What is ICO?
The abbreviation ICO stands for Initial Coin Offering, that is, the initial placement of coins (tokens). During the ICO, the project team sells digital tokens for cryptocurrencies or fiat money to investors. Later, these coins can be used on the project platform as an internal currency or trade them on exchanges. In addition, instead of ICO, the term "Crowdsale" is often used.
The core value of an ICO is an idea. It is for the implementation of some idea / project that the investment is collected. The procedure usually has several stages:
Preliminary announcement.
The initiators of the ICO tell the public in general terms their idea. At this stage, it exists only on paper or even in the minds of a startup team. The level of investor interest in the project is “felt”; answers are given to basic questions. Announcements are held in electronic media, social networks, as well as in the form of conferences. There is a discussion between investors and authors of the idea.
Offer
This is a proposal for cooperation. In the case of ICO - about investing. Despite all the freedom of an ICO form and the absence of regulation, it must be attached to some legal entity. It is on his behalf that the offer comes in. The deadlines for the implementation of the idea, the necessary amount for this, the emission of tokens are announced. To do this, create a separate website or presentation. Sometimes there are preliminary closed sales of tokens. In this way, going to invest for the official launch.
Marketing campaign
When almost everything is ready for the launch of ICO, an advertising flywheel begins to unwind. In contrast to the preliminary announcement, here a startup can already tell more about its product / service disclose investment conditions, goals, and technical details. Various channels are used for advertising: ICO Lists and directories, electronic media, social networks, presentations, thematic portals.
Start selling
A full launch of the sale of tokens is also called a Crowdsale or Tokensale. Initially, a startup offers investors to acquire a token inside their platform (website). Later, sales are launched on public cryptocurrency exchanges. The exit of the token of the ICO startup to the stock exchange is considered to be a kind of proof of the viability of the project. Although this does not always mean that, it will be successful.
All this is very similar to standard crowdfunding or venture capital investment. You invest in a startup at the germ stage. They tell you the idea, announce the conditions of investment. If the project succeeds, you get your dividends. However, ICO is in no way regulated by anyone and is necessarily connected with blockchain technology or cryptocurrency. This does not mean that the project must necessarily engage in the development in the field of fintech. Even for a cheburek one can hold an ICO, if it is somehow connected to the blockchain.
Most of the projects use the smart contracts of the Ethereum platform and investing occurs in ETH, less often in other cryptocurrencies, even less often in Fiat. The potential exhaust from the ICO may be 100-1000-10000 times the initial investment.
This type of crowdfunding originated recently. If the first Bitcoin cryptocurrency appeared in 2008, the first ICO was held in 2013. The pioneering title of the discoverer is the project Mastercoin (now Omni). He managed to collect a solid 5 million dollars.
The emergence of ICO is associated with the general popularization of cryptocurrency and the general availability of this type of crowdfunding. It is enough to have funds (own or attracted) and the idea to initiate an ICO.
There are many similarities between IPO (initial public offering), and ICO (initial coin offering) . The main difference is that investors in an IPO acquire securities (shares) for fiat currency, and in the case of ICO, the internal currency of the project is the token. The main task of cryptocurrency crowdfunding initiators is to sell as many tokens as possible. Rather, sell enough coins to develop your project. Their real value remains uncertain until the project reaches the stock exchange.
The buying party, that is, investors, in the future will be able to use start-up tokens to obtain services, services or goods provided by the ICO. Alternatively, even receive dividends or sell tokens, in case of a project on the stock exchange and further growth in value.
Terms used in ICO
The ICO, as in any specific niche, has its own designations, incomprehensible to the ordinary man in the street.
Pre-ICO or Pre-Sale is an investment attraction even before the start of ICO itself. During presale, the cost of tokens is traditionally lower. A startup in this way collects additional funds for the main part of the ICO. Investors receive bonuses and discounts. PRE-ICO is not as actively advertised as the main monetary offer. Many investors view this stage as potentially beneficial to themselves. They get tokens at a low cost, and then sell them as soon as the coins start to be traded on the exchanges. This is a form of short-term investment.
Crowdsale - as mentioned above, a Crowdsale is the main stage in the sale of coins, that is, the ICO itself. It is used by start-ups themselves to increase the level of trust in their project, since with an ICO, potential investors may have bad associations due to dishonest projects. Tokens are sold on the domestic level - via the startup platform (website), or directly on cryptocurrency exchanges.
Bounty is a reward offered by ICO creators for certain services. Simply put, a startup gives a person his tokens for his contribution to the development of the project. What could it be? For example, adaptation, proofreading and preparation of documentation or ICO press releases or translations of advertising materials and other content in different languages. It can also be a project advertising on websites, forums and social networks. Simple registration with ICO - even for this, individual projects issue bounty. Referral programs, solving technical problems, programming ... For your contribution to the development of ICO, you will receive a certain number of tokens.
WhitePaper is a kind of ICO description. It reveals in detail the essence of the idea, how innovative and promising it is. It describes the methods of its implementation - reveals the technical, marketing details of a startup. A niche and other important aspects that might interest a potential investor are considered. For drawing WhitePaper often, hire outside consultants. This is a kind of "brochure", after reading which, a person understands the whole essence of the project.
ICO List (Listing) - the website which contains a listing directory with information about upcoming and active ICO projects with short descriptions, links and videos. Most of the popular ICO listings rate the ICOs and publish the ratings.
Differences between STO and ICO
STO is a new form of investing blockchain projects by offering tokenized securities. The latter, in turn, represent the shares of the company. Unlike tokens, possession of tokenized securities gives owners all the rights specific to owning ordinary securities. Tokens do not grant any rights.
So, tokenized securities (or stocks) are a category of security tokens that qualify for such an asset.
To determine if a token is a stock, the Howey test is used. It relates the transaction to the investment contract and gives the corresponding result. In order for a token to be recognized as an investment contract, it needs to meet certain requirements:
User investment:
The user is focused on making profits from invested finances;
Investments are in "common ownership";
The owner of the token makes a profit from the activities of other persons.
Due to the fact that according to US law, all ICOs need to go through the registration procedure, STO will become the next trend in the field of cryptography.
Who can join STO?
According to the above legislation, investors must meet one of the following requirements:
Annual income not less than 200 thousand US dollars per one individual or 300 thousand US dollars for spouses;
The amount of net assets should be not less than one million US dollars excluding the real estate in which the potential investor lives;
The amount of the company's net assets must be at least $ 5 million;
A company whose members are all accredited investors.
Seven simple tips how not to become a victim of ICO-scammers:
Despite the increase in the number of scammers, seven simple tips will avoid losing funds when investing in new projects. This information will help you quickly assess the potential prospects of IСO in terms of investment safety and significantly reduce your time spent on analysis.
We do not rule out the possibility of the appearance in our list of projects aimed at collecting funds only. Therefore, all our ratings are estimates of community members and show just recommendations to the of the list authors.
ICOLINK.COM does not sell ratings in the ICO list and does not involve outside experts. Due to this, we suggest that you independently evaluate the financial prospects of an IСO. In our opinion, it is the best way to avoid fraud.
Study the profiles of the startup team members on LinkedIn and other Social Networks
It makes sense to carefully study the profiles on LinkedIn of key project participants (founders, managers and advisors) and try to find out on open sources real stories of their previous work experience. More credibility looks the ICO indicating on the pages of their website and in social accounts the real addresses of offices and real contact information.
Check the applications
Read between the lines when it comes to the statements of project representatives. Before investing in the ICO, check to see if the statement of the project's representatives is unfounded. Read the Media topics linked on the ICO website and check the ratings on the main ICO List websites (some of these ratings are paid, some are not, so treat them as average indicators, which together can warn against investing in dangerous ICO).
Invest only in the existing product
Stay away from ICO, which do not have at least a minimal working version of the product. We are talking about a viable service that should have a map of technological development and be at a certain stage of development. Do not invest in companies that just offer an unsupported ERC-20 tokens
Be wary of small projects
A low collection threshold for ICO does not mean that it is not fraud. On the contrary, this may indicate the desire of criminals to provoke trust and attract as many investors as possible within a short period of time. Often in this case, scammers try to manipulate investors, speaking about the high price potential of the token.
Be wary of financial pyramids
Try to avoid investing in projects offering attractive bounty programs with network marketing features, reminiscent of their structure, financial pyramids.
Do not believe false promises
If a new startup emerges from nowhere, and its team emphasizes its revolutionary nature and promises a significant return on investment in the shortest possible time, you should study the project more carefully before investing in it. Fraudsters are excellent at throwing dust in their eyes and operating with a thirst for quick profit.
Carefully study the Whitepaper
When reading a Whitepaper, pay close attention to the Disclaimer, quality of the texts, the adequacy of the market and competitors analysis, and also the accuracy and clarity of the proposed product description.
Be careful with participation in ICO-projects, do not accept all statements of startups on faith, independently research the work of the company and trust your intuition.
All the information published on the ICO List only for informational purposes and is not a recommendation for participation in a particular ICO or Crowdfunding Campaign!
