The Essential Guide to ICO Investing – Part 2
(Psst! If you haven’t already, check out Part 1 of our beginner’s guide to ICO investing.)
After reading Part 1 of our guide to ICO (Initial Coin Offering) investment you’re hopefully feeling more confident about the sometimes bewildering world of crypto funding.
It can be a confusing and tricky world out there. So let’s take a closer look at some more ICO fundamentals, beginning with the thorny issue of regulation.
Are ICOs regulated?
The regulation of alternative funding markets such as cryptocurrencies is a hot topic at the moment, and the field is changing fast. Many believe that cryptocurrency will never truly challenge fiat money (traditional forms of money) while issues of fraud and illegality continue to be of concern.
Depending on the circumstances of each individual ICO, the virtual coins or tokens can be classified as securities. In such cases, an ICO would be subject to the local securities laws, such as the Securities Exchange Act in the US or the Financial Conduct Authority in the UK.
What is blockchain?
Blockchain technology is what makes alternative funding mechanisms such as cryptocurrencies possible.
Say you’ve invested in some cryptocoins. They don’t physically exist, so how can you be sure that they are stored safely? That’s exactly what blockchain is for. It’s a platform comprised of a digital, distributed ledger (a record of financial transactions). This ledger is used to track and store transactions.
The blockchain is maintained by several participants within a distributed network of computers. A copy of the blockchain is downloaded automatically onto each connected computer (also known as a node). Once a record is stored on the blockchain the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks. That requires the collusion of the majority of the network. This is what makes blockchain safe.
A record’s authenticity on a blockchain can be verified by the community – without the need for a single centralized authority. Decentralization is one of the most exciting things about blockchain. Some believe it could even have a mitigating effect on future economic and political turmoil.
Blockchains use cryptography to process and verify transactions on the ledger. This ensures that the entries are secure.
Blockchain technology is ideal for storing smart contracts (see below) because of its security and immutability. Smart contract data is encrypted, making it impossible to lose the information stored in the blocks.
What are smart contracts?
How do you enforce an agreed upon decision when it’s all taken place in cyberspace? The answer is by smart contract.
This is a computer program stored on a blockchain that controls the transfer of digital currencies or assets between parties under predefined conditions. A smart contract not only defines the rules and penalties related to an agreement in the same way that a traditional contract does. It also automatically enforces these obligations.
Blockchain technology is ideal for storing smart contracts because of its security and immutability. Smart contract data is encrypted, meaning it’s impossible to lose the information stored in the blocks.
What is a white paper?
A white paper is essentially the business plan of a company raising funds through an ICO. It usually includes the business idea, benefits, required investment, the timeline of the ICO campaign, etc.
How important is due diligence when considering investing in ICOs?
In an unregulated field such as ICOs, due diligence is of vital importance. It may not be obligatory, but it’s definitely recommended if you want to avoid scams.
But where do you start? Proper due diligence can take a lot of time and effort.
This is where Asset Verification Protocol steps in. It’s designed to ensure legitimacy. It means you can safely invest in alternative funding mechanisms such as ICOs without having to worry about the due diligence process. Asset Verification Protocol does the hard work for you. Approved assets are given the Asset Verified stamp, designating a certified investment opportunity. Everyone’s a winner.
What excites you the most about alternative funding mechanisms like ICOs?