Being a cryptocurrency enthusiast, you must have gathered much information about bitcoin and other altcoins. But if you haven’t kept yourself updated on the latest ICO discussion, then we are here to help you understand about ICO.
Being a cryptocurrency enthusiast, you must have gathered much information about bitcoin and other altcoins. But if you haven’t kept yourself updated on the latest ICO discussion, then we are here to help you understand about ICO. To begin with the introduction, ICO stands for Initial Coin Offering, which is somehow similar to Initial Public Offering (IPO). But since our subject is based on ICO, we will be concentrating on understanding it. ICO is the fundraising method used by startups for offering products and services related to cryptocurrencies.
If you have been following the latest crypto discussion, then you may have come to know about the fact that some ICO is providing massive returns for the investors, in comparison to others who miserably failed or turned out to be a fraud. For participation in ICO, a person must need to buy digital currency and should be knowing the use of cryptocurrency wallet and exchange. But investors must also be careful enough for doing research and investing in ICO, as it is not controlled by any lawful authority. In short, it is unregulated.
Concept Of ICO
If you want to know about ICO, then you need to understand that ICO is a medium to raise money for the creation of a new app, coin or service. The investor here buys the offerings and gets a new cryptocurrency token in return. This token has utility in the use of product and services offered by the company, or else it is regarded as a stake or project in the company.
Working Of ICO
Whenever a cryptocurrency startup raises money through ICO, it makes a plan through a whitepaper. It makes them decide about the actual objective of their project and other concerns regarding the need for finance, amount of virtual tokens to be kept by founders, type of money to be accepted and duration of ICO campaign running.
In comparison to IPO, where an investor gets a share of stock in the company in exchange for investment, there is no involvement of shares in ICO. Companies instead raise funds through ICO providing blockchain, which is equivalent to cryptocurrency token.
Since ICO is unregulated, it is much prone to fraudsters and scammers, who take undue advantage of overexcited and poorly informed investors. As it is not in control or regulated by any financial authorities like SEC, then it is possible that your funds will not be recovered due to frauds. If you are reading about ICO, then it is important to be aware of risks too.
Investing in ICO doesn’t give you the guarantee to be free from scams. But you can help yourself by following some guidelines to be free from scams.
How To Avoid Scams
Have a good understanding of the developers. Investors must strive for full transparency from the company who is launching ICO.
Always be updated about the ICO’s legal terms and conditions. Being an investor, you need to know about the legitimacy of ICO.
Be sure enough about your ICO funds, which must be kept in an Escrow wallet, which acts as a shield from scams.
So now you’ve got to know about ICO from this blog. In this blog, we gave you insight about the ICO and its working. Besides this, you also got aware of the fact that it is an unregulated body, which doesn’t have any supreme authority governing it. So in that way, it can be prone for scams and frauds, which investors must be careful about before they land up in trouble. Apart from the advantages, there are disadvantages involved in ICO. Still, being investors, one can very well adopt safety measures by following the guidelines mentioned at the end of the blog.