Have you ever wondered how those projects that generated the cryptocurrencies that we now know were financed? ICOs are responsible for pushing these tokens.
This week the series of courses and readings on the world of cryptocurrencies continues, including new professors with topics of interest in this area.
ICO: The possibility of Financing new Ideas
After reading and my own research, I was able to understand that an ICO or Initial Coin Offering is a process that allows financing the development of a project, which is linked to the evolution of a cryptocurrency, generally associated with blockchain technology. .
In order for an ICO to be generated, there must previously be a project to finance, that project that will be presented to potential investors, who will receive a certain amount of tokens that they can use within that project, in exchange for money or another cryptocurrency that already exists.
This project must include a WhitePaper, which is nothing more than a detailed explanation of the project to be developed. At this point, as potential investors, is where you should be more careful and attentive to potential scams.
ICOs can be put into practice either to finance the development of a specific cryptocurrency or a project based on blockchain technology. Remember that the latter may exist for various reasons that warrant storing and / or modifying data safely.
So ICOs can provide the possibility of financing ideas that would otherwise be difficult or even impossible with traditional methods. Many cryptocurrencies that currently exist would not be done if their only option to raise funds, had been to request a loan at the nearest bank.
Differences between ICO / IEO
In an ICO, it is the project developers who are in charge of managing the use of the money that is raised, it is not necessary any type of intermediary or authorization to launch an ICO, only the support of a WhitePaper or document that describes the characteristics of the project, as well as a marketing strategy to attract investors. There are no regulations by some other intermediary.
In an IEO (Initial Exchange Offering) it is different, this is an ICO regulated by an Exchange. This is the one in charge of managing the funds granted by investors and that are collected for the project.
Therefore, the same Exchange places certain rules so that a project can be financed, in the case of developers they must pay a commission so that their tokens are sold through this exchange, as well as investors who wish to invest in the project, They must register and verify your identity as a user of said Exchange.
ICOs in contrast to IEOs provide greater security to investors on the funds deposited, there is a high risk margin when investing in an ICO, often presenting scams or frauds of projects that promise us gold crowns if we invest in these and in the end they do poof! and they disappear with the funds.
Advantage
Any person or team can create an ICO on any platform, it just takes a good strategy and explanation of the project to raise the necessary funds.
With the Internet everything is possible, so an ICO can have international attention and financing thanks to the promotion of the project on social networks. A benefit of globalization.
Being linked to blockchain technology, it eliminates any intermediary, making the ICO process easier in terms of requirements or resources spent.
Flexible Investment, there is no limit amount in which investors can restrict themselves, so they can be made from large investments to small purchases of the tokens offered.
It is not necessary to belong to a select group to make an investment in an ICO, of course it is best to know the basics of this process to avoid losses.
Disadvantages
Security is low, since investors only have a WhitePaper and project website, which does not ensure its application in real life.
Around ICOs there is a lot of mistrust, since there are too many pseudo-projects that paint a utopia and end up disappearing after they get the funds from naive investors.
The value of the token will depend on the demand that is made for it in the market, something that generates confusion for many by not depending on the final product.
ICO BAT
When researching ICOs I was surprised to find Brave among the list of successful projects.
It is a browser that focuses on the privacy of users, offering greater speed when browsing the Internet, with the objective of modifying the digital advertising industry, associated with a token called BAT (Basic Attention Token).
In 2017, at the hands of the former head of Mozilla and creator of JavaScript: Brendan Eich, Brave launched an ICO that managed to sell 1,500 tokens, raising 36 million dollars in just 24 seconds. Using the Ethereum Blockchain platform as a base, the ICO Bat offered the ERC-20 token, allowing them to keep track of the transactions carried out with the BAT token.
The success of this ICO was quite an event, causing instability in traffic for about 6 hours at the same level as Bitcoin. A variant to take into account were the investors who were involved in this ICO, handling figures between 4 and 2 million dollars invested in this project.
With this success, Brave was able to obtain the necessary financing to carry out its project to improve our experience when browsing the internet and how we visualize advertising on websites, obtaining an income in BATs for this.
Currently the BAT, known as the advertising token, is around a price of $ 1.49, consolidating in the position number # 60 in the cryptoactive market.
conclusion
There is no doubt that an ICO is part of the new cryptocurrency-led finance. Allowing in recent years the development of projects that would not exist if not for this type of financial instrument.
However, it seems important to highlight that as cryptocurrency enthusiasts or future investors we must be very careful about the ICOs that come our way. There is a very high number of frauds and scams that take advantage of people's naivety or ignorance.
The topic of ICOs was interesting to investigate, since many of the digital currencies that we are used to seeing or using, were financed and promoted thanks to this process.
I thank the teacher @imagen for proposing this topic, the more informed we are, the greater our growth will be.
Thanks to all:-
Cc: @steemcurator01
Cc: @steemcurator02
Cc: @steemblog
Cc: @imagen