In connection with rapid development of cryptocurrency market and technology of blockchain, appeared a similar process of primary placement of digital currency’s coins. By analogy with the IPO, it was named ICO (Initial Coin Offering). The initial placement of coins is carried out using the IPO rules for a freer cryptocurrency market, taking into account the peculiarities of this market. During the ICO, digital signs (tokens) are placed. In the future, tokens are bought and sold on crypto exchange by analogy with shares of companies.
ICO and IPO are used to attract investments, but they have important differences. ICO is conducted to issue cryptocurrency and create a product. The rights of shareholders here are of secondary importance. In the case of IPO, the conditions are other, ownership is here on the first place. Participants also have different goals. For ICO participants, it is important to increase their investment, and for IPO participants – existence of corporate rights.
Both financing instruments have different control and supervisory regulations. Authorities practically don’t regulate ICO. It even banned in some countries. The guaranty of ICO reliability is technology of blockchain, which is at the stage of development. Situation with IPO is quite the opposite. In most countries, laws have been adopted that govern IPO. Analysts believe that laws regulating of ICO will be adopted with expands of digital currency industry. The circle of subjects that can conduct ICO is very wide. It can be various companies, funds, individuals and societies. To participate in ICO investors only need funds. No special knowledge is required.
The advantages of investing in cryptocurrency are obvious. It is much faster, more convenient, meets the spirit of the times and avoids bureaucratization of the process. ICO work is built on assessment of profitability and feasibility of the project.
At the same time, investors bear certain risks. The most main risk is to get on scammers, who create projects only to raise funds from clients. It’s also important to understand that a startup may not be able to present a finished product, or to disappoint an investor after its creation. Conducting ICO with one stage also carries a risk in terms of long-term existence of the project. After its completion, startup has little chance of gaining additional investment for development. Investors, who participated in the ICO, count on profit from reselling tokens in the future. Also the expense of coins, they can receive services at a lower price.
(information is current for July 2018)
For successfully advance ICO-project, it’s necessary to choose the right platform for its placement. Each ICO developer makes a decision – to create own blockchain or use an existing platform. The advantages of the first option include ability to independently set the rules and not pay for additional services. But unknown project is difficult to untwist. Therefore, most developers choose a ready platform.
Advantages of large platforms:
- convenience and ease of management;
- wide popularity;
- high level of trust;
- ensuring reliable storage of collected funds.
The main disadvantages are the need to pay for the services of the platform. Also the author of IСO-project should follow the rules adopted on resource.
There are many known platforms – Ethereum, Waves, Tezos and others. The world leader is Ethereum. The core of team is based in Canada. This open network founded on principles of blockchain. Thousands of projects based on this platform. Important feature is ability to create contracts that ensure the performance of operations when preconditions are met.
Another well-known ICO platform is Waves. It is also one of open, decentralized networks. Management is carried out from Moscow. The platform is especially interesting for investors, because there is a rule for possible sale of purchased tokens to other users at any time. The developed functional allows using a large number of options for performing purchase/sale or exchange of tokens.
The choice of platform is important for developer of the project, and for potential investor. The first one gets an opportunity to declare itself to a wide circle of users from all the world, and the second receives nominal guarantees of seriousness new project.
The success of ICO is a rather conditional thing. However, amount of collected funds is considered to good indicator. Browser Brave, which is based on blockchain technology, take the first place. The well-known name of creator and a brilliant advertising campaign allowed collecting $ 35 million in just 24 seconds. In total, the project’s tokens went up by 676% in just a week. Startup Aragon was able to conduct another successful ICO. Within 15 minutes, was received amount of $ 25 million. The company is developing a platform for managing enterprises using blockchain. If we evaluate successful ICO projects by profitability, then Stratis, a service for developers, can be recognized as an undoubted leader. Profit for investors, who took part in ICO, amounted to over 150,000%. However, there are other examples of highly profitable and successful ICO projects. For example, cryptocurrency of SpectroCoin company grew by 18 707%, while Storj tokens increased by 11 983%.
Of course, each ICO project develops its own way. Not all of them are profitable and successful. Nevertheless, many cases were fixed, when well-prepared project helped to obtain super-profits, attracting millions of investments in a matter of hours.