An ICO is essentially a mashup between online crowdfunding and an IPO. The main difference is that with an IPO you actually own a part of the company, whereas with an ICO you simply own some of their digital coins.
In order to participate in it, you must simply contribute an amount of an existing cryptocoin, which is usually Bitcoin or Ethereum, and then in return you will be given a certain amount of the new coin from the new project. As the project will not usually be fully developed yet, will you not receive the new coin right away. Instead, a date will be set by the token’s issuer.
Although in the majority of countries this kind of funding is legal, btxchange.io reports that there are some countries, such as China, where ICOs have been completely banned, and other countries where the legalities around them are a little hazy.
You must make sure that you do a lot of research about a company before making an investment, as ICOs can be extremely risky if you don’t approach them with the right amount of caution. Additionally, there is no guarantee that the value of the new coins will rise in value at all, so there is a chance that you will end up with a loss.
How Can You Invest?
If you have done your research and are interested in investing into an ICO, you will first need some form of cryptocurrency and a wallet to hold them. If you are looking to invest in an Ethereum based wallet, then you need to specifically get a wallet that is for Ethereum, such as MyEtherWallet, and some Ethereum tokens.
If you are a cautious investor, then it may be best to skip the ICO and instead wait until the cryptocurrency is launched, then buy coins from an exchange. In some cases though, to a skilled investor, an ICO can be a great choice.
1. To get started, make sure that you are on the official page of the ICO and click on ‘enter’ or ‘participate now’. It is also likely that you should sign up for an account with the company.
2. The most popular option for buying, selling, and trading coins is Coinbase, so you should also sign up for an account on this site. You can buy here Ethereum or Bitcoin to use in the ICO.
3. Transfer the coins that you buy from Coinbase into your wallet using your public keys.
4. Once you have your coins safely in your wallet, you are ready to register for the ICO. You will first have to enter your public wallet address and any other information that they ask for. The steps that you need to take should be pretty straightforward and explained.
5. On the ICO’s launch day, you will be sent instructions on how to transfer your Ether or Bitcoin from your wallet to the ICO’s public address in exchange for the tokens that the ICO is offering.
6. When the time comes for you to sell your new tokens, you will either have to trade them on a token to token exchange that lists the new coin, or there is a chance that the company will buy them back off you.
Investing in an ICO can be both intimidating and risky, but if you have done your research and made sure you have followed all the instructions carefully, there is a chance that you can make some good money.