New coins can be launched through selling to investors during the launch period, but is the process safe or could it be a scam?
If you want to know the answer, you need to know the answers to questions such as:
- What is an ICO?
- What is the difference between an ICO and an IPO?
- What are the risks of ICO?
- Where does my ICO money go?
So let’s go back to basics and understand how safe Initial Coin Offerings are.
What is an ICO?
When compared to traditional finance, an initial coin offering will be like an initial public offering.
In an initial public offering, a company sells some shares as a means to get money that will then be used to finance new projects or anything else that requires capital.
For initial coin offerings, developers who want to issue coins or tokens will conduct an offering and sell some tokens at a set price. By doing so, they raise their capital and start earning coins or tokens there.
As you might expect, there are some differences between an ICO and an IPO.
What is the difference between an ICO and an IPO?
By buying shares of a company going through an IPO, you gain a certain amount of power over the company.
This means that by doing so, you will own a fraction of the company, which means you can vote if you have enough shares.
So, if you are committed to investing in a company’s Initial Public Offering, you must have done a lot of research on the company, its idea, its project, its position, the industry it operates in, short, medium and long. – long-term plan, etc.
When it comes to Initial Coin Offerings, sometimes investors will put money in without seeing the finished product.
As a result, the risk is greatly increased.
What are the risks of ICO?
The main difference between ICOs and IPOs is that while IPOs are highly regulated by the Government or other entities such as the SEC, Initial Coin Offerings are not regulated by anyone.
This also makes it possible for many people to create their own ICO.
This apparent lack of regulation, simply put, means that no one stops the project to make money and run away, a scam known in the crypto world as “pulling the rug”.
What pulls the rug?
Pulling the carpet was a common phenomenon in the late 2010s because many developers made a lot of money and immediately ran away, never to be seen again, simply because there were no official regulations.
How do I know I won’t get pulled by the rug?
In order to avoid the carpet being pulled, you must do as much as possible.
You need to know the project inside out: that means knowing who the team behind the project is, what the goals are, how to achieve them (road map).
Where does my ICO money go?
If you participate in an initial coin offering, you will be investing in a project and the money you provide will, in theory, fund the project and help the coin succeed.
Not having an initial investment will hinder the success of the coin as it will certainly delay the implementation of certain features as well as the coin’s advertising and marketing strategy.
How to make a profit in ICO
By taking part in the ICO, you will also be given early access to the coin at a lower price.
Once the coin is launched and the price rises, investors can sell it at a profit.
Can I make a profit in ICO?
An important point to take notice of, is that most of the initial coin offerings have in fact not been able to follow this route as either the price fell after the launch, or the project never took off as it was planned out.
Profiting in ICOs has been a very difficult endeavor for many. Given how risky it can be short-term, proceeding with caution is expected.
Wrap it up
When dealing with Initial Coin Offerings, one should always keep an eye out for scams.
Even so, ICOs can still be a very promising place where new and upcoming blockchains can be showcased as they try to improve the crypto world.
So, by pulling the rug out as a major con, many investors will still participate in ICOs because, let’s face it, you never know when the next big thing will pop up.
And, in hindsight, don’t you wish you had been there for Bitcoin in 2010 when it was trading between $0.0008 and $0.08 per coin? Because we always will have.
New coins can be launched through selling to investors during the launch period, but is the process safe or could it be a scam?
If you want to know the answer, you need to know the answers to questions such as:
- What is an ICO?
- What is the difference between an ICO and an IPO?
- What are the risks of ICO?
- Where does my ICO money go?
So let’s go back to basics and understand how safe Initial Coin Offerings are.
What is an ICO?
When compared to traditional finance, an initial coin offering will be like an initial public offering.
In an initial public offering, a company sells some shares as a means to get money that will then be used to finance new projects or anything else that requires capital.
For initial coin offerings, developers who want to issue coins or tokens will conduct an offering and sell some tokens at a set price. By doing so, they raise their capital and start earning coins or tokens there.
As you might expect, there are some differences between an ICO and an IPO.
What is the difference between an ICO and an IPO?
By buying shares of a company going through an IPO, you gain a certain amount of power over the company.
This means that by doing so, you will own a fraction of the company, which means you can vote if you have enough shares.
So, if you are committed to investing in a company’s Initial Public Offering, you must have done a lot of research on the company, its idea, its project, its position, the industry it operates in, short, medium and long. – long-term plan, etc.
When it comes to Initial Coin Offerings, sometimes investors will put money in without seeing the finished product.
As a result, the risk is greatly increased.
What are the risks of ICO?
The main difference between ICOs and IPOs is that while IPOs are highly regulated by the Government or other entities such as the SEC, Initial Coin Offerings are not regulated by anyone.
This also makes it possible for many people to create their own ICO.
This apparent lack of regulation, simply put, means that no one stops the project to make money and run away, a scam known in the crypto world as “pulling the rug”.
What pulls the rug?
Pulling the carpet was a common phenomenon in the late 2010s because many developers made a lot of money and immediately ran away, never to be seen again, simply because there were no official regulations.
How do I know I won’t get pulled by the rug?
In order to avoid the carpet being pulled, you must do as much as possible.
You need to know the project inside out: that means knowing who the team behind the project is, what the goals are, how to achieve them (road map).
Where does my ICO money go?
If you participate in an initial coin offering, you will be investing in a project and the money you provide will, in theory, fund the project and help the coin succeed.
Not having an initial investment will hinder the success of the coin as it will certainly delay the implementation of certain features as well as the coin’s advertising and marketing strategy.
How to make a profit in ICO
By taking part in the ICO, you will also be given early access to the coin at a lower price.
Once the coin is launched and the price rises, investors can sell it at a profit.
Can I make a profit in ICO?
An important point to take notice of, is that most of the initial coin offerings have in fact not been able to follow this route as either the price fell after the launch, or the project never took off as it was planned out.
Profiting in ICOs has been a very difficult endeavor for many. Given how risky it can be short-term, proceeding with caution is expected.
Wrap it up
When dealing with Initial Coin Offerings, one should always keep an eye out for scams.
Even so, ICOs can still be a very promising place where new and upcoming blockchains can be showcased as they try to improve the crypto world.
So, by pulling the rug out as a major con, many investors will still participate in ICOs because, let’s face it, you never know when the next big thing will pop up.
And, in hindsight, don’t you wish you had been there for Bitcoin in 2010 when it was trading between $0.0008 and $0.08 per coin? Because we always will have.
