ICO: to invest or not to invest?

Since Spring 2017 there have been a lot of talks around such a new for the non-cryptocurrency world phenomenon as ICO. And above the talks, there were even more actions: the number offerings was growing exponentially as well as the amounts of the deals. Today I will try to explain what is ICO, why everyone around is going crazy about it and is it worth to invest in one.

What is ICO? ICO (Initial Coin Offering) is an issuance of tokens for use in the projects, for which money is raised. In other words, it’s a kind of crowdfunding, where you receive some money (in cryptocurrency) to pay for the future project’s services. Or the new cryptocurrency is positioned as more advanced as a payment method with the upgraded blockchain system.

As for me ICO now has more chances to raise money than some equal project raising on crowdfunding platforms. The reason for this is that the competition between the ICO-projects is much less tough than one between regular crowdfunded projects. As nearly 50 ICO are held monthly now, all of them are in sight of a huge number of potential investors.

Considering the realized projects, the most successful of them is Etherium. It’s now standing on one line with Bitcoin as the universal cryptocurrency. Why was it so successful? It proposed the improved blockchain system, decreasing the transaction time and increasing protection. This is also the point of plenty of new cryptocurrencies being issued on ICOs.

Why is everyone talking about it? By October 2017, coin sales worth USD 2.3 bln had been conducted during the year, 10 times more than in the whole 2016. The largest ICO was Block.one raising USD 185 mln on the issuance of their EOS token. OK, but is that all? I think people see a possibility of “easy investing”. Nothing is regulated in this sphere, you don’t need to register and get any kind of permission. It is now like a golden fever: everyone rushes into it.

Why to invest? I see 3 obvious reasons to invest in ICO. Firstly, basic speculation: buy cheap – sell expensive. Secondly, to spend the purchased tokens increasing in price to use the services of the project for the relatively lower price. And the last but not the least, just to back the project you like. In the first case, some of the most successful ICOs can double or triple the invested amount in just a month or even days. The second case has the same nature: the tokens purchased earlier can allow using the services of the project 2-3 times cheaper. The third one represents the nature of the true crowdfunding and doesn’t have a lot in common with traditional investment.

How to identify a good ICO for investing? As there’re no laws regulating ICO in any country in the world, lots of fraud ICOs were launched. This is the real dark side of ICOs. As I’ve already mentioned, lots of people started to rush into the new interesting sphere not really getting what all it is about and choosing totally unacceptable options for investing.

So, the first advice for not losing money on ICO investing is to have a closer look at the project behind the new token. Usually, the “bad” projects don’t have the clear formulation for what the new cryptocurrency is really issued, what are the advantages of the project, how it is going to monetize its features and what will attract the new users (those willing to buy the new cryptocurrency making it grow). Not only the project itself can determine the success. It would be a really good advice to evaluate the market for the potential service backing the cryptocurrency: why it will grow, does it have any limits, what are the chances against the competitors.

As for “good” projects, they usually have quite a long story (at least couple of months of pre-ICO) with lots of sources to get to know about, like: social network pages, website, forums discussions, etc. The great trait of a good project is the news of great venture investors investing in it. These guys evaluate the projects much more strictly, but if do invest – they will do everything for the project to emerge.

Invest responsibly. Ill-conceived investments may harm your bank account. Reed more.

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