Beginner’s guide to ICO investingNeha Kapoor
ICO – Initial Coin Offering is a growing trend to raise the funds to build a new technology. Even Startups are employing this method to raise funds for their growth and developing new technology. The only way to participate is via ICO investment.
A simple question to all readers - what are ICOs and how do they work? ICO is a crowdfunding system for companies that receive cryptocurrency instead of the traditional one. Selling tokens (cryptocurrency) is the major reason to hold this event.
For your investment via cryptocurrency, digital tokens will be issued which represents part ownership of the company. This provides access to future profits of company’s products and services. Once the token sale is complete, these ICO are available for exchanges. Many such ICO has increased its value exponentially in a very short amount of time and overnight millionaires have been created in the last 12 months.
How do they work?
Without knowing how the ICO works, you cannot blindly invest in them. There are a few steps that are carefully executed to make the token selling a huge success while raising capital for the startup.
• An economically successful blockchain project is proposed and needs to raise funds through ICO
• The whitepaper is then prepared which describes the technical details, business models and roadmap for the company
• These projects may or may not have a working prototype
• Marketing campaigns via social media and search engines will initiate and create awareness of your ICO token selling event
• They specify the amount of token available for selling along with its price and utility
• They also specify the amount to be raised for their project
• ICO token sales begin and investors can start buying token in exchange for cryptocurrency
• Tokens are available after the event is complete for exchange
These are the basic outline of how the entire event is planned and executed. We know how it works and we need to know how to participate.
There are 2 ways that you could take part in ICO depending on how early you need these ICOs. They are:
• Buying token through exchanges
This is more of a passive participation where you buy tokens of ICOs that have been recently released by a company.
• Direct participation in the ICO event
A direct participation via enrolling yourself for buying tokens directly from the startup during the token sales event is another option. You have the option to sell these tokens at a higher rate soon after the event is over.
We learned what is ICOs, how they work and how to get involved in them. Now, we need to know the different types of ICO for the better idea.
Types of ICO
The type classification is done for ICO mainly based on pricing method in token sales. Most common types are:
• Increase in price directly proportional to increase in investors
This is a many step process while distributing ICO. The most minimal cost will be set for tokens in the principal cluster that is sold. Once the flow of investors starts to grow, more stages will develop accordingly which will certainly increase the price of the token which has been brought previously.
• Price drop over time
ICO token sales start at a set price by the startup or any organization and then auction begins. The price starts to drop once the auction progresses proportionately till the very end. This is a long-term process which can stretch up to a year.
• Fixed price tokens
Fixed price tokens don’t affect the price of the tokens. They are fixed price and be exchanged only at that price. There is a freeze time which blocks selling or trading these tokens as soon the event is over, during this time it is impossible to trade the tokens you have. Once the time is up, you could start trading these newly bought ICO.
• Random price tokens
There is no fixed price for tokens for this type of ICO. The company collects funds from investors post which they held a token sale and distribute tokens to investors as per their share in the funds. There is a catch in this type of ICO, you need to be careful about the pricing and number of tokens issued for circulation.
How do I start?
If you are still reading, the same question will be lingering in your mind too. How to start? Not to worry, I’ll discuss that information as well. There are a few simple steps which will help you kick-start your cryptocurrency journey.
• Find an ICO of your interest
• If you have a digital wallet good enough or you need to get one
• Buy cryptocurrency or if you already have it, well enough
• Transfer a few coins to your wallet to make the investment for ICO
• Prepare your ICO checklist
• Wait for ICO countdown
• Once the sales begin, start buying
• Claim your tokens
You need to keep track of your cryptocurrency else it will be a hassle for you. There are many such websites which specialize in tracking, trading, exchanging your cryptocurrency with wallet options. I have had a few of them in mind and one of them seems to have caught my interest. Encrybit is the website which can be said as the future of cryptocurrency trading. A simple and unique upcoming site which provides the platform to buy and sell cryptocurrencies in an improved manner. Quite thoughtful to launch one of the finest exchange in the world by seeking people’s opinion. It will be at a center of attraction for potential investors to participate in pre-sale ICO and help in generating soft cap for the exchange. Why not give it a try? Cryptocurrency is here and you need to explore and exploit the endless possibilities.
Cryptocurrency is growing and disrupting other traditional financial institutions in a huge way. We need to be aware of the current situation and try to exploit the situation to the maximum. The people aware of this situation are taking initiatives like ICO token sales to improve their financial status, why don’t you try it as well? It is not illegal and with your smart decisions, you could significantly improve your financial status. I hope this information will assist you in setting up and start investing in ICOs.