Investing

What Are ICOs – Pros and Cons

 

If you’re not aware, ICOs stands for Initial Coin Offerings, and we can just define it as a way of accumulating immediate funds for kick-starting as well as developing new start-ups and bloc-chained ventures.

Let’s get you started on how it works? First, the developers for a specific projects requests funding through an ICO. Secondly, the funds are paid or released via a cryptocurrency such as Bitcoin or Ethereum and investors receive tokens as an exchange for these funds. Lastly, the tokens can either be used as a native currency or give the holders (investors) some powers within the project.

The biggest ICOs of all time is the Ethereum ICO regarding the project potential and raised funds.  In 42 days in the year 2014, the Ethereum raised about $18.4 million, and it has become one of the most powerful and innovative cryptocurrencies in the world.

There are some benefits of ICOs and criticizes at the same time. Here you’ll find the Pros as well as the Cons of ICOs.

 

Pros of ICOs

 

 

  • Opportunities 

The existence of ICOs leads to the rise of many opportunities for promising and upcoming projects. For instance, Ethereum for the past one year has progressed to become the second most powerful cryptocurrency from the Bitcoin, which is the first dominant digital currency.

  • No paperwork needed 

Many projects don’t start at the anticipated time, or sometimes they don’t even get executed at all. It’s because of that hectic process of getting right all the paperwork involved. When it comes to ICOs, they either pass through a minimal paperwork process or not.

  • Incentive 

The success of ICOs the past year has led many developers to have a motivation when it comes to developing new and exciting projects.

  • Project’s exposure 

ICOs lead to the exposure of the project which in turn, makes more potential investors want to take part in such a project.

  • Early access to valuable tokens 

Some tokens obtained through ICOs have an enormous potential of becoming valuable cryptocurrencies. For example, one Ethereum ICO presale was about 40 cents which could turn in one Ethereum that now goes for approximately $369.

  • Community building 

With an ICO, it’s possible to come up with an idea of building a community around the funded project. By doing so, it makes the project to be transparent, and potential investors can know the direction of the project.

 

Cons of ICOs

 

  • Scammers 

ICOs attracts a lot of scammers since it requires less paperwork thus they can create fake white paper and make off with a lot of investor’s money. Also, there can be an omission of essential project details by the developers to make the projects appealing to the investors.

  • Pure speculation 

Projects funded by ICO are not based on exact results but based on the idea of the project. After going through the white paper, you can decide to invest by trusting the team of developers rather than checking actual outcomes.

  • Other disadvantages 

There are some minor cons of ICOs such as whaling time (wealth investors rigging ICOs deals to favor them, network congestion, some difficulty in storing the tokens, and government intervention (regulation the ICOs to prevent scams).

Conclusion

All in all, investing in ICOs is a risky step to take, but if you think the benefits are worth the risk, then ICOs is the blockchain technology to go for. Be sure of what are ICOs – pros and cons, and that has been carefully covered in this article.

 

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