How do I invest in ICOs?
Currently, you cannot participate in Initial Coin Offerings(ICOs) with Euros nor US-Dollars. For this, an established Cryptocurrency like Ether or Bitcoin is needed. The CryptoGo-Team recommends Ether, since most ICOs are based on the public Ethereum blockchain.
Coinbase is a provider with an integrated Bitcoin-Web-Wallet. It’s designed simply and intuitively and provides the most important features of an Exchange. Besides Bitcoin you can also buy Ethereum and Litecoin at Coinbase. The optional two-factor authentication should absolutely be activated.
In the case of Coinbase, you can also buy cryptocurrencies via credit card (immediate purchase, with 3,99% additional charges) or bank transfer (transfer time 4-5 days). These are immediately added to the account’s balance. Once you are in possession of cryptocurrencies, you can also use Exchanges which only accept cryptocurrencies as a deposit. These providers, like Bitfinex for example, enable trading with a multitude of other Coins and Tokens.
As another Exchange for depositing via bank transfer or credit card the CryptoGo-Team recommends Bitstamp. This provider is registered in the EU and has a banking license granted by the Luxembourg government.
No matter with which Exchange you register, every provider demands a verification of your account. This process is known as KYC/AML („Know Your Customer/Anti Money Laundering“). For this, a photo or scan of an identification document (such as a driver’s license or a passport) and often even a copy of a utility bill, with your name on it, need to be provided. Official correspondence with banks or insurances are often also accepted, whereas other bills, such as from amazon or a cellphone bill, are not accepted.
Alternatives to Exchanges are Anycoin from the Netherlands or Bitpanda from Austria. With both providers you can buy and sell cryptocurrencies, but you cannot trade them. Also, sometimes much higher fees can apply than with the Exchanges mentioned above.
I did it! And now?
As already mentioned, most ICOs are based on the Ethereum blockchain. De facto, you send Ether to the Smart-Contract-Address of the ICO. This registers the incoming transaction and sends the corresponding amount of it’s own Token back to the same ETH-address. Unfortunately, this only works if you have the private keys of the address from which you transferred the Ether. This is not the case with all established Exchanges. That is why you need a Wallet to participate in Initial Coin Offerings. If you own a large number of cryptocurrencies, you should get yourself a “Cold Wallet” in the form of a USB drive, like the Nano Ledger for example. At the end of this article you will find a list of recommendable Wallets.
What should be considered when choosing an ICO?
While in the whole year of 2016 there were 64 Initial Coin Offerings which collectively collected 103 million US-Dollar, at the end of September 2017 there were already over 150 ICOs with an overall investment volume of more than 2 billion US-Dollar. Because of this large number of investment opportunities a fundamental analysis before a possible involvement is vital. The CryptoGo-Team offers an excellent start to this through our analyses & reports. Even though we have been thoroughly engaged with the sector for quite some time now, our assessment does not replace your own analysis. It should be pointed out, again, that investments in ICOs harbor a very, very high risk. Many companies have nothing but an idea at this point. Barely any ICO can produce a prototype. Even the planned launch of the actual product is commonly two years in the future.
ICO – Let’s go!
If you followed all steps until now, you can finally start! On the day of the ICO the company publishes an address on it’s official website, which potential buyers can send their investments to. In the run-up you’ll frequently find a countdown to the start of the ICO. When that runs out, you can officially participate. What exactly the site shows after the countdown is different from project to project. In many cases, buttons with labels like “Contribute Now”, “Get Token” or “Join Crowdsale” show up. Here, care should be taken that you are really on the original company’s website, because with larger ICOs there are often a lot of fake websites with very similar URLs.
Checking the ICO’s Token Sale Address/ Public Key
Before sending anything to an Ethereum address, you can check the provided address for it’s in- and output on etherscan.io. For that, copy the published address and paste it into the search bar on Etherscan. There it can be tracked how much Ether arrives. At the same time, it’s a good idea to follow relevant social media channels like Slack, Telegram or Reddit.
On the part of the company, it’s often recommended to use a certain amount of GAS. This can be adjusted manually in every Wallet. If you use My Ether Wallet, turn the GWEI controller up. This makes sense if you want your transaction to be processed very quickly. It’s necessary mostly with ICOs with a very high demand, which are often sold out in minutes, sometimes seconds. That’s why with these, it’s worth it to increase the GWEI value and therefore increase the priority of your transaction. The higher GWEI is adjusted, the faster your transaction is processed. But the drawback are the higher transaction fees (similar to express shipping).
Specialty: Initial Coin Offerings with Whitelisting
Some ICOs can only be participated in after a so-called “Whitelisting”. The extent of this can vary from project to project and based on country specific regulations. In some cases a simple registration via email suffices. In more extreme cases, the complete KYC/AML-process must be undergone to even have the possibility to inivest during the ICO.
If you participated with Ether, the Tokens are automatically transferred to your Wallet. Should they not appear, it’s possible that the Token-address needs to be assigned in the Wallet. The information necessary for this should be provided by the company during or after the ICO. But to observe the whole process you can track the processed transactions on Etherscan.