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An ICO (Initial Coin Offering) is a form of corporate financing that leverages the power of the blockchain. In this way, funding is obtained to start cryptocurrency projects quickly.
Basically, it is an instrument that makes it possible to finance a new project without the administrative and legal bureaucracy that would be necessary through traditional channels.
The method is based on bringing a cryptocurrency or token to the market in search of investors to buy that token or cryptocurrency, something similar to traditional stock market shares.
This new form of financing has been revolutionizing the cryptocurrency market in recent years, reaching profits of over 50,000% in some cryptocurrency ICOs.
History of ICOs
The first ICO took place in July 2013. It was carried out by Mastercoin with the Ethereum cryptocurrency. Thanks to that ICO they managed to raise 3,700 BTC which was equivalent to 2.3 million dollars at the time.
It wasn’t until 2017 that ICOs became more popular, as by the middle of the year there were already about 18 websites tracking various ICOs. In May, the ICO of Brave, a web browser, was launched. In this ICO, a total of around $35 million was generated in just 30 seconds.
At the beginning of October 2017 the ICO market had risen in value to $2.3 billion. By the beginning of November, about 50 ICOs were being registered each month.
The ICO that raised the most was the Filecoin ICO in January 2018. It went on to raise $257 million including $200 million in the first hour of the ICO. By the end of 2017 cryptocurrencies had grown 40 times more than in 2016. Through ICOs companies managed to raise overall around $6 billion.
As always in the world of cryptocurrencies you have to be very careful to avoid scams and ICO scams are not far behind, and if something abounds in ICOs are scammers, who take advantage of the ignorance of thousands of people.
ICOs have a great technology such as blockchain, however the novelty of this new technology causes the lack of knowledge of many investors and their eagerness to chase fast money, especially now that cryptocurrencies have become known worldwide.
If you want to invest in cryptocurrencies you can buy them on Bitnovo website. However if you want to go further we can give you some tips so you can avoid an ICO scam in time.
- Your keys, your money. Remember never to share your private key with anyone
- Do not trust anything, not everything is what it seems, inform yourself about the subject, do not go blindly.
- Read carefully the whitepaper of the project where the objectives and functionalities of the project should be written.
- If it does not have a white paper or you can’t find it, don’t take the risk.
- Beware of misleading advertising that may appear on social networks.
- Remember that no one gives anything away, especially not money.
- Learn about the developers behind the project.
- Don’t forget that the world of cryptocurrencies is full of scammers who take advantage of people’s ignorance.
- If you have decided to invest after these tips, invest only what you are willing to lose.
ICO vs. traditional stocks
ICOs differ from stocks mainly in the legal framework, however, this is not the only difference. Below we will look at some of them:
- Requirements. To participate in an ICO there is usually no minimum net worth requirement, and if there is one, it is usually no more than €100. However, to participate in an IPO the government requires a multimillionaire, which means that very few people can participate.
- Support for buyers. The government supports investors participating in the exchange, however, it does not present any support for ICO participants.
- Economic Health. For a company or citizen to participate in an ICO there is no requirement on the part of the company conducting the ICO. However, if a company wants to go public it must be audited and meet the criteria requested by the government which are usually quite high.
- Recognition. While stocks are recognized by the government and financial institutions, cryptocurrencies, for the most part, have a more difficult time being legally recognized.