Welcome to the cryptocurrency age! We are currently in an era when the modern-day currency is slowly losing its essence. This is all down to the mammoth rise of cryptocurrencies over the past few years. It all kickstarted when Bitcoin was introduced a few years ago. What made this concept so appealing? There is no sort of regulating authority for the currency. You are the sole owner of your money and you may do as you wish with it.
The value of these currencies has skyrocketed from a few hundreds to almost $10,000 in a matter of just a few years. This is the best return on investment any sort of investment could possibly give you. However, many fractions of its supporters have raised concerns as to how much more could Bitcoin grow? It is often thought to as a bubble; a bubble which is highly unpredictable and could burst any moment.
Despite the volatile nature of the Bitcoin, a number of alternative coins have come up thanks to the record-breaking blockchain technology concept. Certain other concepts such as initial coin offerings (ICOs) have also gained a lot of popularity over the years.
What Is An Initial Coin Offering?
What is an initial coin offering? A company starts to generate its own cryptocurrency units. In order to fund its operations, they need capital which could be in the form of other cryptocurrencies as well. Hence, this concept enables users to exchange their existing cryptocurrencies like Bitcoin, LiteCoin, Ether, etc. in exchange for cryptocurrency units generated by the company.
This has attracted a number of cryptocurrency investors into the fray, catapulting the fame of ICOs to a newer level. An alarming amount of USD 350 Million has been raised in the form of initial coin offerings already. Majority of this amount has been raised through crowdfunding campaigns alone. The funds gathered from these campaigns can be thought of a crowd-funded seed money for a start-up.
So far ICOs have performed considerably well and are thriving in a market of close to 800 cryptocurrencies.
What Makes Initial Coin Offerings So Special?
- The Capped Contracts Concept
Many of the blockchain start-ups, who have offered initial coin offerings, have introduced the cap concept on its investors. A cap can be defined as the minimum or maximum limit of cryptocurrency units, an investor has to invest, in order for it to qualify as an investment.
- Max Cap: It is defined as the maximum expected financial goal of an organization. It is the more than enough funds required for the project to take shape and operate. It can also be thought of a threshold amount which will cover the development phase of the project and help it sustain until it reaches profit generation phase.
- Min Cap: It can be defined as the minimum most financial goal of a prospective company. In simple terms, it is the minimum amount of cryptocurrency units required for the start-up to function.
Why has this feature of ICOs been mentioned? This concept shows that there are certain limits in place. Investors are prevented from over investing as well as under-investing.
- Muti-Signature Contracts
Every company accepting cryptocurrency units as investment have a multi-signature system in place. Rather than the traditional single signature authorization system, ICOs authorize transactions if multiple authorities put down their signature on the transaction document. The signature can be both digital or on paper.
There are chances that multiple employees of a company have access to the firm’s cryptocurrency wallet. They could potentially misuse this to launder money from the account. Any sort of transaction will be valid only if necessary authorizations are put into place.
- ICOs are Utilized for Multiple Projects
The success of any ICO can be determined by the type of project they operate on. Every ICO works on a unique project and also provide multiple varieties of them. This way potential investors can have the liberty to choose what project to invest on. Apart from project details, users also gain access to a number of exciting features the ICO offers.
For example, Crown Cloud Blockchain Technologies, along with ICO offerings, gave its users access to their cloud space. The users could store their data on their cloudspace.
There are a number of other interesting ICOs as well which offer multiple benefits to all their investors.
- A Very Easy Investment Process
The entire investment process is a multi-step process. The process is divided into the following steps:
- The first step involves a user to purchase a standard cryptocurrency. This can be either a Bitcoin or an ether, or rather any of the cryptocurrencies which the ICO is willing to accept. However, it is important for the user to purchase an online wallet and to store all their cryptocurrency units in the wallet. This is done so that the cryptocurrency is safe and intact and free from any third-party hackers. Wallets also offer every user a private key without which the wallet cannot be accessed and hence no investment can be made.
One must make sure that they do not lose their private key information. However, a number of ICO service providers offer a number of key loss prevention methods. All in all, your key is pretty much safe.
- The next step involves the user to decide which ICO they wish to invest in. How does one make a choice? Do a thorough background check on the project members. Understand what the whole project is about and also keep tabs on the white papers of the ICO offering. A white paper is nothing but a document which furnishes the basic details of the project.
Once an ICO has been chosen, a cryptographic message is sent to the postal details provided by the ICO service provider. Once they receive the cryptocurrency units from a user, the amount is reflected on their website which flashes how much investment is received so far. As more and more investment is pumped in, the price of each ICO coin unit increases.
- Once your transaction is complete, it is always advisable to make use of an offline storage model to store the necessary cryptographic information for a user to cash in on the coins. It is also called as “Cold Wallet Storage” and remains one of the most effective ways to store and protect your ICO coins or any other form of digital currency.
- Regulations and Security Features On Offer
There is always a rising concern amongst people concerning the security features which ICO service providers offers to their customers. It is very common that phony ICO providers accept cryptocurrency investments from users and finally elope, making it a perfect crime.
Due to such instances, the ICO industry despite it being a very appealing one, is walking a tightrope when the trust factor comes into picture. Hacking remains one of the major concerns when it comes to Initial Coin Offerings. As much as it attracts investors, it also attracts potential hackers along with it as well. To tackle this, ICO service providers are adopting a number of reliable security measures, so that the transactions are protected and safe.
One of the most common methods is email authentication and Google authentication. This is supposed to be part of every login process.
Another must-have feature is a smart contract feature. This generates a number of addresses from just one funding address. This way there isn’t’ just one address which a hacker can attack. Multiple addresses reduce the risk of attack and in order to secure a large fund, the hackers must access multiple addresses making it virtually impossible.
Major ICO service providers are not regulated by any central government. Hence your investment is free from taxation laws and your money is virtually your own.
Future Of Initial Coin Offerings
These are just some of the few interesting features which modern-day ICO service providers have on offer. The industry is expected to grow at a rapid rate in the years to come and now is actually the very best time to invest in ICOs.
Despite the negative aura surrounding Initial Coin Offerings, people are still flocking to invest them. Earlier on ICOs were being offered at relatively low starting rates. But now, the prices are growing at exponential rates. Hence, now is the best time to invest.
Another reason why ICOs are very reliable is for the fact that they are considered to be the future when it comes to start-up funding. Newer ICO service providers are coming up with appealing projects and this is surely going to attract a ton of investors to their fray.
People have tons of cryptocurrency units at their disposal, but they have no clue as to what could be done with them. They either en-cash them or just watch their investments grow.
With the help of ICOs, they are exchanging one cryptocurrency for another exciting cryptocurrency unit. Pretty exciting, Isn’t it?