Every single month there is an announcement about new coming crypto project and they need fund, But how they collect fund? In my previous post I describe what is coin and what is token. There, I told you something about ico. This article explores the key features of Crypto ICO in very easy language. That will help you to have clear cut knowledge of crypto trading.
Hello steemians, It‘s @rks2562. How are you? Hope you are all well.First of all we have to know some basic details about ico.
- ICO ( INITIAL COIN OFFERING):
ICO or initial coin offering are connected to the blockchain technology, it’s a new way for companies to raise capital and develop their projects around decentralized applications. Early investors are rewarded with amazing programs, free tokens with referral programs and gifts for every inscriptions.
This makes ICOs very popular, shareable and funded. Behind money that is put into every new project, ICO’s makers release a share of their total supply in order to reward contributors for helping them getting funded.
Most of the time contributions done by Bitcoin (BTC), Ethereum (ETH) or fiat money and there are minimum number of participants get this offer. It is pre determined that how much investors can take participate and how much the reward value by companies.
to understand the features of ICOs, it will be more well defined to compare it with something similar in the financial market, also called an Initial Public Offering (IPO). IPO refers to the public sale of the shares of a company for the first time, with the purpose of collecting funds for business expansion and development. Let’s look at the differences between a cryptocurrency ICO and a stock IPO.
- ICO VS IPO:
A. INTRODUCTION TO THE MARKET:
The main strategy of an ICO is to raise funds for the project and enter the market, and the ICO is usually performed by the startup companies. where, IPO is usually performed at a later stage when a company is financially stable and wants to expand and develop to the public or some times to minimize taken loan interest. Its raised capital is used for the future visions of a company.
B. AUTHENTICATION:
When a company wants to concern an IPO, it must create a legal document called also prospectus. This document is a legal declaration which includes key information about the company and the IPO, and must meet some standards of precision. On the other side, ICOs are not limited with any legal document. They have a document in the form of a white paper where everything about the project and its purpose is explained. But, point to be noted that ICOs are not forced to create a white paper, where IPOs must have the legal documents for successful operation.
C. BELIEVEABILITY
There are some requirements that a company must do in order to list its shares via an IPO. Having a track record of earnings, and it should be confirmed by a professional accounting agency in india sebi did the job. In the ICO process, companies do not have to have a track record or any regulatory framework. Most of the ICOs have just a white paper that is also not necessary.
D. TIME PERIOD:
The IPO process is a long term process that can take up to 8 months. That is because of the requirement of legal processes. But the ICO process is short term. The time period of an ICO depends on the nature of the project. When a company concerns white paper and a smart contract, they can start crowd funding. The duration of a crowd funding depends on the project and also depends on its maximum hard cap, and it generally takes up to 1 month.
E. ACCESS OF OFFERINGS:
IPOs are oriented only to the institutional investors such as banks. There is a small part of the whole process that is oriented to the retail investors. But in case of, ICOs are opened for anyone. All you need to have is a currency of Bitcoin or Ether or companies native currencies ,which you will convert into the token of the particular ICO.
While ICO and IPO sound as similar processes, but they are extremely separated. However, both of them are well-promising processes that can lead a company to success and we are crazy for them.
- HOW TO AVOID ICO SCAMS???
But ico scam is happening now a days. A Vietnamese cryptocurrency company Modern Tech launched an ICO for its Pincoin token, raising $660 million from approximately 32,000 people and run off, we all know about it. There is some tips to avoid scams:
Make sure about the project whether it is good, long term or it’s just short term and the project is not familiar. Sometimes short term, unfamiliar icos run off.
Most of the icos don’t have white paper please check white papers before trading.
Most of the icos don’t declare their founders, partners, or advisers indentity. So check it.
4.Some times icos offers multi level earning, sometimes it is fake they just promote their icos and collect funds.
- REMEMBER ONE THING
There’s no free lunches”
THANK YOU
RAKESH DAS
@rks2562
