The rise of popular cryptocurrencies, such as Bitcoin, has brought with it the development of many other crypto coins, which are more commonly known as altcoins. These alt coins have brought a large surge of interest around a unique way to fund digital projects – initial coin offerings (ICOs).
As you can see in the infographic below created by BTXchange, in some cases, ICOs have raised literally hundreds of millions of dollars.
During an ICO, an interested investor can buy tokens that a startup is offering, in the hope that, when the startup’s project develops, she will profit from the investment
Risks Of ICO
Like with most investments, an ICO doesn’t come without some risks. There have been a huge number of projects that have failed because the token didn’t sell well, so the company was not able to offer much, or any, growth.
There have also been a number of ICO scams since their creation. For example, in February 2018, the crypto startup of Giza raised £2.4million in a fake ICO, which engaged more than 1,000 investors.
Good And Bad ICOs
There are a number of ways you can tell a good ICO from a bad one. Those that have a good hype in crypto communities and strong development team are usually pretty trustworthy. Whereas those that have unachievable goals, unclear descriptions, an undefined team, and an absence of trust usually should be avoided.
Benefits
For the company initiating an ICO, there are a number of benefits. Not only does it provide the initial funding that the project will need for further development, scaling, and expansion, but will also just start the service with a number of users that are already able to use the tokens. This has the potential to drive up the value of the coin from the outset.
From the outset, ICOs have been very popular, with 54 major ICOs in 2016 which raised almost $103 million, to 92 major ICOs in 2017 which raised $1.25 billion. Only time will tell what the end of 2018 will bring.
We have really only seen the beginning of what ICOs and altcoins are capable of, with the coming year poised to be an exciting year for ICOs.