What is an ICO?
Initial Coin Offering (ICO) is an unregulated alternative means of raising funds based on new digital crypto-currencies that have emerged on the margins of the traditional financial system. The ICO has recently gained popularity to become a major source of capital for startups.
Since the end of the first round of ICOs, organized by Omni Layer (formally Mastercoin) in 2013 and Ethereum in 2014, many others have followed.
More than $3.2 billion has been raised this year just through digital currency sales to investors. This model helps many projects and startups get the funding they need to get their businesses off the ground.
How does ICO work?
Startups raise funds by creating and selling their own digital currency called tokens. Tokens are similar in composition and characteristics to established digital currencies such as Bitcoin and Ether.
Creating your own digital currency and initiating an ICO is not as complicated as it sounds. ICOs typically take place on the Ethereum network, the leading blockchain (the technology behind digital currencies) and platform for ICOs.
The software behind Ethereum and Bitcoin is open source, meaning the source code is freely available for anyone to modify and create their own digital currency using the Ethereum Smart contract.
This computer protocol facilitates the transfer of digital assets between parties according to the agreed upon terms of exchange. If you don’t feel like modifying the code, companies are willing to do it for you for a small fee.
Investors usually buy the new coins or tokens by sending the developers Bitcoin or Ether – the digital currency within the Ethereum network. The tokens purchased are used exclusively on a computer service that the developers design, or promise to design.
The emerging ICO market – which only really started to thrive during the spring/summer 2017 season – is currently filled with scams and rip-offs of all kinds and crowded with amateur startups with no real experience.
In order to educate our readers about the risks involved and by presenting a reasonable process for researching and analyzing ICOs, the cryptocurrencies.co.uk team has compiled this educational document.
Identify interesting ICO:
We recommend spending no more than 5-10 minutes on it, trying to get an overview of the project and their website before moving on to a more in-depth investigation. As a general rule, you do not want to invest in companies that give negative first impressions.
Review the presentation video
Does the team have one? If so, be sure to analyze it first. The video should give you good info about the project and quickly improve your understanding of it.
Script and language used in the video
Let’s move on to the video and analyze the quality of the script.
Questions to ask yourself:
– Is the script clear and has it been proofread? Do you see many grammatical errors?
– Does it look like a professional writer worked on it?
– Analyze the basic message. Try to assess the amount of “filler” versus concrete, critical points.
Quality of the website
– What is the quality of the website?
– Does it look like the website of a company that cares about the appearance of its message?
Analyze the founding team
Analyze the profile of the founders, are they known, do they have expertise in the field of crypto. Like a startup or any other business, it is often the founding team that will make the success.
List of Upcoming ICOs (Update July 2021)