For high-tech and capital-intensive startups, financing is vital to compete and survive in the market.
One of the fundamental and, at the same time, most difficult steps for entrepreneurs is to find and choose between different sources of capital to finance their startup. Currently, taking advantage of blockchain technology, startups have recently begun to finance their operations with ico development service( ICOs ). This is also often known as token sales.
In ICOs, entrepreneurs distribute digital assets, such as coins and tokens, to investors in exchange for capital. These tokens take on different functions and utilities within the issuer’s network as soon as the project is launched. Initial coin offerings (ICOs) are a novel form of financing that has generated billions of dollars in the blockchain ecosystem. Potentially challenging traditional funding vehicles such as venture capital or business angel investments.
What are ICOs?
Initial coin offerings (ICOs) or Token Sales are a form of financing in which companies, mainly startups, raise funds through tokens or cryptocurrencies that they have created themselves. In the case of ICOs, units (tokens) of a virtual currency are sold that are still in a very early stage of development or even in the status of a theoretical white paper.
This sale, to raise funds, is usually against Bitcoin ( BTC ) or Ether ( ETH ) and not in traditional currencies such as euros or dollars. The proceeds benefit the project developers. Furthermore, it is intended to ensure sustainable financial viability for the continued development of the virtual currency offered. ICOs are different from traditional crowdfunding to the extent that blockchain technology transfers some of its implications and characteristics. For example: transparency, immutability, decentralization and openness, to the properties of the ICO.
An initial coin offering is typically announced with the disclosure of a whitepaper that describes the token sale, the underlying IT protocol and blockchain, as well as the project and business model. It also describes the distribution and function of the token, the rights of its holder and its value. The most common way to offer tokens is through an auction, with the proceeds going to fund the startup or project.
What functionality do they have?
An ICO token is a cryptocurrency issued specifically for a project in question. Among its functionalities, this has to digitally represent a right or a set of rights. The simplest form of representation is that of the token. This simple token, called utility, does not convey any rights over the company, the project or the product. Their investment incentive is due to the real prospect of an increase in value in case the associated project is successful and demand for the tokens increases.
There are also usage tokens, which, similar to a voucher or license, transmit access or the rights to use a product or service. An example of this is the American startup Protocol Lab: its Filecoin aims to become the currency of a decentralized computer network in which users can rent each other unused storage space. Your tokens represent the rights to use the buffered storage space on your website.
ICO also function as assets or products. Among other things, these tokens can embody ownership of something. An example of this is the Chinese company Tether, whose USDT token represents a right to one of the US dollars held by the company in each case. They can also function as work tokens, where providers do not issue tokens for payment, but in exchange for work. So-called “advisory agreements” are those in which consultants are hired whose services are rewarded as part of the token sale.
How can you make money by staying up to date with ICOs?
Before investing in any ICO, you should do thorough research on them. There is currently a large list of ICO software development, which due to their projected figures attract a large number of investors. Many of these will yield some very attractive figures, numbers that will surely catch the attention of any investor. Names like IOTA, Stratis and NEO, which have risen to the ranks with gains of over 100,000%, can seem very attractive to investor.
However, looking back, there is a bigger reason why these companies have found success. It is about the vision of the company and the results it offers to the community. There is no formula you can follow to know if an ICO will be profitable or not. But learning as much as you can about the company’s product, team, and vision can help give you peace of mind with your investment.
To make money with ICOs, you must be up to date with the information about them and take these aspects into account to consider the profitability they can provide:
Know and follow up on the team of developers, the best ICOs have a great team of developers behind them.
Review the technical document and defined roadmap, this is important because it can be an easy way to determine if a company is legitimate or not.
Follow up on social networks, checking the reviews of the company you are interested in.
Is it safe to participate in them?
Given that investors who get involved in an ICO do so at a very early stage of project development, it is an extremely speculative risk business. This type of business is associated with enormous profit opportunities, but also with the risk of total loss. If you invest in an ICO, you can make a lot of money, examples like NEO , Ethereum or Spectrecoin are proof of this. But there is no way every initial coin offering will later become a valuable coin.
Therefore, choose your investment vehicle carefully and only invest money that you can get back if in doubt. This high risk, on the one hand, is because numerous inexperienced investors are attracted by easy access via the Internet and the promise of quick money. Most projects consist of complex technical topics, the evaluation of which requires deep technical understanding and extensive research.
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On the other hand, the technical simplification of the ICO process itself increasingly attracts unprofessional providers. Due to the early financial entry into the project, it is difficult to predict whether it will ever be completed and launched and whether it will develop favorably or fail later. Furthermore, due to their internationality, ICOs carry the risk of more difficult legal enforcement, as different legal systems and bodies often clash with each other.