What is an ICO?
You probably have heard of the term ICO or initial coin offering. But if you are like most people, you probably don’t have a clear idea what it is and how it works. Here’s an analogy to help you better understand what an ICO really is.
Imagine you’re a startup in Silicon Valley and you have this awesome idea for a new cryptocurrency system. Let’s say you want to target the parent/babysitter payment system so it can become encrypted and digital. Furthermore, let’s pretend you aptly named your currency BabyCoin.
While your idea is undoubtedly awesome, you still have one major challenge to solve—you need people or investors who would be willing to give you money so you can make the currency.
Of course you always have the option to get backing from venture capitalists or from banks. However, can you raise money without giving up your ownership of the company? With initial coin offering, you can!
Here’s a short summary of how it works: you create a document where you will write in detail how the system works (this is called white paper). You also make a website explaining why your concept is awesome so people will be enticed to invest. You then ask investors to send money (this can be in the form of Ether, Bitcoin, or Fiat).
In return, you will send those people a BabyCoin. Investors then will hope your coin will be used and circulated heavily so its value will increase enormously.
Investing in ICOs
ICOs didn’t become massive by accident. Primarily, the rise in its popularity can be attributed to the idea that it can offer lucrative ROIs. If you’re looking to invest in one but don’t know how to find a good ICO, you’re in luck. In this article, we’ll list down some of the key characteristics ICOs with high potential have so you don’t end up wasting your investment.
Nuanced white paper
In essence, a white paper is the project documentation. ICOs with high potential have a white paper that clearly details relevant information on the project’s general and technical details. Ideally, it is also in the white paper where you can see the business plan as well as the stages of financing and the specific keynote markets.
As a general rule of thumb, an ICO worth investing in should have logical and realistic ideas as well as concise and clear formulations. A link repository and availability of the part of code are also good indicators.
Awesome and informative website
The website will act as the “portrait” of the project. It is where you can find information about the project, the token offerings and its amount, the names and contact numbers of the founders and other important details.
Experienced and trustworthy team
If the site clearly indicates the project participants alongside their contact data as well as other relevant information, it can greatly increase your confidence in the project. In addition, it would also help a lot if those people are already associated with other successful ICOs in the past.
Protection against inflation
Another key element you can look into if you want to find a good ICO is protection against inflation. If the company issues unlimited tokens, there is a huge possibility the tokens will quickly lose their value. Ideally, the number of tokens that will be issued should be predetermined. Preferably, no more than 80 percent of all tokens should account for the initial coin offering.