Beginner’s Guide: What is an ICO?

2017 is the year that the market for ICO’s exploded. Now, new ICO’s are being funded every day and investors are always looking for the next ICO goldmine.
But do you understand what an Initial Coin Offering is, and how they work? This guide will teach you some of the basics.

In this guide, we go through what an ICO is, how to find the best projects to invest in, as well as the most critical pitfalls you should keep in mind.

When you get into the crypto market and the blockchain technology that supports it, it is likely that you will come across many unknown concepts. One of these, and especially if you are looking for investment opportunities, is the abbreviation ‘ICO.’

There are several things to be aware of when you start your journey as a cryptocurrency investor. You might have learned how to get a hold of Bitcoins and Ethereum, but acquiring ICO’s is another process.

When you invest in an ICO, you are not investing in a finished product. You are putting your money into a brand new project, which can be lucrative for your wallet, but they can also trick you around.

In this guide, we give you a thorough review of what an ICO is, essential pitfalls you should know about before you invest, as well as just how to proceed when you want to put your money in an ICO. Read on, making it easier for you to sift the favorable investment opportunities from the bad ones.

What is an ICO?

We start by looking at precisely what an ICO is and about the basis for this collection.
Have you ever wondered how new blockchain technology is being funded?

If you have started to look into the opportunity to invest in crypto and blockchain technology, you probably have noticed one thing in particular. There are many different projects you can invest in. We have come a long way since Bitcoin was the only cryptocurrency on the market.

So, of course, it’s fun that there are so many projects that you can put their money into. But if you think of a little longer, you may start wondering what’s going on behind the rug. The vast majority of cryptocurrencies launched requires extensive project development, and a has hired a number of employees. Although a lot of blockchain-technology is based on volunteering, it is impossible to avoid the fact that all these cryptocurrencies will cost money to develop.

How do the development of cryptocurrency and innovative blockchain-technology get financed? As with everything else within the crypto space, one can summarize the trend of one word: decentralized. And an ICO is just that: A decentralized way to fund new crypto projects.

ICO: Commitment to innovation and cryptocurrency

ICO is an abbreviation for ‘initial coin offering.’ This means that a block-linked or cryptographic project offers early investors an opportunity to finance the project. In return, investors receive a number of tokens, or value certificates, proportionately to the amount of money they invested in the project with their investment.

In principle, this means that those participating in an ICO buy ‘shares’ in the company that arranges it. Thus, one can compare an ICO with diligence, which makes it possible for people all over the world to invest in a new cryptocurrency, a new blockchain project or both. Once the ICO is over, investors will receive their securities. We will look at how the structure of this tends to look a little further down in this guide.

Note: An ICO is not the same as an initial public offering, and the main difference is in the regulation of the two collection types. An IPO undergoes strict processes and has strict rules to comply to in order to launch. On the other hand, an ICO is decentralized and therefore does not follow any specific laws or regulations. Thus, ICOs are unregulated.

Anyone can launch an ICO

Just as there are several types of financing structures to businesses, there are also many types of ICO is one can invest in. A new cryptocurrency is in many cases designed on top of another blockchain (eg, ERC20 standard to Ethereum). Other projects operate their own blockchains and are therefore more comprehensive.

Whatever kind of project it is all about, they all share in common that anyone can launch an ICO diligence. Because this is based on investment from people around the world who believe in the project, one does not depend on much capital to launch an ICO.

In fact, anyone can download the open source code from existing blockchains and start designing their own project. It’s up to you as an investor to sift these projects apart so you end up with solid investments you can feel completely comfortable holding.

Keep in mind that initial coin offerings are unregulated. When anyone else can launch them, and they are decentralized, this means that you should be careful about this side of the investment front. In this guide, we show you what you should be most careful about, so you do not lose your investment for reasons that can be avoided.

To learn how an ICO works, check out our next post in the ICO guide:
Beginners Guide: How does an ICO work?