What is an ICO: how to use it correctly, investment advantages

What is ICO?

12 Dec, 2019 Judy Rubio

The initial coin offering is a very widespread and common term in the crypto community and it is still in the gray area for a lot of people. What is the essence of it? What cryptocurrency projects are carried out ICO?

Why do you need an ICO?

The abbreviation ICO means the initial placement of tokens. In the future, they may be equated to coins, used to pay for platform services or other purposes. You can read more about buying tokens in the article "Investments in ICO".

Tokens are not the same as shares. Their owners do not receive a stake in the organization and do not have the ability to influence management decisions. ICO is a kind of crowdfunding, in which participants send money to the business in order to receive certain benefits on favorable terms in the future.

For example, for tokens Storjcoin X you can buy disk space in the company Storj, as well as to increase the bandwidth. The user can earn crypto assets, it is enough to rent space on the hard drive.

Thanks to the ICO, the project receives the necessary funds for the development or entry into the crypto-exchange. Additional money allows to accelerate the development of the project, improve its infrastructure and achieve competitive advantages.

Advantages of ICO

Project owners and investors get undeniable advantages when using ICO:

  • High speed of obtaining financing. ICO does not have strict regulation, so it does not require to prepare an impressive package of documents and collect stamps. You just need to start the process of placing coins and create suitable conditions for attracting investors. Often it is enough to develop a professional website and whitepaper.
  • Increased scalability of projects. Thanks to the presence of a site for ICO, novice projects can reveal to the world a team of developers and investors. Such steps contribute to the development of trust and help to attract the necessary capital in the future.
  • The possibility of obtaining large revenues. Although ICO is accompanied by higher risks in comparison with the purchase of shares, investors can get much more profit in case of success of the startup. The economic situation and the situation in the stock market do not affect the price of coins as much as shares.
  • Early access to a potentially profitable company. A number of ICO projects bring huge profits for investors who purchased tokens in the first stages. Ethereum is a prime example. One ETH coin at launch cost around 35 cents, now the rate is in the hundreds of dollars. In the article "What is Ethereum?" you can read a lot about this cryptocurrency.
  • Easy to create a community. Initial token placement allows project owners to create a powerful community for their startups. This creates a public opinion about the development team, increasing the level of trust. As a result, investors are more willing to invest in the project.

ICO funding helps you to reach a whole new layer of untapped projects! However, do not believe beautiful road maps and misleading white papers if they have nothing to show for it. It is important to know that there are many scams operating in this market. Therefore, before you invest in a startup, it is better to allocate some time and learn more about it. Start investing with a small amount in several projects. So you can reduce risks and gain valuable experience!