ICO’s, what are they?

Most of the companies that are just starting out with Cryptos do an ICO to raise money.

They do this by writing an ICO whitepaper that presents their idea to the public. In the whitepaper, they try to be as detailed as possible. They explain all aspects of the project and reveal their vision. Such promises are similar to those of Bitcoin in 2009.

Bitcoin promised to create a decentralized and trustworthy digital money system. Ethereum used the same method in its blue paper for a decentralized application platform on the blockchain.

How do the projects start?

Some cryptocurrency projects start their ICO by launching their website. These websites often contain details of what they intend to do with investors’ funds.

After investing, the tokens are sent to investors’ wallets, typically ERC20 wallets.

Others display user balances in each investor’s dashboard on their website.

A good example is EOS with its epoch system. It promised unprecedented scalability, speed, and developer flexibility.

What are the limits of ICOS?

ICOs also have a hard and soft stage.

The soft stage is the minimum amount expected by the project, while the hard stage is the maximum.

If a project does not raise its minimum expected funding or its soft stage, the funds are returned to investors. Cases where the soft stage was not reached are rare in cryptocurrencies.

However, it is common to find projects that are sold out, which means that they have reached their rocky stage. At those points, there are no more ICO tokens and buyers have to wait for the launch.

What are the types of initial coin offerings?

Following its structure, there are three forms of ICO.

In the first case known as a static pool ICO, the developers of the project set a price and a maximum supply of tokens.

The second type of static pool allows developers to define a preset price, token supply, and dynamic funding goal. Doing this increases the price of the token according to the amount of investment received. In both cases, the maximum supply does not change when the token is released.

The third and final structure of ICOs does not have a fixed price or a direct limit for the supply of tokens. The developers only set the limit according to the funds received from investors.

Financing systems for cryptocurrency projects

ICOs, as a project proposal, have been the main way of raising funds for cryptocurrency startups.

That does not mean they are fully regulated. Since they are not regulated, you cannot compare ICOs to stocks.

ICOs use a methodology to distribute assets to sell tokens and raise funds for blockchain projects.

The first ICO was launched on the bitcoin network by Mastercoin in 2013. The project raised around $500,000 in one month.

As in all markets, some win, some lose, but successful ICOs enter the cryptocurrency stream. The new startups continue with new ICO proposals.

The most successful ICO

Ethereum was launched through an ICO in 2014.

Initially, buyers could get Ether in exchange for Bitcoin, over 7 million Ether were sold in less than 12 hours. That would be worth $11,697,000,000 in current value.

At the end of the sale, the amount raised was 50 million ether or $83,550,000,000 in today’s money.

Ethereum allowed developers to implement smart/autonomous contracts on the Ethereum blockchain.

Sales dramatically increased to over 200,000 in 2019 and over 350,000 in 2020. Congestion leading to higher bids for block space on the Ethereum network has also led to high transaction fees of late.

The most collecting ICO’s

ICO support grew 118% from $5.1 billion to $6.3 billion in Q1 2018.

With its EOS.io platform, technology company Block.one sealed its place as the top-grossing ICO.

The firm raised around $4 billion, making it the highest-grossing ICO in history.

Telegram (TON) was the 2nd most funded project in ICO history, but later, due to US government regulations, the project was cancelled.

The Big Scams

Over the years, ICO’s have also attracted a number of scammers and unethical activities.

There are many alarming anecdotes from the ICO field.

One project, Moari, which started as a promising future prediction platform, simply stated that they were ripped off. They claimed that the ICO investment fund was stolen by a rogue agency.

While many people have become rich by investing in ICOs, many have also lost millions of dollars.

The causes of scams are security breaches, legal issues, and management by rogue founders, who simply build a website, associating a smart contract to steal from investors.

The biggest scam in crypto is that of Pincoin and iFan who stole a collective $660,000,000 from investors. plexicoin stole 15,000,000 and Bitcard stole $5,000,000.

These and other cases are well documented on the Internet.

Google and Facebook ban ICO’s

As a result of ICO scams that worsened with the crypto bubble in 2017, major websites took action.

They did this by banning related ads or providing financial information that could be misleading.

The banned ads on these websites were related to binary options, initial coin offerings (ICOs), and cryptocurrencies.

Reports from most of these websites like Facebook, Twitter, Google, and Mailchimp reveal that they care. They said they were concerned about the integrity of their services and found such ads to be dishonest.

Conclusion

If you are thinking of investing in an ICO, you should be careful.

Take your time to get to know the founders by searching their profiles on LinkedIn and Facebook.

Make sure they have the white paper available on their website. Also, please email or call them via your phone if they provide a number.

You must be sure that you are dealing with ethical professionals. If in doubt, do not invest.

In short, you have to be very aware of the risks that this type of currency entails, which we have explained in the article on virtual currencies.