What is an ICO? Is it smart to invest in an ICO?

ICO is an abbreviation for Initial Coin Offering. It is a method of raising funds for blockchain projects. Instead of issuing company equity, it is used to issue digital currency of blockchain projects. The digital currency, usually Bitcoin or Ethereum.

For example, if I would like to do a "decentralized notary office" project based on blockchain technology today and I think this project will have a bright future. So, I organized a team, but how to do it without money?
 

In the past, we had to go through a complicated evaluation process to identify the feasibility of the project through a variety of indicators. At the end, only a small number of projects got money from angel investment and venture capital (VC). If you want to raise funds in the stock market, it will be more complicated.
 

You need to strictly regulate your business behavior, provide a lot of reports, and even the chief responsible person must assume certain legal responsibilities to prevent you as a business operator casually infringing on the interests of investors since you have much more information than the investors.

However, on the ICO platform, your financing is so simple. You don't even need to register for a company. It may just be a few-page white paper. Sometimes, you don't even have white papers. There is only one project vision. To issue a “XX currency” and sell a small part of it will be worth tens of millions of dollars. Even billions of dollars in Bitcoin or Ethereum.

 

1. Some famous ICO projects:

Mastercoin: Now renamed Omni. It is the earliest ICO project that could be checked, expanded the Bitcoin function through meta-protocol and raised 5000 BTC.

Bitshares: It was one of The Three Musketeers in "digital assets second-generation."

Ethereum: It raised more than 30,000 Bitcoin on ICO. It is the most successful ICO in the past two years, and also the digital currency/blockchain project with the highest market value except Bitcoin.

TheDAO：Equaling us $160 million, ICO crowd-funding broke the world record.

Golem: golem ico completed a crowdfunding cap of 820,000 ETH in about half an hour.

Waves: waves ico raised about 16 million U.S. dollars (29,636 BTC) in ICO.

Qtum: Qtum ico only supports BTC/ETH.

2. The advantages and disadvantages of ICO

Advatanges:

A. Short financing cycle

B. Simple financial process: The founding team can directly introduce their projects to investors through other forms of papers, such as "white papers" and "crowdfunding rules," which can quickly gather investors interested in the project.

Disadvatanges:

A. Since some ICO projects ended up in failure or proved to be fraudulent, this raises the level of caution and suspicion among investors on the ICO.

B. The general environment has not yet had a perfect supervision and clear restrictions on ICO, which has increased the uncertainty of ICO. Although there are some platforms currently conducting due diligence on ICO projects, this is more of a partial self-regulatory nature. The law does not specify this.

 

3.The benefits of ICO to individuals

There are many potential benefits to participating in the ICO. One of the more significant is to help companies release products. And after buying tokens, you may benefit from selling again.

In most cases, encrypted tokens issued during the ICO are sold at a fixed bitcoin or dollar price. Its price does not have any endorsement, except for the community's confidence in the development team to complete the product, so the price is usually very low. After the project is developed and released, token prices will be supported by real and effective products. Generally this will drive prices up. At this time, the original supporters will sell tokens and gain considerable profits.

Take the Ethereum ICO in 2014 as an example, the selling price of each ether was 0.3-0.4 US dollars. After the launch of the project's main platform in July 2015, the price of each token rose sharply, reaching a high of US$19.42. This means that the luckiest participants can get more than 6000% return on investment.

However, it must be remembered that no revenue is guaranteed. ICO activity may fail and all investment will be returned to the sender. Even if it succeeds, there is a possibility that the developer cannot complete the final product and the token price will never rise. This is the risk that ICO participants must consider beforehand.