HOW DO ICOs WORK?
The process of launching a new cryptocurrency has many steps attached to it. We won’t delve too far into that specific process, but we’ll share some of the basics with you.
- The company or startup has an economically viable blockchain initiative that they want to raise funds for, and they decide that an ICO is the best route for their success
- A white paper is produced, discussing the project, roadmap and their business model
- A proof of concept or prototype is launched
- A huge marketing campaign is launched, increasing the hype around their ICO
- The team outlines the conditions for their ICO, including items like price per coin or token, how many tokens will be available, and how much the team is intending on raising
- ICO is launched, coins/tokens distributed to the group of investors who participated in the ICO
- Then, that crypto becomes available on the exchanges
SOUNDS KIND OF LIKE AN IPO RIGHT?
Initial Public Offerings are very similar to ICOs, including the core pillars that help us define whether or not these offerings are a good purchase for our individual portfolios.
At CoinSmart, there are five core pillars that help us define well-implemented blockchain tokens/coins:
- Value Proposition
- Third party review (Expert review, Security Audit, and perhaps a bug bounty program)
WHAT ARE THE BENEFITS OF ICOs?
Historically, ICO performance is pretty tough to dispute. Many a millionaire has an ICO to thank for their overnight investment success. Crypto is liquid, unlike being involved in an IPO and receiving shares for your investment, ICO tokens are liquid so long as there is a functioning crypto exchange.
And there you have it, ICOs and everything you need to know to get started.