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, otherwise known as 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.Â
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.Â
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.
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. However, some initial coin offerings (ICOs) accept fiat currency for payments.
In this article, we will precisely go over the full details of ICOs, the advantages and disadvantages of participating in initial coin offerings, and things to consider before investing in ICOs.
Understanding Initial Coin Offerings (ICOs)
The initial coin offering (ICO) can be considered a cryptocurrency-based initial public offering (IPO). ICO is a capital-raising activity within the cryptocurrency and blockchain world.Â
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 Initial Coin Offerings Operate
It takes an extensive understanding of cryptocurrency 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 a blockchain company. The business must set goals for its fundraising campaign and produce pertinent information about the project for potential investors.
Project Planning and Whitepaper
The project team creates a whitepaper before an ICO. The whitepaper outlines the project's goals, technical details, required cash, the number of tokens held by the team, and the available forms of payment.
Token creation
Token creation is the third phase of initial coin offering. Tokens, in blockchain industry are trade-able representations of a crypto asset or utility, whose value are expressed in monetary terms.
A blockchain platform is needed to create cryptocurrency tokens. It is common to spin off a blockchain network from existing networks through DeFi technologies and smart contracts.
Token Sales
The project team declares the ICO date and starts 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 did not meet the set target.
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.Â
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 participating in Initial coin offerings:
- Early Access to potential innovative projects - ICOs provide ample opportunity to invest early in a potentially profitable blockchain enterprise.
- 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.
- The Adventure and Fun - ICOs allow investors to participate in something from the ground up. This may be an extremely thrilling and rewarding experience.
Risks in Participating in ICOs
Investing in initial coin offers (ICOs) provides opportunities for high reward, but also risks. On one hand, investing in ICOs can result in significant gains in a relatively short period, perhaps only a few months.
However, ICOs are not regulated, so investors need to navigate through a minefield of scams and fraudulent projects to identify legitimate investment opportunities.Â
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.
 How to Participate in ICOs
Initial coin offering (ICO) is still a new concept and the entire process is not completely regulated. Below are the steps on how to participate in ICOs safely, reducing the risk of scams/frauds.
Value determination - Analyze the ICO Project
The first step in analyzing an ICO is to learn about the project and its team members. The project website should contain sufficient information on the team. The team must have a successful track record of creating, promoting, and expanding a blockchain-crypto project.
Secondly, analyze the ICO whitepaper. The goals of the project must be clearly stated with clear problem statements. The project must provide a business problem solving service to a real market to be considered an investment opportunity.
Additionally, If an ICO white-paper claims a consistent set profit or rate of return, it is likely a Ponzi scheme.
Registering for ICOsÂ
Once you have researched numerous ICOs and decided to invest in one, you must register on ICOs listing platforms or websites by creating accounts with those platforms or websites.Â
There are numerous ICOs listing platforms or websites that provide enough information on ICOs projects for individuals looking to invest in ICOs.
For this study, we will focus on DAO Maker Launchpad and walk you through the process of creating accounts on the platform.Â
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;Â 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.Â
- 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.Â
- Don't fall for just online and forum adverts, and remember to consider the criteria outlined above.Â
- Use a variety of security measures, as well as a reputable Bitcoin wallet that supports 2FA authentication and seed phrases.Â
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.Â
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.