What is an ICO?
Initial Coin Offerings, also called Token Generation Events (TGE), are based on the fundamentals of the Blockchain and use the decentralized, tamper-proof concept of this as a technology layer to offer new tokens publicly on the market for the first time. These tokens are fixed and defined rules and are often based on already established blockchains. One of the main reasons for companies to offer a token on the market is the procurement of funding in the Seed-Phase of the company.
Distinctly from an IPO (Initial Public Offering), an ICO does not offer shares from the stocks of shareholders or an increase in share capital on the market, but tokens. Tokens serve to finance the project and are issued on payment of an established cryptocurrency like Ether (ETH), Bitcoin (BTC), or NEO.
The company doesn’t have to convince venture capitalists, offer portions of the company or execute lavish and expensive IPOs. At the same time ICOs work on a pure basis of trust by the investors.
These cryptotokens can have diverse functions regarding usability. They are often premined and only offered in the context of the ICO or pre-sale.
The price of the token and the rate of issuance are determined by the issuer and are defined within the hard- or softcap. With the acquired funding development should be advanced and the demand for tokens should rise based on it’s increase in functional and speculative value. The functional value is in direct correlation with the use of the token. The speculative value is determined by traders and investors, who observe the token in relation to others and trade them on the markets (Autonomous Research LLP, 2017:p.10). In June of 2017 the total sum of ICO funding of $550 million was larger than the traditional Angel and Seed-VC financing (CNBC) for the first time. With, so far, 148 ICOs and a collected funding of $2.2 billion in 2017 (To Date 09.25.2017) corporate funding employing ICOs is of increasing relevance.
Tokens come with their own financing model. It is as if you throw the venture playbook out of the window. If you are a VC and you are not simultaneously euphoric and terrified by what’s going on, you are not paying attention. This completely destroys the existing Venture business model, which is based on proprietary access early on. Now everybody has that.
Naval Ravikant, Founder & CEO Angellist & Coinlist.
Investing in ICOs
Investments in ICOs can have an extremely high return but can also lead to catastophic losses due to lack of experience, hackers or fraud. CryptoGo has set it’s sights on collecting relevant information and analyzing new Initial Coin Offerings. Focus of our analyses are only the most exciting ICOs so that you, our reader, don’t waste your time on irrelevant things. With our analyses we offer a supplemental and compact source of information on new ICOs so that you can make better investment decisions.
But consider this: Only invest in an ICO if you are already well versed in the crypto world: stock markets, wallets, fees and keys etc. An introduction you can find here.
You have the opportunity to acquire your coins before the general sale of them. ICOs or presales offer the opportunity to acquire tokens or coins before the public trading on stock markets and for more favourable terms so that you are in a better starting position on the first trading day. If the project is successful the value of the token should rise over the issue price, as well.
Traditional financial markets are subject to various regulations that mostly exist to protect the investors. ICOs are not subject to these regulations. This can be interpreted as an advantage as well as a disadvantage but it is fact that investor should check very carefully before investing into an ICO. ICOs can be quite chancy: some tokens rapidly lose value after the first trading day, because of disadvantageous presale-conditions or absurd bonuses, for example. If you got on during the general “crowdsale” you could have a bitter awakening. Additionally, a whole host of factors can influence a , from the investors point of view, successful ICO, which demand a non-trivial amount of attention.
Through our reports we try to minimize these risk for you and to offer you thought-provoking impulses for new investment decisions.