ICOs Explained — What are They and How to Invest Wisely
Tags: ICO, Blockchain, Cryptocurrency, Cryptocurrency Investment, Esport

Along with the rise of Cryptocurrencies into the mainstream, ICOs have become an increasingly popular fundraising mechanism for new technology companies. An ICO is an “initial coin offering” and borrows the phrase from the traditional IPO (“initial public offering”).

However, there are some fundamental differences. Whereas as an IPOs are typically launched by companies with long histories, ICOs are usually fundraising efforts by new companies. They are often referred to as a kind of combination between Kickstarter projects and IPOs for this reason. ICOs are high-reward ventures with the potential for 100s or even 1000s times the return on investment. They are also high-risk and must be approached with caution and plenty of due diligence.

With the Esports Interactive Platform (EIP) ICO starting on April 4, we thought it would be useful to explain how ICOs work.

Photo by Francisco Gomes on Unsplash

How Do ICOs Work?

Generally, an ICO is held to sell “tokens” for a new cryptocurrency at a discount. Often, the start of the token sale will have significant discounts to encourage early investment. The ICO will start and run to a fixed schedule in which a limited amount of tokens will be available to be sold. Similar to stocks, if the value of the cryptocurrency appreciates, then the investor will make a profit.

The process is usually started with a white paper, which lays out the following information:

· The concept and what the project is about.

· More specific information about how the project operations once funded.

· A Roadmap for the development of the project.

· Financial information.

· Details of the ICO and how to participate.

How to Choose Which ICOs to Invest In

There are a number of factors to consider when assessing whether an ICO is a good investment, such as:

The White Paper

The first step in picking an ICO is reading the White Paper. The ideas should be well presented and the plan should make sense to you. One of the main things to consider is whether the project actually needs to be done on the blockchain. Is there a reason for a new cryptocurrency to be involved and is it crucial to the success of the project or merely added on as a fundraising tool? It is important to read the details as statistics can be cherry-picked to make the opportunity seem better than it actually is.

Project Developers

Learn about the project developers and find out about the team behind the project, their roles and experience. Although most companies launching ICOs are new, it is important to check whether they have been involved in similar projects or in the industry in the past. Some start-ups don’t even list their team members at all. This should be a red flag for any potential investors.

Fund Transparency

Is the company transparent about how the funds will be used? This includes the total number of tokens to be released, how many to be sold at the different stages of the offering, and how the raised funds will be distributed amongst the development team and promoters. Past the ICO, the company should show the details of how the funds should be allocated between the different departments to bring the project to completion.

Road Map

Does the company have a good long-term plan for the product? A reliable ICO will have a road map outline the various stages of financing and product development. You should evaluate whether the objectives stated are consistent to the long-term goals of the project and if it is realistic to complete them within the given time frame.

I hope you found this brief introduction to ICO investment helpful. I encourage you to check the upcoming EMP token sale for Esports Interactive Platform (EIP) at our official website, and the whitepaper here.