This term is widely used in the world of cryptography. This is the abbreviation for cryptoterm Initial Offering of Coin. It is a model used for cryptography projects and companies to get off to a good start. However, you have to be very careful and well informed before participating as some are scams and you can lose a lot of money. How does an ICO work? The main function of an ICO is to raise money to start a cryptographic project or business. During the time it takes, which is usually at least a week, users have the possibility to purchase tokens for the new project in exchange for Ether or bitcoin. When you make the purchase you will get the first coins of the project together with the other participants of the ICO, the value of these coins can be determined in 3 different ways:
1. Provision of static tokens and price.
If an ICO has a specific purpose or limit to reach, if the fixed amount is reached the ICO stops. This ensures that the price of the tokens you receive will maintain its price during the ICO.
2. Static token supply and dynamic price
The number of coins is fixed and their value depends on the amount collected. The more you collect, the more the value of the tokens will increase. The founders have the advantage that if the sale is very successful they can raise a huge amount of money.
3. Dynamic token supply and static price
In this type of ICO the price of the tokens does not vary but the number of coins during the ICO does. The more money you collect the more coins you create and the more coins you can buy. An example would be that for each Ether obtained an extra token would be created. An example: the Ethereum ICO took place from July 20 to September 2, 2014. During these 42 days it was possible to participate in the initial offer of Ether coins. Of the 3 models explained in the previous section Ethereum used the last third, i.e. the supply of Ether coins was dynamic while the price was static. During that time frame, worth between 30 and 40 cents per Ether, the people who participated in it got a total of 1137 Ether in exchange for bitcoins. With this the Ethereum team managed to raise the enormous amount of 18.5 million dollars. Unfortunately, a large amount of money was kept in bitcoins, which at that time was falling heavily, so a large amount of money was lost. How to participate in an ICO? Each ICO has its own rules and procedures. It’s important to plan everything. Participating in an ICO can be complicated, especially if it’s your first time. It is always important to remain calm and self-controlled so as not to take irresponsible risks.
- You must make sure your Ether is ready in your wallet. There will also be transaction costs.
- Always read the ICO sales instructions. They usually publish how to participate in the ICO a few days before it starts. Reports to avoid surprises.
- Make sure you have all the information at your disposal to join. In this blog I have found a template to fill in with information that can help you decide whether or not to participate.
- Name of ICO
- ICO address
- Start date and time
- First block number
- Information that you consider important
- Your offer
- Link to instructions
- Login from your wallet
Irrigation of an ICO
They are not under regulation, scams are always possible. This is the main reason why we should pay a lot of attention to them, especially if we plan to invest a lot of money in it. It is very simple for scammers to set up a website and think of the names of the team behind the project. Even through fake accounts, they encourage people to invest in them through forums. Once they get a good sum of money they mysteriously disappear and everyone who invested loses their money.
Points to pay attention to in an ICO.
The team behind the ICO must be transparent. If you can’t find the founders and developers of the project, start by putting your foot back. But if he finds them, it doesn’t make us absolutely sure it’s not a scam either.
Here are 5 essential points that an ICO must meet to be seen as safe. We may run into a secure ICO that does not comply with any of the points, but it would be an exception.
- Is the equipment behind the cryptographic coin transparent? Do you know the founder? Who are the developers?
- Have you published a technical paper online? What’s the currency plan? Is it feasible and realistic?
- Is the money handled securely? For example, will smart contracts or an ICO-coin escrow wallet be made?
- Does the team answer your questions? Do they keep the community constantly informed?
- Can you safely store the tokens you receive during the ICO? There’s already a wallet and it’s working fine?