We are witnessing a revolution in recent years: the crypto revolution.
But as in every revolution, there is good and bad.
And for an innovative project, there can be a hundred scams.
So must we be afraid of ICOs?
It is undeniable that we must remain vigilant, but by remaining closed to these totally revolutionary products.
How does an ICO work?
To avoid possible scams to ICOs, it is good to understand what are these crypto currencies and their Blockchains.
Very often, we are presented with the ICOs as crowdfunding.
It is indeed a company that distributes virtual tokens, or tokens, to finance its projects.
This is quite similar to an Initial Public Offering.
So what does an ICO bring with respect to these more traditional products?
In reality, an ICO is an opportunity to circumvent the rules that govern these products on a global scale.
Because if we applied the rules as they exist, it would be impossible to raise sums as important as we have seen for some ICOs.
For the company launching an ICO, it is a question of raising a maximum of funds with a minimum of legal obligations.
For example, the company is not obliged to make public its financial or commercial information.
In addition, it saves significant accounting and legal costs.
To differentiate itself from traditional fundraising and to escape existing rules, the company issues “useful tokens”. These tokens are for internal use only and therefore do not meet the rules governing stock market securities.
All this makes an ICO an excellent business for the company that launches it.
But what interest for investors?
In fact, investors will speculate on these chips, buying them at very low prices and hoping to resell them with maximum profit.
This is why the pre-sales of ICOs are so successful. Because the price of the tokens is really broken.
Originally there was Bitcoin
It is obviously Bitcoin that made investors want to buy crypto currencies.
Because it is true that the first to have bought Bitcoins have made spectacular profits. This is why speculators also hope to get rich with new cryptocurrencies.
And that is also what tokens sellers promise by ensuring that their chips will do as well, or better, than Bitcoin.
Are ICOs bad products?
Are ICOs then bad products to be wary of at all costs?
To answer this question, we must first of all point out that since Bitcoin is open-source, it is easy to copy it by making certain changes. This has been done for many tokens.
In addition, it is possible to multiply the chips to infinity, since they are virtual. It does not cost more!
It should be added that beside these copies of Bitcoin, appeared the ERC tokens 20, which are attached to the Blockchain Ethereum. Emissions from these ERC 20 tokens are even easier because they are grafted onto the Ethereum network, without the need to create a new Blockchain.
In addition, the distribution of these cryptocurrencies is worldwide through the Internet. So, anyone, anywhere in the world can invest in these chips.
Then payments are made in Bitcoin or Ethereum. So no need to go through a bank or other traditional means of payment.
Another important element: these technologies are complex and little understood by the public or the regulators.
This explains the lack of regulation.
That’s why some countries like China simply ban ICOs. This does not prevent their citizens from investing in foreign ICOs.
For all these reasons, we would be inclined to be wary of ICOs.
Yet, ICOs are not fundamentally bad.
Because this is an easy way for startups to raise money in having to go through a rigorous process.
And it’s also an easy way for speculators to invest and resell their chips very easily.
ICOs, the new gold rush
Bitcoin was the first crypto currency and it remains to this day at the head of the pack.
Some compare it to the new gold: virtual gold. Safe haven, decentralized and easy to access.
Would the ICOs be a new gold rush?
And if so, for whom?
For those who issue these tokens, or for those who buy them?
What do they represent in this new and promising crypto economy?
One thing is sure. In this new gold rush, let’s keep our eyes open and do not be fooled by open sellers.