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ICO stands for “initial coin offering.” It’s a lot like an IPO (initial public offering), but for cryptocurrencies. By some estimates, 2017 saw more than US$3.5 billion pumped into ICOs.
You will need to decide whether buying into a cryptocurrency at its ICO stage is a good idea. Some cryptocurrencies do well after their ICO. For example, Ethereum started life as an ICO. Each Ether token was initially sold for 0.0005 bitcoin, but has multiplied in value since then. Of course, the opposite can happen as well, so you need to be careful.
An ICO is when a company sells a new cryptocurrency coin to the public for the first time. It’s designed to spread the new currency and to make sure it has plenty of traders.
Later on, these traders will usually be the first to start buying and selling the tokens on public exchanges.
The first Australian company to launch an ICO was Power Ledger. This is when its POWR tokens were first released to the public.
The crowdsale raised (at the time) AU$34 million, consisting of the following:
Since the ICO, the price of POWR tokens has increased, although it’s had its ups and downs like any other cryptocurrency.
It’s not all good news. There are countless ICOs happening all the time, and the vast majority of new coins won’t get very far. Some are even outright scams or ICO pyramid schemes, where people simply hype up and start selling worthless tokens.
If you want to get involved in an ICO, it’s important that you make an informed decision and know exactly what you’re purchasing.
The best ICO to get involved with is one that you understand, can believe in and genuinely think will succeed.
Look for the professional coins that have clearly had a lot of work put into them, and avoid the shady “get rich quick” schemes. Here are a few tips:
Currently, the most popular way to buy into an ICO is probably with Ether. This is because the Ethereum network is a very useful and flexible platform for creating new applications.
You’ll often see coins in ICOs specified as “ERC-20”. This generally means it can run on the Ethereum network and can usually be held in an Ethereum-compatible wallet.
If you’ve found an ICO that you think will succeed, you might decide to buy into it. However, before you do, check a few things:
The most popular cryptocurrencies have years of development behind them, and today’s legitimate and successful ICOs might be aiming to reach maturity years later, with exceptionally ambitious goals.
Consider two real coins – one is legitimate and the other is a scam.
IOTA doesn’t use a blockchain. Instead it uses a “directed acyclic graph” network of its own design called a tangle.
Through this, its developers promise to create a cryptocurrency network with the following:
It’s an ambitious project that uses buzzwords to make promises that sound too good to be true. But it’s also a legitimate, transparent and viable open-source project, and the value of IOTA tokens has multiplied since the ICO. The people who bought into its ICO are probably very happy with their decision to buy.
PlexCoin is on the other end of the spectrum. It skipped over all the technical details and instead offered some fairly basic features, most of which already exist. All the details were vague, except its promise of a 1,354% return in the first month.
This alone makes it almost certain that it’s an ICO scam. No legitimate ICO will ever guarantee a return.
Its creators are also anonymous and there are no details of the team behind it. But if there were, they might show that “PlexCorp” was created by a Canadian businessman named Dominic Lacroix who has previously been charged with six counts of fraud.
Despite that, it managed to raise over $15 million from unsuspecting traders afraid of missing out on the next big thing.
You can still find its website here, although you probably won’t be able to make a purchase even if you wanted to. Its accounts have been frozen by the US Security and Exchange Commission (SEC), and its creator charged with illegally profiting from defrauding customers.
Look for signs of a scam, and indications that it might not be a very successful purchase.
You should also look for ICOs that are committed to working in line with all government regulations where possible.
If they aren’t, the entire project might be on thin ice later and prone to being shut down by regulators.
ICOs are getting regulated differently around the world. They might be off-limits to traders from certain countries or might have their own terms and conditions to satisfy regulations.
For example, in China, all ICOs were banned outright. And in Australia, an ICO might be classified as either a managed investment scheme or a share offer and subject to the laws of each.
It depends on the situation, but in the examples to date, there are generally three potential outcomes:
Whenever you buy into an ICO, remember that there’s always a chance of losing your money. With some due diligence, you can minimise the chances of this.
Simply search for upcoming ICOs and you’ll find hundreds of them. Just remember that most of them probably won’t go too far. Look for the ones that offer more use, more practicality and show every sign of being set for success.
In many cases, you’ll also notice that they only accept certain currencies. The most commonly accepted are Ethereum and bitcoin, so you might need to buy one of those first and then trade it for the ICO coin.
As the name suggests, Augur is a fortune-telling platform. It’s a decentralised platform built on the Ethereum blockchain to crowdsource predictions.
It allows its users to make predictions. They get rewarded for accurate predictions, and lose out on inaccurate ones. For example, users might wager 50 cents (in crypto money) on a sports match that has a 50/50 chance. If they’re correct they get back a dollar, and if they’re wrong they lose the 50 cents.
Collectively, all these predictions have come together with an unusually high rate of accuracy, often with a higher success rate than any individual expert.
The Augur ICO ran from 17 August 2015 to 1 October 2015, during which time it sold 8.8 million tokens at less than a dollar each (out of a pool of 11 million), to raise $5.1 million
At the time of writing, at the end of 2017, each of those tokens is worth about $29.
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