An ICO (Initial Coin Offering) is the initial placement of tokens on the
blockchain. It is a specific crowdfunding model. ICO participants finance the
development of a project in return for future benefits. ICO is often compared to
IPO. But unlike IPO, participants in ICO often do not receive a stake in the
company and cannot influence the internal management decisions.
It is believed that the first ICO was held by Mastercoin in June 2013. The
Bitcointalk forum announced the launch of crowdfunding for the project. As a
result, ICO Mastercoin collected more than 5,000 bitcoins.
However, ICO Ethereum, held in 2014, was perhaps one of the most powerful
ICOs. Tokens then were sold for $0.30. In two years, their value on the exchange
increased up to $12- $13, and in June 2017 they already cost $390.
There are a lot of ICOs nowadays. The new projects, which assure their
prospects and look for investors, crop up almost every day. The more such
projects are created, the less of them will be successful. A lot of ICOs are
originally set up just to fleece people. The number of such projects will only
grow as people become increasingly interested in making easy money through
These days, the developers of these startups have even found a way to get the
support of people who do not have the money to investing ICOs. The bounty
program was invented just for them. It is an opportunity to get your share of the
project tokens without investing your own funds. For this, you just need to
popularize the project.
To get a bounty, you may:
Promote the project (via social networks, email
databases, campaigns on Bitcointalk forum) so that
potential investors learn about it
Translate information about ICO into other languages
Look for bugs in the project
Design logos, booklets, and other information
(sometimes on a competitive basis)
Design mobile applications, wallets, or other software
If you have the skills for doing at least something from the list above, you have
every chance to earn a bounty!
As you’ve probably already grasped, there are many scammers in ICOs. Let’s
talk about scam ICO. Just google “scam + history,” and you will see a large list
of various services that in one way or another have decided to play on the trust,
or carelessness of others. The fields are the most diverse: from energy to the
banking sector. Though ICO has existed only since 2013, this field has seen a lot
of scams as well.
How can you tell if an ICO is a scam? Here’s what to look out for:
The ICO project creates only digital currency, which is
positioned as a universal means for international
payments without indicating its specific advantages
The ICO project is described as extremely large-scale,
though it does not present a specific model of profit
The ICO project developers are throwing every effort to
promote it and say almost nothing about the code, which
might even be closed (not open-source).
Scammers usually develop a platform without demonstrating any results of
work. Sometimes the main developer is notorious in professional circles or has
already been involved in the crook business.
It is worth mentioning that there are several examples of successful ICOs. The
success of an ICO is dependent on a number of conditional things. The
conventional indicator of success is the amount of raised funds. In this regard,
the leader (at the time of writing this book) is the Bancor project, which raised
396,720 ETH in less than three hours in June 2017. An example of another rapid
crowdsale was the innovative Brave browser campaign, which raised $36
million in the very first few minutes of the project. Furthermore, the projects
Storj ($30 million in less than a week) and Aragon (which collected the required
275,000 ETH, about $25 million, in just 15 minutes from the start of the ICO)
joined the ranks of successful cryptocurrency crowdsales in May 2017.
There are also the following projects: MobileGo ($53 million), Gnosis ($12.5
million in 10 minutes), Blockchain Capital ($10 million in 2 hours), Aeternity
($2 million in the first few hours), and, finally, the Status project (about $100
million) which crashed the Ethereum network. And we can’t forget about the
legendary The DAO project, which collapsed and gave birth to Ethereum Classic
in summer 2016.
The success of an ICO largely depends not only on the idea but on a smart PR
campaign as well.
You may ask: How are the investors’ funds protected in such projects? My
answer is very simple: The funds are not protected. By and large, the only safety
guarantees are the reputation of the project, i.e. the reputation of the people
unknown to you.
Why do people still invest in these projects considering all these factors? Here
are some reasons people take the risk of participating in ICOs:
Desire to make money on a trend
Desire to assume the role of an investor
Desire to keep up with other investors
Belief in a startup.
That’s why it’s very important to carefully choose an ICO to invest in as there
are no laws governing the conduct of ICOs and protecting you from scammers. It
is not uncommon in ICOs, like in crowdfunding, for a project to never even get
to the stage of product implementation.
If you are still interested in a certain ICO and ready to invest in it, pay attention
to the following key points:
Project’s whitepaper and road map
Essence of the product (feasibility, demand, is there a real
problem which the project solves?)
Connection of project with Blockchain (whether it is
needed or far-fetched)
Project team (experience, their history)
Main persons behind the project (experience, their
Substantiation of the project’s purpose (what money is
You should also find answers to the following questions:
what will drive the demand for these tokens/cryptocurrency?
what will provoke a large turnover of coins and what can be
acquired for them?
whether you will be able to exchange them for goods or sell them?
At the same time, when you analyze an ICO as an investor, you should
understand whether the project can independently solve the problem or task it’s
Moreover, keep in mind the following tips:
Choose a project in which you understand at least
Invest rationally, don’t agonize over it, and do not put all
your money on one project
Always be careful. Even if you are lucky with one ICO,
you are not guaranteed against loss forever.
You can use icorating.com to gain insights on the companies running ICOs.
Icorating is an independent agency where you can find the lists of different
ICOs, both closed and upcoming. There is even a list of ICOs considered to be
blatant scams. The icorating.com experts analyze the following ICO features:
Business model (its relevance, merits ,and flaws) Market niche (prospects
and dynamics of development of the chosen niche for doing business) Team
(business experience in the traditional market segment, Blockchain industry,
experience in Blockchain development) Competition (level of competitive
pressure in relation to companies with similar business models from the
traditional market segment and Blockchain economy) Technical background
(availability and quality of a prototype or source code) Analysis of feedback
from the community Having reviewed the preliminary assessment of ICOs by
this agency, it will be easier for you to analyze the project you’re considering in
order to make a final decision on whether to invest in it or not.
Another resource for ICOs is icotracker.net. Here you will find a list of
upcoming ICOs. I also recommend icobazaar.com, icocountdown.com and
The ICO market now resembles the boom of dotcoms (1995-2001). People today
remember the time when companies like Apple, Amazon, or Google arranged
IPOs and wonder at the kinds of fortunes they could have made if they had
invested in those companies in back then.
The ICO market gives you another chance to become a part of these new cyber
success stories. Some ICOs have the potential to grow dramatically over time
and to recoup the initial investments manifold. Still, according to some experts,
most projects in 2017 may turn out to be frauds. It makes sense, as it now easier
to invest thanks to the virtual economy. People invest their money practically
sight unseen in any company with a more or less decent presentation. Such a
thoughtless approach plays into the hands of scammers.
An ICO (Initial Coin Offering) is the initial placement of tokens on the