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How to invest and earn on ICO

26/03/2018 00:00
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ICO: How to invest and earn

ICO (initial coin offering) is a crypto analogue of IPO in a modern world. But, while IPO’s (initial public offering) assume the company's initial public offering in traditional economy, ICO acts as its’ cryptocurrency analogue. In ICO people share the tokens of the project and use cryptocurrency exchanges to do this.

Main advantages of ICO: benefits for investors

Huge profit

Most investors like ICO’s because of very large return on investment. So, for example, in October 2017, the venture capital company Mangrove Capital Partners conducted a special study of the profitability of ICO. The study was conducted based on 204 completed campaigns for the moment of these studies conducting. At the end of the analysis, Mangrove Capital Partners managed to find out that the average profitability of all ICOs was 1320%. And, if the old model of economy (IPO), investors had to wait for years to profit, with ICO they can get their income within the first months.

Low Entry Threshold

Investors can invest their funds in ICO irrespectively of their level of income. While it is not possible to invest small amounts in traditional investment model (this is either unprofitable or simply impossible due to entrance barrier), then with ICO method they can make quite profitable contribution (for example, for $10 investors can get really large profit if the tokens are worth, for instance, $ 0.03 per "coin").

Why ICO is so popular among start-ups

If investors are interested in ICO (as a way to get a really good profit), then companies, in turn, are interested in getting a good start capital. The ability to quickly collect the large amount of investments is a key feature of the ICO. So, for example, Brave browser managed to collect 30 million dollars just in 30 seconds.

The second feature of ICO is its simplicity. Such elements of the traditional economy as company registration, provision of guarantees for investors and taxation are not an obligatory part for ICO. This option is very good and simple for startups, especially if they do not have any extra funds to register their project.

Main stages of ICO investment

Typically, ICOs are organized by start-up companies, which do not have enough followers yet. So, it is important for such companies to attract as much attention as they can. Usually, the process of organizing of ICO includes the following:

  • Pre-announcement – a statement that tells about the project (on various platforms that are popular in the crypto community). For example, as Reddit or Bitcoin Talk. The founders of ICO can make a small executive summary, where they can explain the main goals of their project. While receiving any feedback, the organizers can also make the necessary adjustments to create the final business model.

  • Offer – is made using the business model as a basis. It is a proposal for a deal. The offer lists the essential terms of the contract, and the document itself is created on behalf of the company. Also, the offer necessarily indicates the desired amount of investment and specifies the terms of the project.

  • PR campaign is the main part of the ICO investment. It is called to popularize the project, especially if it goes about a little-known start-up project. To make the great campaign, the organizers usually involve the PR agencies.

  • An ICO itself. There are two ways of the token emission on this stage. The first way: the organizers just collect the money and then release the tokens. The second way – the company releases its tokens just at the start of the ICO.

How to invest in ICO, possible risks

Fraud

When something becomes very popular, the scammers will not keep you waiting for them for too long. The sole purpose of such dealers is to collect from the naive users as much money as possible. Therefore, while you choose an ICO for investment, be especially careful (for example, read any reviews about the campaign).

Project implementation

Sometimes the campaign just dies until its launch. This could be caused by various organizational or technical problems. In addition, the investor himself can be disappointed by the project.

No additional investments

All ICOs are one round projects, so they do not include any additional funding for the investors. You can see it as a risk if you are interested in long-term investments.

How to choose a worthy project

Before you start to invest your money in some ICO project, be careful to pay attention to such things:

Review the sales agreement. This is important because the agreement may specify some details that were not stated publicly.

Check the availability of the public offer.

Look for an already existing working prototype.

Review the status of the documentation (for example, a whitepaper).

Check the existence of an escrow account.

Check the fact of company registration and the reputation of the founders of the project.

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