The Essential Guide to ICO Investing – Part 1

The Essential Guide to ICO Investing – Part 1

So, you’re thinking about investing in Initial Coin Offerings (ICOs). And you probably have more than a few questions. Where do you start? Welcome to our jargon-free beginner’s guide.

The future is already here

The world of investments is changing fast. Tech-savvy, early adopter investors are tapping into the advantages of modern investment alternatives. Alternatives such as ICOs. Are you ready to join them?

First things first. Take care.

It’s crucial that you understand the basics of ICOs. In general, developers, start-ups and individuals are using ICOs to raise capital for fair and lawful investment opportunities. However, ICOs have also been fraudulently used to entice investors in with the promise of high, unrealistic returns, leaving the victims high and dry.

In the still largely unregulated world of ICOs, due diligence and asset verification are key to protecting yourself from scams.

What is an Initial Coin Offering?

Just like Initial Public Offerings (IPOs), ICOs are used to sell a share of a company to raise funds.

In an ICO campaign investors buy a share of the issued crypto coins with another virtual currency or with fiat currency (traditional forms of money). These coins, also known as tokens, can – in general terms – be compared to the shares of a company sold to investors in an IPO.

ICO offerings give investors a stake in products or services which are typically yet to be created and launched. They offer investors the possibility of potential profit in exchange for risk and possible failure to deliver.

If the money raised does not meet the minimum funds required by the firm, the money is returned to investors and the ICO is deemed to be unsuccessful. If the funding requirements are met on time, the raised money is used to either initiate the project or to complete it.

The coins or tokens are automatically created, secured and disseminated by using smart contract technology and stored on to a distributed ledger, based on blockchain technology. (Part two of this guide will explain how smart contracts and blockchain work.)

What are virtual currencies, tokens and coins?

A virtual currency is a digital representation of value that can be digitally traded and functions as a medium of exchange, unit of account, or store of value. Virtual tokens or coins can also represent other rights. In some cases, tokens or coins are classified as securities. This means they may not be lawfully sold without registering with the local regulator of securities exchange.  

What is a virtual currency exchange?

A virtual currency exchange is when a person or entity exchanges virtual currency for fiat currency, funds, or other forms of virtual currency for an exchange fee. Secondary market trading of virtual tokens or coins may also take place on an exchange. In most countries, these exchanges are not registered and are not considered to be regulated exchanges. Therefore they do not have the same level of protection as publicly listed stocks.

In part two of our beginner’s guide we’ll examine other ICO essentials – smart contracts, white papers, regulation, and the underlying blockchain technology.

Now it’s over to you! What topics would you like to read more about?

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