Welcome to Kafycrypto, your number one crypto news, and marketing channel. This article is about Cryptocurrency ICOs and IDOs.
Some years ago I ventured into online business. I was introduced to a website that pays you 2% of any amount you invest in the platform. I was excited about the prospects and decided to try it. In the first couple of weeks of my online business adventure, I bought into the idea because I watched my capital grow gradually by 2% every day.
So I decided to increase my investment by something close to one thousand percent. The prospect of the returns after 2 or 3 months had me salivating even while sleeping. But the feeling didn’t last for a month. A few weeks after my huge investment, I could not gain access to the website. It became static. In the following weeks, I received one excuse after the other from the administrators of the site. Not too long after that, they became unreachable.
That was how I lost my investment. However, despite my terrible experience, I have seen and heard success stories in the online business terrain. I have even experienced a little myself. So, it is true that people make money online. It is also true that people still get scammed online.
The emergence of cryptocurrencies sort of amplified those facts. People can now make money online through cryptocurrency investments. And sometimes it is quick and easy. In the same vein, folks also get scammed in crypto easily these days. And if I may add, quickly.
ICOs and IDOs are ways to get into cryptocurrency investment. Cryptocurrency ICOs and IDOs are becoming popular. Unfortunately, many of these new cryptocurrencies are scams that will take your money and run (and most likely not give you anything in return). Fortunately, there are ways to avoid getting defrauded by cryptocurrency ICOs and IDOs; read on to learn more.
Initial Coin Offerings (ICOs). What are they?
An ICO is a fundraising method that trades future crypto coins for cryptocurrencies that have an immediate, liquid value. Usually, a percentage of the tokens is sold to ICO participants and a portion is kept for the company’s needs (private investors, etc. In an Initial DEX Offering (IDO), new projects offer their tokens on decentralized exchanges (DEXes) instead of through a direct sale. Because decentralized exchanges are accessible to anyone with an internet connection, they provide a more inclusive playing field for projects seeking funding.
Defining Initial Distribution Offering (IDO)
An Initial Distribution Offering (IDO) is a new way for projects to raise funds and launch their tokens. In an IDO, a project sells its tokens on a decentralized exchange (DEX) instead of through a traditional initial coin offering (ICO). This allows investors to buy the tokens with other cryptocurrencies, rather than fiat currency. In this article, we will maintain our discussion as it relates to ICO because the elements are almost the same in both cases.
The differences between ICOs and IDOs
IDOs have come to be preferred to ICOs among investors for the following reasons:
- They are more stable because investors can’t jump on all the tokens available at once.
- Decentralization offers the benefit of accessing the token from anywhere at any time.
- The token is immediately available on the exchange after the ICO event.
How Cryptocurrency ICOs work?
Startups begin by deciding on what blockchain to run the ICO. Then they announce it along with the rules that will govern the ICO.
After the announcement, the offering company begins marketing to attract interest for mining the token that gets launched eventually.
In the process, the offering company keeps working on the system to make sure there are as few glitches as possible.
Another stage is for the company to seek to list the currency in reputable exchanges. This listing is necessary because it gives investors access to the coin. This is similar to what companies do when they go public. The company going public will need to be registered with the stock exchange as a way for investors to gain access to their shares.
The coin can also be bought or accessed through the offering company’s website. But listing with reputable exchanges offers credibility and also inspires trust in the investors.
The process of running an ICO can be divided into the following steps:
Initial white paper release: at this stage, the offering company seeks to create awareness for the emerging token by releasing a white paper and engaging in marketing activities on popular online platforms like Reddit and Twitter.
The extent of distribution of the white paper can give the company an idea of the market demand for the project. The response of prospective investors to available information will enable the company to make necessary adjustments to existing project plans.
The offer: This is the eventual release of the white paper that has gone through all the necessary adjustments. The paper at this stage outlines the benefits that the project offers the investors. Including possible risks and how to avoid them. And also, information on how to make the most of the project.
The following are some of the details that should be included in the final release of the white paper:
- The total amount of money the ICO seeks to raise
- The price of the financial instrument.
- A clear timeline for ICO completion and the start of returns for the investors.
Following the release of the last version of the white paper, the team intensifies marketing.
Marketing: The effort of the marketing unit is key to the success of the ICO. Marketing is pivotal to raising the required capital for the project. Since most companies launching an ICO are relatively unfamiliar to investors, marketing is needed to create awareness and improve knowledge of the project.
The marketing is targeted primarily at institutional investors who are likely to take the bulk of the security tokens, but the higher percentage of the target audience is the participators. The participators will most likely be the ones to mop up the utility tokens.
The marketing campaign gives rise to buying and selling of the token. Most of this buying and selling will take place at a designated exchange.
The ICO: There are two common ways that offering companies usually distribute tokens:
- The first is to distribute it directly to the investors after reaching the target capital.
- Another way is to sell the token on various crypto exchanges.
Once the sale has ended, the company commences its obligations.
For the investor, it’s a case of exploring the various exchanges or social media sites that publish active and up-and-coming ICOs and then opening an account, acquiring the tokens, and having completed the necessary due diligence on the company or project in question. The following sections explain how to find profitable ICOs and invest in them.
Finding profitable Cryptocurrency ICOs and IDOs
It used to be a grueling task to find the right ICO to participate in, but there are now tools that make the process much easier. These days you can simply visit the ico calendar section of Coinmarketcap and find both ongoing and upcoming ICOs. the website icodrops.com also offers such a service.
Steps to participating in Cryptocurrency ICOs and IDOs
Participating in ICOs and IDOs is a known way to invest in cryptocurrency. The first step to becoming a participant in an ICO is to be aware of it. When you have become aware, the activities listed below will follow naturally:
- You choose an exchange; this is an essential step. From what we’ve seen above, the token being offered is usually registered with exchanges. And the information about which exchange has the coin listed will be in the white paper. Your job is now to choose where to participate from.
- Do the necessary research on the project by doing the following:
- Investigate the quality of the project team and angel investors.
- Do a proper study of the white paper
- Analyze predictions and general opinions about the ICO
- Create a wallet that is configured with the token needed to participate in the ICO.
- Get information about the purchasing process so that you can be fully prepared and alert.
- Participate in the ICO
- Join support communities to stay abreast with developments related to the token.
Tips for buying into Cryptocurrency ICOs and IDOs
When buying into an ICO or IDO, it’s essential to do your research to avoid getting defrauded. Here are a few tips:
- Check the team’s background and experience.
- Make sure there is a detailed roadmap with achievable milestones.
- Evaluate the project’s code and security measures.
- Look at the project’s community engagement and support.
- Do your due diligence before investing any money.
An ICO, or Initial Coin Offering, is a new way of raising startup capital in the blockchain and cryptocurrency industry. In an ICO, a startup creates a new digital currency and sells it to investors in exchange for fiat currency or other cryptocurrencies.
A cryptocurrency IEO, or Initial Exchange Offering, is similar to an ICO but instead of the startup selling the tokens directly to investors, they are sold through a cryptocurrency exchange. This is also known as IDO.
The lack of proper regulation for ICOs is the reason participating in them comes with a level of risk. As a participant, you must do your due diligence, as explained in this article, to avoid being scammed by illegitimate ICOs.