Cryptocurrencies are becoming more and more renowned. You may recognize the name ‘ICO’ or ‘Token Sale.’ Many individuals are unaware of what ICO or Token Sale means.
The short description below indicates what investing in an ICO or Token Sale entails.
What an ICO or Token Sale Means
A token sale or initial currency offering is a crowdfunding project for producing and selling digital tokens. For this to come to a realization, the company creates digital currency or tokens and swaps a popular currency like ether, fiat, Bitcoin or different cryptocurrencies with investors.
The public invests in these startup ventures for two reasons:
- Individuals believe that in due course, the worth of the tokens they are purchasing now will increase depending on the demand in the market.
- When an investor buys these digital tokens, he/she can make good profits; for instance, a share or service of the entire startup proceeds.
The History of Token Sales and ICOs
In 2013 The Mastercoin project performed its first initial coin offering, and this same year many other firms did the same. After this, interest in token sales reduced, and the 2016 scandal made people hesitate in investing in these ventures.
The venture of TDAO produced $150 million plus, on the platform of Ethereum. However, someone hacked this system, obtaining cash worth about $60 million from the venture. It impacted many people enormously.
It made the U.S. Securities and Exchange Commission and the Ethereum Foundation decided that forthcoming ICOs should take extra care. After a law was implemented saying that trading digital assets like tokens provided by ICOs require federal rules, people’s interest in this practice increased.
Token Sales High Reward and High Risk
Investors need to know that when their portfolios feature ICO tokens or coins, it is hazardous. But, the advantage is that they can benefit greatly. Get details before investing and study the white paper, go through responsible review sites and avoid making quick decisions.
Taking part in an ICO
These ventures’ best feature is that investing is possible for anyone. A fantastic way to do this is to investigate well about the workings of initial coin offerings. You also need to ensure that you have an understanding of what to do to have a successful ICO.
When you understand ICOs, Cryptocurrency and overall investment principals, you can improve your prospects of getting substantial proceeds in the future.
How does a token sale work?
For an ICO to start, the startup company should be willing to get a rare kind of Cryptocurrency. The project becomes a worldwide investment community instead of trying to get capital from common venture capital techniques or banks.
The company first creates a comprehensive plan like a website, an operative prototype sometimes, and a white paper. It then presents digital tokens for the latest currency then exchanges it for regular currency, mainly fiat, ether or Bitcoin.
Is it permissible to trade Token Sales and ICOs?
Yes, even though some SEC securities regulations govern them. Because they are new, where legality is concerned, they are flexible.