has grounded the project to a halt. The release of the “Tezzies”, the Tezos coin, has been set back and may never occur.
The Securities and Exchange Commission is set to make an example out of Tezos by stipulating that the tokens sold via this particular ICO are securities and to be regulated and registered as such. By failing to do so, the defendants allegedly made “false and misleading statements of material facts”.
There are currently at least two class action lawsuits against Tezos. It is set to become Theranos version 2, another notable ICO failure.
Along with Theranos and Tezos, the biggest and most well-known ICO project failure was the DAO (Decentralized Autonomous Organization). This was an investment project where the stakeholders would vote on all aspects of the development.
It would be independent of any countries and have no management or corporate infrastructure. It was an experiment to see how it would be viewed by regulatory authorities as no country could really claim governance of an entity that was not incorporated, with no headquarters or infrastructure.
Ultimately, the DAO failed due to a security breach where user funds (Ethereum) were stolen. This caused a split in the Ethereum Blockchain and ultimately led to Ethereum and Ethereum Classic.
And the SEC ultimately ruled that the DAO tokens would be viewed as securities, though the reasoning for this is quite shaky.
ICOs are inherently risky and China and South Korea have decided to ban them outright, though they may reconsider this position in 2018. ICOs are risky by their very nature, as most of them raise money for investments without any kind of product. There are few restrictions as to who can invest in ICOs.
Currently, the Securities and Exchange Commission has decided that some ICOs should be treated as securities. Despite the risk, ICOs still represent one of the most lucrative investment opportunities in the cryptocurrency market and if you want to invest you need to understand how it works and how to register.
One ICO success story is Bancor. It is similar in many ways to Tezos, except that it has a clear vision and a good management team.
It raised $153 million in less than 3 hours, becoming the most successful ICO ever. You could even say it is the most successful project ever in terms of the capital raised in that timeframe.
Bancor has seen massive integration with coins, wallets and platforms including Wax token, SENSE, Power Ledger, EOS, DAI, Metamask, Mist, Parity, and OmiseGo. A total of 100 token projects have announced integration with Bancor, with a total of 320 partners.
It is not going anywhere and is set to be a gigantic success with this level of support and its previous track record. The Bancor token is the BNT (Bancor Network Token).
The main difference between Bancor and Tezos is that Bancor is decentralized but still has a system of governance in place. What they set out to do is fundamentally the same.
In many ways, Bancor works like Ripple Net. You can put your cryptocurrency on the Bancor network and exchange it for another cryptocurrency with fees that are very near zero.
Unlike with Ripple, the shareholders have a say in Bancor. Ripple is completely controlled by the initial corporation, Ripple Labs, who own all the tokens and can print more if they wish. It is essentially the same old centralized banking model disguised as cryptographic decentralization.
Invest Safely in ICOs
To conclude, you can make a fortune in ICOs or you can lose everything. In 2018 and beyond there will be yet more scandals and more success stories.
A safe option in this industry is to perform your due diligence, get in early and above all do not put all your eggs in one basket.
The cryptocurrency sector is rising on the whole and if you invest in a number of different projects then you should be all set. Investing is easy and you can get details by visiting the ICO website.
In the meantime, it would be a good idea to download an Ethereum wallet and familiarize yourself with cryptocurrency. It is similar to learning how your fiat bank account and credit card work, just for the cryptocurrency industry. This is going to be a necessity moving forward.
You can also invest in ICO tokens through Kucoin and Binance as well as investing in the exchange themselves. This is an easy way to gain exposure, and these platforms have many advantages, in particular, the lack of verification and the tiny trading fees.
Just remember to withdraw your cryptocurrency funds from these platforms, as online sites can be hacked and the security protocols of these Asian exchanges is nowhere near the levels of their larger Western counterparts.