ICO or Tokensale's in Laymen's Terms

I am writing a series of articles, to assist non-technical users and newbies to the world of Crypto to understand more technical concepts. My main goal is to enable the non-technical audience to have conversations with the more technical audience.

Today we are talking about ICO's (Initial Coin Offerings) or Tokensales.


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Venture Capital

Historically Venture Capital was one of the key methods for Start-up companies to raise funding to get their new business off the ground. It is great to have a business idea, but everything costs a lot of money. In my opinion the idea for the business is not even 10% of what is needed to take a business to market. You need to market the idea, you need to travel to meet people to introduce to the idea, you need to bring in other people to help you build the business. And this is only mentioning a few of a start-ups expenses.

The most terrible part of using a VC to raise capital to start your business is that they take a massive part of the equity in your start-up in return for providing you with the money to start your business. If I say massive, we are talking about even 70%-80% of your business is not yours when you start.


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What is an ICO or Tokensale?

The Financial Times calls ICOs “unregulated issuances of cryptocoins where investors can raise money in bitcoin or other [cryptocurrencies],” which is accurate, especially if you focus on the word “unregulated.”

Sticking close to the older financial publications, The Economist also took a look at the financing mechanism, describing what you buy in an ICO in the following fashion:

ICO “coins” are essentially digital coupons, tokens issued on an distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights. Investors hope that successful projects will cause tokens’ value to rise.
Quoted from WTF is an ICO?

As with any thing where you can make a lot of money, there are risks involved with investing in ICO's. A good friend once told me that Not all people in Crypto and ICO's are crooks, but all crooks are in Crypto

For me this means that you need to be very careful when investing in ICO's or Tokensales. There are a lot of things investors look into before investing in an ICO. Typical things that potential investors usually look into before investing in a tokensale are:

  • The people involved in the business. Take some time to look at their profiles on LinkedIn, Facebook or whatever means you can. Google them and see if they have histories. At the end of the day, these are the people that will build the business and execute on their business plans.
  • The Whitepaper - A Whitepaper in the sense of an ICO, is a document that provide you all of their information on how the business will work.,

I hope this gives you a better idea of what an ICO or Tokensale is.

Disclaimer: This post is by no means financial advice, or in any way a suggestion to invest into any ICO. I am just trying to explain what an ICO is in Laymen's terms.

Some of my other in Laymen's Terms Post.

Happy Steeming!


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