ICO project: essence, investment risks and forecasts

The essence of the ICO project

Translated from English, the abbreviation ICO stands for “Initial Coin Offering”, this is “initial coin offering”. ICO appeared with the advent of electronic money on the market. Those users who have been working with the world of cryptocurrencies and blockchain for a long time are aware of all the intricacies of this project. So, ICO in simple words is one of the many well-known fundraising for a project, which is necessarily associated with blockchain or crypto and is called “crowdfunding” or “crowdsale”.

High-profile ICO projects in recent times

A successful ICO project is Tezos. Thanks to the ICO, Tezos managed to raise $206 million in less than 5 days. The company plans to make a unique and reliable development, which will be the basis for the necessary contracts in the open registry. The developers presented the idea of creating their own language, which will ensure the reliability of computer-written code in smart contracts. The entire Tezos team supported this proposal and implemented it in the shortest possible time.

Also a successful project was the platform for creating contracts EOS, which is similar to the Ethereum platform. It was able to raise $170 million in about 5 days. Bancor is a coin exchange platform using the Bancor token. Here, the costs are much less than in exchange services and crypto exchanges. The platform managed to raise $153 million in 3 hours!

As for unsuccessful ICO projects, the CoinDash campaign is such a project. Immediately after the launch of the campaign, the malicious actions of attackers who hacked into the wallets of participating users and transferred all funds to their accounts were discovered. It was not possible to return the money, the only way out was to close the project.

Where were ICO tokens created?

Strictly according to the ERC-20 standard, ICO tokens were created on the Ethereum blockchain. The ERC-20 complex includes a list of rules, norms and requirements for creating tokens. Present on the ERC-20 standard are smart contracts that serve as a guarantor of the fulfillment of all these rules.

Variants of other popular platforms that issue tokens:

• Stellar
• Waves
• NEO
• NEM

After the creation of the token, the ICO project was engaged in attracting investors to financially support the development. The ICO company provided all the information about its commercial activities, attaching official business documents, contracts and, of course, the principle of the site, where it is possible to access information about those participating in the ICO.

There are several types of ICO tokens:

• utilitarian (they are also called “appcoins”, they make it possible to use all the functions and services of the company);
• share coins (a payment method that is formed on the basis of an assessment of the company's value);
• Proof of Stake tokens (the issue of PoS tokens is retained and dividends are formed. The reward for the user will be proportional to his personal funds).

Differences between an ICO project and an IPO development

Quite often, ICOs are compared to IPOs. An IPO (Initial Public Offering) refers to companies that sell a portion of their property to raise large amounts of cash. In turn, the ICO serves as a mechanism to raise funds for their developments without losing part of their shares.

Investors with extensive experience in the cryptocurrency environment are already familiar with the term IPO, that is, buying company shares for money. In ICO, instead of the company's shares, project tokens are put up for sale. The main goal of startups is to sell as many internal tokens as possible for the development of the project. A small minus is that the real value of the tokens is unknown until the finally implemented project is released on the exchange.

ICO investments and risks

Why is the attention of investors fixated on this project? Everything is pretty simple. They want to quench their thirst for interest in a new project, while earning a profit from the resale of tokens already with their markup. They also expect to use the services of the ICO project at a low cost in the future.

The obvious disadvantage of investments is that the cryptocurrency market is not properly controlled and the legal authorities will not be able, in which case, to protect the injured investor. Also, investors are not guaranteed a 100% profit from developers. If you want to invest, then be prepared to lose.

To reduce investment risks, you need to familiarize yourself with the following components:

• “White paper” (charter, which contains a utilitarian function, clear prospects for the development of the ICO project, technical aspects of the project, documents and the principle of work);
• Kit-market (marketing industry);
• Road map (gives an assessment of the further work of the project after its implementation);
• Github code (will allow you to analyze at the programming level if you understand basic codes).

Summing up, it can be said that absolutely everyone can invest in cryptocurrency. Despite the amount of income from the assets you bought and the risks of investing, one thing is for sure, an ICO project gives considerable privileges to developers, investors and positively affects the progress of financing new developments in general.