Altcoins, Bitcoin, Opinion

How Does ICO Work?

The boom in the cryptocurrencies market has led to the establishment of various coins by numerous crypto-startups companies. As a crypto enthusiast, you should read this opinion on whether to Join Crypto Now or Later.  This has equally created confusion for those just joining and do not know how it operates.


What is an ICO?

ICO is the abbreviation of Initial Coin Offering. It means that someone offers investors some units of a new cryptocurrency or crypto-token in exchange against cryptocurrencies like Bitcoin or Ethereum. Since 2013 ICOs are often used to fund the development of new cryptocurrencies. ICOs can be considered to be like the regular shares one buys from a company with the hope of making huge profits in the future but in this regard, we are referring to digital assets.

An initial coin offering (ICO) according to Wikipedia is a controversial means of crowdfunding centered around cryptocurrency, which can be a source of capital for startup companies. In an ICO, a quantity of the crowdfunded cryptocurrency is preallocated to investors in the form of “tokens”, in exchange for legal tender or other cryptocurrencies such as bitcoin or ethereum. These tokens supposedly become functional units of currency if or when the ICO’s funding goal is met and the project launches.
The first token sale was Mastercoin in 2013 followed by Ethereum in 2014 which recorded raising 3,700 BTC within the first 12hours, click here to read the full article.
In 2018, there are over 100 ICOs in the market waiting to hit the exchange market which will make their investors rich, though you have to be very careful when investing in an ICO as there has been series of reports that scam ICOs are now in the market ready to run away with investors’ money. So, you have to be careful and do thorough research before investing.

Read: How To Create A Bitcoin Wallet Successfully On Blockchain

How Does ICO Work?

ICO investment can come in form of fiat currencies or major cryptocurrencies such as Bitcoin, Litecoin, Ethereum, Ripple and get investors will get in return the project token. In order to get investors to partake in their ICO, most projects give out to free tokens to individuals who registers and also invite their friends to register, it is generally known as airdrops. This is done in order to gain popularity and prominence. Before partaking in an ICO, it is recommend you try and do the following so as to prepare you in making a better choice.


Whitepaper: Check the Whitepaper of the ICO. The Whitepaper contains all the necessary information to be known about the coin. It is expected to explain in details what an investor tends to gain by investing. The WP will contain the road map which will detail the different developmental stages of the project. You can always read the Whitepaper from the official website of the coin.         

Values: The technological idea behind their projects. Some blockchains will be based on PoW or PoS. You need to know exactly what you will gain by supporting such project with your money. Will that particular technology stand the test of time? What problem are they solving in the crypto world? You need to know and understand all these details.

Team: It is very important to check out the team members behind the project to ensure they are real and not stolen profiles. The team must equally be able to prove that they have what it takes to deliver on their promises. Proven track records of competency and relevancy is very important.

Security: What are the security mechanisms put in place to ensure the tokens of investors are protected from conventional security challenges. They must be able to guarantee you a reasonable level of security to store your tokens. With the increase 51% attacks on blockchains, a project must ensure optimum security so as to boost more confidence for future and potential investors.  

Regular Updates: Try to check if such ICO has community support and feedback system. They must have genuine social media channels such as Facebook, Twitter, BitcoinTalk, Telegram where they update their existing and potential investors.           

Note: The above mentioned points (if a particular project should meet all) do not mean such coin will be promising. This post is purely for educational purpose and should not been seen as a financial strategy.

So the final decision lies with you to do more research before investing in an ICO.

What has been your experience with ICOs so far, kindly share in comment box to enlighten others.

2 thoughts on “How Does ICO Work?

  1. Most of ICOS I’ve seen before are just to scam investors. While only few of them are good. I’ll urge everyone to invest wisely. And also we should do our research before we invest our money. Thank you

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