How to Participate in Initial Coin Offerings (ICOs)
Written By
Jesse David Ifeanyi (Jaywrites)Cryptocurrency Writer
Reviewed By
Franklin IzuchukwuCrypto Writer, Business Writer and Radiographer
"Initial Coin Offering," or "ICO," is a once-common way of acquiring money for seed-stage cryptocurrency ventures. Initial Coin Offerings have become a well-liked means of project and startup funding in cryptocurrency.
An Initial Coin Offering (ICO) is when a blockchain-based firm creates a specific number of its native digital tokens and makes them available to early investors.
The primary benefit of initial coin offerings (ICOs) is their ability to cut out intermediaries and establish a direct line of communication between the company and potential investors. Furthermore, both sides' interests coincide.
The majority of Initial Coin Offerings (ICOs) mandate that participants make their payment using another cryptocurrency; Bitcoin (BTC) and Ethereum (ETH) are two popular options. Additionally, some initial coin offerings (ICOs) take fiat currency.
What are ICOs, precisely, and how do they operate? We will go over the idea of initial coin offerings (ICOs), their advantages and disadvantages, and things to consider before investing, all covered in this comprehensive guide.
Understanding Initial Coin Offerings (ICOs)
The initial coin offering (ICO) can be considered a cryptocurrency-based initial public offering (IPO). One capital-raising activity within the cryptocurrency and blockchain world is an initial coin offering (ICO).
In contrast to more conventional fundraising techniques, companies can avoid the drawn-out and expensive process of going public by using initial public offerings (IPOs).
As an alternative, businesses might sell their tokens straight to the general public, allowing early adopters to purchase tokens at a lower cost before they are listed on cryptocurrency exchanges.
How Do Initial Coin Offerings Operate?
It takes an extensive understanding of technology, finance, and legislation to conduct an initial coin offering (ICO). An ICO involves the following steps:
Choosing investment goals
Any initial coin offering (ICO) aims to raise money for the company. The business sets goals for its fundraising campaign and produces pertinent information about the business or project for possible investors.
Project Planning
The project team creates a whitepaper before an ICO. The goal of the project, its technical details, the required cash, the number of tokens held by the project team, the allowed forms of payment, and the ICO campaign schedule are all described in this paper.
Token creation
Token creation is the next phase of the initial coin offering. Tokens in the blockchain are representations of an asset or utility. The tokens created can be traded and used interchangeably.
A specific blockchain platform is needed to create the tokens. Creating tokens without starting from scratch with code, unlike building a new cryptocurrency, makes creating tokens relatively easy.
Alternatively, these tokens are created with minimal code modifications on blockchain platforms that now power cryptocurrencies like Ethereum.
Token Sales
The project team will declare the ICO date and start the token sale as soon as the whitepaper is complete. The "early bird investors," or project aficionados, will purchase tokens during this phase.
The initial coin offering (ICO) is declared a failure if the funds raised are insufficient to complete the project and the investors have their money back.
Initial Offering
The project team distributes the tokens to investors upon completing the ICO campaign's financing target. There could be multiple rounds to the offering's structure.
After the ICO, the company can use the money raised to provide a new product or service. Investors can either wait for the tokens' value to increase or utilize their purchased tokens to gain access to this latest offering.
How ICO works
Benefits of Participating in ICOs
Here are the benefits of joining ICOs:
- Early Access to Innovative Projects
Early access to potential ventures is another advantage of participating in initial coin offerings (ICOs). You can invest in a potentially profitable enterprise by purchasing tokens during an initial coin offering (ICO).
- Democratic Funding
With initial coin offerings (ICOs), the general public can fund projects. In contrast, conventional investment approaches are frequently restricted to qualified individuals.
- Potential Investment Return
The possibility of significant returns is one of the primary drivers of ICO investment. ICO investments have frequently allowed investors to make large profits.
- Risks and Rewards of Participating in ICOs
Investing in initial coin offers (ICOs) has a high level of risk and reward. On one hand, investing in ICOs can result in significant gains in a relatively short period, perhaps only a few months.
On the other hand, ICOs are not regulated, so investors need to navigate through a minefield of scams and fraudulent projects to identify legitimate investment opportunities.
Another risk to consider is that even if the ICOs succeed, there is no assurance that you will receive a return on investment because ICOs are generally volatile, and their success is difficult to predict. With this in mind, an investor can make little profit or even lose money.
One of the most significant benefits is the possibility for huge returns. This could help you achieve your financial objectives far faster than if you had invested in a more traditional investment.
Another potential benefit of investing in final stage businesses is the chance to be a part of something fresh and exciting. ICOs allow investors to participate in something from the ground up. This may be an extremely thrilling and rewarding experience.
How to Participate in ICOs
The initial coin offering (ICO) is still a new concept and operates outside the regulatory system. Investors who want to engage in ICOs frequently wonder how to participate in an ICO securely. Here are steps on how to participate in ICOs safely.
Analyze the ICO Project
The first step in analyzing an ICO is to learn about its team members. The project website should contain sufficient information on the project team. The project team should have a successful track record of creating, promoting, and expanding a blockchain-crypto project.
Another way to analyze the authenticity of an ICO project before investing is to analyze the ICO whitepaper, as there are many ICOs for Ponzi schemes. If an ICO whitepaper claims a consistent set profit or rate of return, it is likely a Ponzi scam.
If the project has a product or service to provide to a real market and addresses a business problem then it is worthwhile to invest.
Registering for ICOs
Once you have researched numerous ICOs and decided to invest in one, you must register for ICOs listing platforms or websites by creating accounts with those platforms or websites.
There are numerous ICOs listing platforms or websites that provide enough information on ICOs projects that are useful for individuals looking to invest in ICOs as it helps them to get a better understanding of the projects and make more informed decisions.
For this study, we will focus on DAO Maker Launchpad and walk you through the process of creating accounts on the platform.
DAO Maker Launchpad
Participating in the DAO Maker Launchpad is straightforward and only requires a few steps if you have a non-custodial cryptocurrency wallet. DAO Maker Launchpad accepts a variety of wallets, including:
- Trust Wallet
- Coinbase wallet
- MetaMask
- Block Wallet
- Bit Keep
- Coin98
- Rabby
MetaMask is one of the most popular and easy to use because it works with a variety of browsers, including Chrome, Edge, Firefox, Opera, and Brave. Furthermore, MetaMask allows users to purchase cryptocurrency directly with fiat using their credit card, making it easy to obtain cryptocurrency for investment in the launchpad through the following steps:
- Step 1: Set up your MetaMask wallet: If you don't have a MetaMask wallet, you can rapidly create one using the web browser extension. However, if you already have one, connect it to DAO Maker and finance your Launchpad investments through MetaMask in your browser.
- Step 2: Connect your wallet to DAO Maker: Once your MetaMask wallet is ready, go to the DAO Maker website and click Connect Wallet, then follow the directions.
- Step 3: Create a DAO Maker account: You will also need to create an account on DAO Maker and go through KYC verification by uploading photos of your identification documents. This could be your passport, national identification, or driver's license.
- Step 4: Go to Launchpad: To access all live and former projects, go to your DAO Maker account and pick Launchpad at the top of the homepage. You may also filter the results to find the one(s) you're most interested in investing in and learn more about them to help you make a decision
- Step 5: Buy Cryptocurrency: To participate in an initial coin offering (ICO), you must first own cryptocurrencies such as Ether or Bitcoin. Fiat money is not allowed to participate in an initial coin offering.
- You can as well make use of DAO and if you don't have any DAO but hold another type of cryptocurrency, you can exchange it for DAO at the current market value via the DAO Maker website.
- Step 6: Stake your DAO tokens: To participate in private SHOs, you must stake at least 250 DAO for 30 days. This will provide you with similar DAO power to invest in projects and an income of up to 15% the longer you lock your DAO.
- Store Tokens Securely: To participate in an ICO and ensure the security of your assets, you must have a compatible wallet with the tokens issued and the accepted cryptocurrency. There are several sorts of wallets available, each with various levels of security and ease. They include; Online Wallets (Web Wallets), Software Wallets and Hardware Wallets
- Regardless of the wallet you use, never reveal your seed phrase or private key to anyone. Create a tangible backup of your seed phrase or private key using paper, metal, or plastic.
- Ensure you use a strong password and PIN to prevent unwanted access to your wallet and also regularly update your wallet software to address any flaws or vulnerabilities.
Tips for Successful ICO Participation
Knowing these steps when investing will protect you from ICO scams and make the investment process easier:
- Assess the project's validity.
- Invest only in projects you are confident and informed about, or research if you have questions or concerns.
- Do not rush to invest or make quick judgments when pressured by scammers.
- Don't fall for just online and forum adverts, and remember to consider the criteria outlined above.
- Use a variety of security measures, as well as a reputable Bitcoin wallet that supports 2FA authentication and seed phrases.
Conclusion
ICOs have contributed significantly to the growth of the cryptocurrency sector by offering a unique means to fund new projects.
However, as with any investment, they include dangers. Participating in an ICO can be exciting and involved in the cryptocurrency industry when done with caution.
You can securely navigate the ICO landscape and make more informed investment decisions in the ever-changing world of cryptocurrencies by conducting significant research, understanding the basics, and staying updated.
The above material is not advice and does not guarantee the techniques' success.