5 Key considerations we should consider before investing in an ICO

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If you have been in the crypto space for a period of time now, one of the ways to earn exploding amount of profits is to participate in Initial Coin Offerings (ICOs).

As the name implies, ICOs are inspired by the more commonly-known Initial Public Offerings (IPOs) but in practice they are different. Before we consider investing in an ICO, let us explore and understand the differences between ICOs and IPOs.

Initial Public Offerings Initial Coin Offerings
Commonly referred to as a public offering. Known as an unregulated way of raising funds for a new cryptocurrency venture
Stocks belonging to private companies/entities are offered to the public for the very first time. A percentage of tokens are allocated for public sale during an ICO campaign to the early investors of the project in exchange for legal tender or cryptocurrencies such as Bitcoin and Ethereum.
Purpose is to raise capital to expand or to be publicly traded. Purpose is to raise capital from the public to fund their project/ start-up.

With so many ICOs happening in the industry, it is good to know which are the ones to invest and which to avoid.  At a higher level, what are some key considerations we should consider before investing in an ICO?

  1. Legal Status
    Do you know what is the corporate structure of the company? Did the whitepaper states what rights do you have as an ICO investor? Are there any conflicts of interests or security risks from key members of the team? [1] Does it comply with Anti-Money Laundering?
  2. Coin Supply
    Is the digital token supply fixed or mineable? How many tokens will be issued in total? You need to understand the allocation of coin supply because it will affect tradability and your ability to sell off your token when you want to. [1]
  3. Security
    Security is the most important part of any digital token. Investors need to know the strength of the blockchain protocol and digital token encryption used so that it will not be vulnerable to cyber attacks. [1]
    (Image: List of PoW 51% (Proof of Work Mining) Attack Costs for Each Cryptocurrency[2]Is the token’s blockchain hackable or demonstrating a security and disclosure of vulnerability? )
  4. Market Demand
    Is there demand and enough tokens available to the public? Is it globally traded? How is the interaction between the team and the community? Is the company funded by venture capital firms?
  5. Project Scalable
    Is it scalable which allowing for growth? Does it have a mechanism for raising funds for future development?

Majority of the ICOs in the marketplace are campaigned by newly created start-ups or companies that do not have any prior experiences. No matter how good their business plan is illustrated to be, investors should always take measurable precautions. Are you willing to take this investment risk? Let us know in your comments below.

References

  1.  Heong, S. K. (2018, January 03). What Is An Initial Coin Offering (ICO) And Should Singaporeans Get Involved In One? Retrieved from https://dollarsandsense.sg/initial-coin-offering-ico-singaporeans-get-involved-one/
  2. List of PoW 51% (Proof of Work Mining) Attack Costs for Each Cryptocurrency. (2018, June 02). Retrieved from https://bitcoinexchangeguide.com/list-of-pow-51-proof-of-work-mining-attack-costs-for-each-cryptocurrency/

 

Thanks for reading!


Ampliv.io is a consulting company dedicated to blockchain startups and enterprise projects. Our team with 10+ years experience brings your strategic next-gen blockchain innovation to the extraordinary level. Our key offerings are 1. Technology Research & Innovation and 2. Market activation in Asia.

Yuree Hong

Yuree Hong is an entrepreneur, speaker, and blockchain tech consultant working actively in the blockchain and cryptocurrency industry; Founder and CEO of Ampliv.io and SHEBlockchainers.Asia. Featured on Forbes, Yuree is a growth-oriented visionary with ten years of marketing experience in APAC and the US. Her key skillset covers marketing, blockchain startup consulting, blockchain tech research and corporate training. She founded SHE Blockchainers Asia in 2017 with her passion for female inclusion in the blockchain industry. Ampliv.io, blockchain consulting firm, helps tech startups and enterprises navigate the blockchain industry and make the real use cases. She believes in the power of technology emergence in our daily life that transforms business models. She is passionate about working with tech startups, who can leverage her experiences from top brands to agencies. She worked at Korean Telecom, Brandtology (Microsoft, Citibank, Estee Lauder), Omnicom Media Group (Intel) and technology startups in cybersecurity and digital health.

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