ICO – How Does It Work?

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An Initial Coin Offering is a fundraising initiative. Someone has a new concept, and they create a space in the blockchain to fund that idea. During this process the rules and expectations are outlined, as well as what the initial concept will cost, this layout is also known as white paper. A fixed value is established, according to which the tokens (new coins) will be exchanged at. The tokens are exchanged against cryptocurrency usually equal to Bitcoin.

• How Do ICOs Work?

When the new project has been concluded, and the white paper has been finalised, a contract will be drawn up that will include what the value of the tokens will be and what the return on investment will be for the investor.

The creators try to create as much awareness and interest in the new investment as possible; this will also determine what the demand and pricing will be once the project has been completed and officially launched. At this point, the white paper will be announced, and the marketing strategy is put in motion.

ICOs have a window period of about one month when it is active. During this crucial time, the ICO will be advertised and tokens sold via social media and other cryptocurrency websites. Companies will have the opportunity to invest in the new concept, and in return receive cryptocurrency value for their funding (tokens).

This asset gives the investor certain rights and insight into what the features of the investment or new project will be like.

Once the ICO is launched, the investors will have their share of the new company, and as the company progresses, they will receive their dividends.

• Two ways in which tokens can be released on the blockchain.

1. Take the full capital and divide it according to each investor’s initial investment.
2. Sell the tokens on cryptocurrency exchanges.

• How to enter into new ICOs

Keep your eye on social media sites such as Facebook, Reddit, and Cyberfund; they are all trusted sources of new and current ICOs.

As every situation has two sides positive and a negative, ICOs have them too.

 Positive

1. Many companies have skipped the foundation phase of a new company and became very successful through ICOs.
2. Very high Return on investment ratio, which provides a lot of opportunities to investors, even though the risk is very high.
3. Your funds in Initial Coin offerings are easily accessible whenever you wish to get out, and the tokens are exchanged for Bitcoin or any other cryptocurrencies.
4. ICOs have no extravagant fees.

 Negative

1. With too many similar projects, there are going to be many failures.
2. Easy for fraudsters to take advantage.
3. If the ICO is not managed properly, it is likely to fail.

If you are eager to start investing in ICOs, you will need to prepare yourself by opening a cryptocurrency wallet. However, there is one important thing to remember when choosing a cryptocurrency wallet. The private keys of the wallet must be exportable, as some of the ICOs do not have a specific wallet assigned to them and they might be incompatible with the tokens.

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