If you are planning to venture into the world of cryptocurrency, participating in an Initial Coin Offering (ICO) is a great way to start. You will not only get a token that can be used for future services if you are lucky, one or two years from now the value of the token you purchase can significantly increase and that is exactly the best recipe to make money from cryptocurrency. So, before you start investing your money, here are some things you need to know about ICO.
How ICO Works
To put it simply, ICO is like a combination between crowdfunding and Initial Public Offering (IPO) with some twists. The purpose of an ICO is to raise fund for a project, just like a crowdfunding. However, unlike a traditional crowdfunding, ICO uses blockchain technology and cryptocurrency. Furthermore, instead of donating their money, the backers expect to profit as a return on their investment.
ICO also has similar principles with IPO. In IPO, a stake of the company is shared with the investors in exchange of money for the operations of the company. Meanwhile in ICO, instead of sharing the company with the investors, the company that starts the ICO project offers future services and tokens to the investors. This is why many companies nowadays prefer to launch an ICO since it allows them to retain complete control of their company.
How to Choose an ICO to Invest In
With the rise of cryptocurrency, many people start showing their interest to participate in an ICO. But you have to be careful since there are many ICO scams out there. To make sure you will earn profit instead of losing money, check these following tips below.
1. Check Forums and Media
The easiest way to verify the reputation of an ICO is to go to ICObuffer or similar ICO listings. Read reviews carefully before making any decisions. Moreover, you also can go to cryptocurrency forums and consult with ICO experts there. If there is something to be suspicious of about the ICO, the company’s website will not disclose it. Cryptocurrency forums and media are the places you can dig deeper about the ICO.
2. Invest in Something Valuable and Useful
ICO nowadays offers various products and services from decentralized banking service, gaming, real estate purchase and rental to freelancer platform. When you choose an ICO, you must try predicting which products or services will be more valuable in the future. The reason why you invest in an ICO is that you expect the high return on investment. So, if you invest in an ICO that doesn’t offer useful service, it is very likely the value of the token will not increase in the future.
3. Evaluate the Whitepaper
It is very important to evaluate the whitepaper before investing in a project. Whitepaper contains very useful and crucial information regarding the project. It is the document used to convince people to invest in the project. So, you really should question the commitment and seriousness of the company if it launches the ICO without a comprehensive white paper. When you are evaluating the whitepaper, make sure to find out the vision and mission of the ICO, why the company needs an ICO and what the benefits the company offers for the investors. Make sure the whitepaper also clearly states the company’s development plan and also the timeline of the ICO. This way, you will be able to know when you can expect some results of your investment.
4. Research the Team Behind the Project
You also have to find out who the team behind the project is. It is best to invest in a project that is led by experienced people in the field of cryptocurrency and blockchain technology. The developer that has plenty of experience usually will not hesitate to put the information on their personal website and LinkedIn. If the whitepaper doesn’t disclose the developer team, it is a red flag and you should reconsider your decision to invest in that project.
The popularity of cryptocurrency has opened a huge opportunity for start-ups to launch their ideas and find investors for their projects. Unfortunately, it also makes cryptocurrency investment a susceptible field for scam and fraud. This is why you should be very careful when investing in an ICO. No matter how tempting the project is or how big the profit the developer promises, you should not be easily swayed. Evaluate the whitepaper first, research the developer team, consider the long-term value of the token and go to credible forums and media to check whether the project is legit or not.