All you need to know about Crypto ICO and Stock IPO
Initial Coin Offerings (ICO’s) have been in the crypto news since a few months after some of them gave amazingly good returns going upto 100x while some left the investors with “penis” written on a webpage. This unregulated and quick mechanism to raise millions of dollars is being used by many crypto blockchain projects to distribute their tokens and some of the scammers to rip people off their life savings. So what is a crypto ICO? Is it the same as stock IPO? How many of these initial coin offerings have been successful and given good returns and what is the risk percentage involved when investing into a crypto ICO? We will have a look at all this in this article.
What is a Crypto ICO?
To make the understanding better, ICO can be best defined as a hybrid of the kickstarter model and stock IPO. A blockchain startup which is running a crypto ICO offers its coins/tokens in exchange of another cryptocurrency like Bitcoin, Ethereum or NEO and if the value of those tokens increases, the investor ends up making a lot of profit. In case of the kickstarter model, a person asks for crowdfunding and in case of a stock IPO, the person buys a share in the company. Clubbing them both, in a crypto ICO, the person is funding the project as well as getting a share in the project in terms of the tokens/coins that the latter provides.
How is a stock IPO and crypto ICO different?
While there are a number of technical differences between the two, the one major difference is in terms of regulation. While stock IPO is a highly regulated mechanism and happens over a recognized exchange with government commissions providing protection against scam, there is nothing like this when we talk about a crypto initial coin offering. A crypto ICO happens as simple as that you send one of your cryptocurrencies the blockchain company and they send back their tokens corresponding to the cryptocurrency you sent.
The second major difference is in terms of the credibility. A crypto ICO can be initiated by any company and even you can start your ICO with a website and a word document known as the “whitepaper” but in case of a stock IPO, you can start your own IPO only if you have a solid track record of being a good company and clear the filtering out parameters set by the commission of your country
Access to offerings:
While anyone can participate in a crypto initla coin offering, the access to a stock IPO is exclusive and limited. Not everyone can participate in an IPO and buy a company’s shares.
These three major differences give an overview on how the new crypto ICO is different from a traditional stock IPO.
How risky are crypto ICO’s and should you invest?
Until July 2017, when the crypto market cap was 5 times lower than what it is today, a whopping 1 billion dollars had been raised in initial coin offerings. As we write this article in March of 2018, this number has gone up by at least 5 times. In the last quarter of 2017, initial coin offerings became the buzzword in the crypto world and while some of them have offered good returns, some ripped off people of their life savings. Having said that, before we dive into the statistics, let’s have a look at some of the biggest initial coin offerings of all time:
1. Ethereum: The second largest cryptocurrency today was the first crypto ICO in the history.
2. Golem: Golem is one of the biggest competitors to ripple for payment processing and has been a successful ICO.
3. Argor: A very innovative project which has maintained a consistent value over time was also an ICO.
The list goes on because almost every coin you see in the market today was an Initial coin offering someday but these are personal favorites so we mention them.
So what have crypto ICO’s been up to?
• More than 10% of the money raised in initial coin offerings have been stolen:
Yes, you read it right. Around $37.5 Million have been stolen and this is the reason why most of the advertising giants and governments are running against crypto ICO’s to regulate them and in worst case, ban them.
• The highest return on investment that an ICO has offered is 1,477,000%!
Yes. If you would have invested $1 in the NXT ICO back in 2013, you would have had $1,477,000 today.
• 66% of initial coin offerings FAIL!
As reported by the Bitcoin Journal magazine, more than ⅔ coin offerings fail in reaching their desired goal.
We can keep talking about this all night, but now coming to the next question of “should you invest in a crypto ICO”? Well, we don’t have any answer to the same but we can just advice you to not follow any of the blogs of YouTubers when taking such decisions but do your own diligent research. The crypto market is unregulated and there is no one to back you up if your money is stolen so you need to be sure where you are putting your money into by yourself.