What is an Initial Coin Offering (ICO)?
We are in a digital world and the probability of coming across the word “Initial Coin Offering (ICO) is very high. Then you might have been wondering, what is an ICO? In layman’s terms, it refers to the process of raising money, similar to an IPO in the stock exchange. This might seem okay to simplify it to the minimum comprehensible level.
Technically in cryptocurrency term;
‘’An initial coin offering (ICO) is the technical term used by cryptocurrency enthusiast to define a new digital asset launched into the cryptocurrency ecosystem”
There are a lot of ICOs that are being launched daily into the cryptocurrency ecosystem, therefore it is advisable to carry out due diligence before investing in any ICO.
It is always good to invest in ICOs at the early stage, if it eventually turns out good, and you happen to be one of the early HODLer, it will be one of the best investments you can ever make as the ROI is usually on the high side.
According to Investopedia;
“A whitepaper is an in-depth information issue by organizations to the public to highlight their products, services, features, goals, and vision of the organization”
This is the reason investors take a critical look at the whitepaper of an ICO in order to decide if it’s worth investing in or otherwise.
How to invest in the right ICO
Regardless of the amount you are investing with, it is right to point out that ICOs have a high reward and high risk, carrying out the right diligence and patience is the difference between someone that will gain a high amount of money from an ICO and one that will lose heavily.
- Research: Carrying out a detailed research about the project is a very good way to know if an ICO is worth investing in. The best way to know everything that is all to know about the ICO is the whitepaper. The Whitepaper must be extremely detailed that even a layman that is not involved in the cryptocurrency ecosystem must be able to make meaning out of it. If the Whitepaper is vague and contains grey areas, kindly take the baton and exit.
- Transparency of the team members: The developers of the ICO must not be anonymous, you must be able to place a face on the people handling the project. This is very important before investing your money into any ICO. Anybody can come up with a whitepaper or website and launch a token. The track record of the developer behind the project is extremely important. Is he/she a person of integrity? Questions like this are very important to help make a logical conclusion about investing in an ICO.
- Transparency of the project: it is logical to know what the money raised during ICO will be used for. The project and roadmap must be clear as crystal and must not have any form of opaquely. Do not invest unless there is a product or you can see clear signs of what the product can achieve.
Conclusion: A lot of ICOs like Ethereum have scaled and some have failed. A lot of ICOs will be churned out in the near future. The major way to participate in an ICO is to have a wallet. I hope this article has been able to help clear your mind about what an ICO is.