The blockchain ecosystem offers a growing number of investors new avenues to make money. While many buy tokens or trade digital currencies, a new investment option involving Initial Coin Offerings (ICO) is now becoming common. With the popularity of ICOs undisputed, understanding how to participate in crypto ICO or knowing where to purchase ICO in a legitimate way often remains a challenge for many.
ICOs have the same fundamentals as Initial Public Offerings (IPOs), however, with lower regulatory backing and varying dynamics to create your own cryptocurrency. This article is a beginner’s guide and aims to address the knowledge gap in getting in on the ICO train. Sit back and let’s explore how to participate in an ICO together.
Why invest in ICO tokens?
Every investor participates in token sales or owns cryptocurrency for various reasons. Using myself as an example, I hold some coins because I believe in the disruptive technologies they brandish. Unique projects with a visible use case conducting token sales may catch my attention, as many notably have, away from regulators. This was the case with the Ethereum Blockchain. To use the Ethereum platform for creating a smart contract, ETH is needed, and therefore, I purchased a few to put on my Ethereum wallet immediately.
However, everyone’s goals differ, and only through a broad survey can we get to know the minds of investors. For what is most likely, Initial Coin Offering (ICO) tokens can present a whole new financial opportunity to investors per rate of gain. But before you turn into an investor yourself, you should understand, what is an ICO. In reality, ICO tokens are often sold at a relatively lower price compared to the price the tokens eventually list. This gives the investors a good return on their investments. Check out our review about the best ICO websites to find related offerings.
Depending on the problem the blockchain startup is aiming to solve, investors also exchange ICO tokens in order to gain access to the protocol and its products or services. For every varied reason each investor may have for backing a particular ICO, there is a feeling of being a part of an ecosystem designed to proffer solutions to a particular challenge. This sense of belonging is a vital reason why many invest in ICOs and also a good one to hold for those looking for a reason to join the train.
How to Participate in ICOs
Getting information about a prospective about an ICO is the first thing to do in order to be a part of the project. However, knowing about the token sale is not enough knowledge to secure an allocation. There are key things you must note before you can successfully participate in an ICO.
There are many instructions out there that detail how to buy an ICO, however, many are not simplified for all to understand. In this section, we would propound on how to purchase ICO tokens, as well as the key things to watch out for in a typical token sale.
The process to participate in the ICO is described step by step below:
1. Decide where to buy ICO tokens (a trustworthy ICO exchange)
If there is one thing that is common in the digital currency world, it is the duplication of businesses with the same model. For instance, we have hundreds of new cryptocurrency exchanges, as much as there are thousands of coins and tokens. The space has a limited regulation and this draws in a lot of new projects to spring up. Therefore, always be aware of a potential scam.
This proliferation of platforms is why you must choose the ICO token exchange or platform carefully. Popular exchanges like Binance, Coinbase, Gate.io, Huobi, and Kraken amongst others typically offer a launchpad platform where new tokens raise capital through crowdsale. Amongst these options, you need to decide on which platform to pitch tents with.
On Coinmarketcap you can read all about new ICO coins on the market. If you have a particular presale you have been following, the project may recommend a particular crowdfunding platform, in which case, you may not have the liberty to choose. The intent of choosing a crowdfunding platform is so that investors can do their due diligence in terms of registration.
Most token sale processes usually involve Know Your Customer (KYC), and Anti Money Laundering (AML) checks. It is also good to decide where to buy your ICO tokens in advance as some platforms may not be available in your region due to regulatory compliance. Knowing which ICO exchange operates in your area will save you time in your ICO investment pursuit.
2. Set up your ICO wallet
After you must have registered on an exchange where you can purchase ICO tokens, you will need a funded account. As a crypto-related investment, you will need to have a wallet set up with the right cryptocurrency to participate in the token sale.
Most exchanges with launchpads offer an ICO wallet for their token sale process, however, those who do not often proffer a flexible option that prospective participants can explore. There is a likelihood that the majority of centralized exchanges with ICOs will offer a Bitcoin (BTC), Ethereum (ETH), or Stablecoin wallet to make your purchases in fiat currency, such as USD.
Once the wallet is up, you will need to fund the account either through a debit or credit card or via a P2P purchase system. Buying Bitcoin or Ether via credit card is a straightforward process that is similar to how general merchandise purchases are made online. The P2P system involves purchasing the coins you need directly from other sellers.
It is not uncommon to open a third-party cryptocurrency wallet such as MyEtherWallet, Metamask, or Trust Wallet. These wallets are free from the prying eyes of exchanges and they support ERC-20 token formats as well as other new tokens which are typically used in ICOs today. The third-party wallets are better storage options for the ICO tokens when they are distributed. You can fund these wallets by transferring the right tokens for the sale from an exchange.
With your funded wallets with the right digital currency as specified by the token issuer, then you are good to go. Just keep in mind that storing also new coins and a hardware wallet always makes sense for safety reasons and not to share your private keys.
3. Learn how to buy ICO tokens at CoinList exchange
Token purchases and the underlying process may vary from one platform to another. It is important for intending token sale participants to understand the process of purchasing these tokens on their exchange of choice. So, let’s learn how to buy initial coin offerings.
Let us take the popular token sale platform CoinList for example. The process involves pre-registration for the particular token sale program. Once you have agreed to the terms of the sale and verified that your country is not among the blacklisted nations, your registration will be approved.
On the token sale date, eligible participants are assigned a place in a waiting room for about an hour, and when the sale begins, each participant will be assigned a random number to enter the sale. When it is your turn, you will have a limited time to log in and make your purchase. The approved coins you can use for your purchases on CoinList include BTC, ETH, USDT, and USDC.
While the model of CoinList is fraught with sheer luck, it is one of the models out there. Other exchanges may require investors to join a Whitelist, and others may require you to stake their native token to gain access to the sales. It is the duty of the intending investor to do his own research about what is obtainable on his exchange of choice.
4. Do basic diligence before you purchase ICO tokens
Token sales can be a very risky investment. It is advisable for prospective investors to do their due diligence before committing their capital. Unlike in the broader financial market where startups raise money through Initial Public Offering (IPO), there is no one to hold if the investment fails. This level of risk is why many governments go against plans to offer an ICO.
Based on this premise, investors can take their time to do the following before participating in an ICO;
Examine the whitepaper
Before committing your funds to any ICO, you must read, analyze and understand the project Whitepaper. These Whitepapers are crucial in communicating the visions of the project, the technology behind it, and the ways of implementing its laid out goals. From the details in a Whitepaper, you can get a good glimpse of a project worth your time and money.
Analyze the team members
The team building a project based on blockchain technology should not be faceless. Know the team members, their qualifications, motivation, and general capability to execute the project. With the limited regulations in the crypto world, it is easy for any set of developers to group up, and launch a project with no sustainability model all to raise large amounts of money. Watch out for these and more fraudulent types of projects.
Analyze the project tokenomics
Token economics (tokenomics) is vital to predicting the potential success the project may brandish. Projects with bad tokenomics can end up marring the protocol, especially if the token is central to the functioning of the ecosystem.
5. Purchase the tokens
At this stage, you are certain you are participating in the ICO and you have the domiciled funds for this. Make the token purchase and complete any form of documentation that may be required. You need to be sure your payments are cleared and save any confirmation from the exchange account or platform confirming your payment/participation in the sale.
6. Join the protocol’s social media communities
Most legit ICO projects often maintain a presence on social media which may range from Telegram, Twitter, Discord, and Facebook. It is ideal to join these communities for updates about the protocol development, new products, and ultimately, about the token you participated in.
Joining such forums helps you bond better with the team, as well as other investors. With this, you can be a true part of the ecosystem they are building, especially if you make use of the product and service on offer.
7. Claim/Receive your tokens
Different ICOs have different plans for the distribution of the purchased tokens. While some may be distributed after the sale to the ICO wallet you submit, others may have multi-month/year lockup periods. Either way, your participation in the ICO is not complete until you receive the tokens you paid for in your wallet.
Other tips on how to invest in ICO tokens safely & successfully
Check the track record of the launchpad
The success of every ICO is dependent on various factors, amongst which positive sentiment is one. This sentiment builds up with the track record of the prospective launchpad or ICO exchange that conducts the fundraising. An exchange with a good track record of successful ICOs post-launch is best than that which has no track record.
Avoid get rich quick schemes
There are ICOs that are best described as get-rich-quick schemes. These ICOs often make promises that are antagonistic to what their business model showcases. Investors should try as much as possible to avoid such ventures as capital may be at risk.
Reliance on influencer promotions should be low
As someone who has been a researcher and keen observer in the space, I can attest that it is very common for new projects to consult the services of social media influencers to promote their projects. These influencers need the money being paid to them and will decorate any project to the best of their ability. Reliance on YouTubers or other supposed influencers should be limited when planning to invest in a token sale.
Key takeaways on how to invest in ICOs
ICOs can be a very lucrative alternative to investing your capital in innovative blockchain projects. There are ways to get the most of the investments, and users must understand the demands from both the token issuers and the exchange platforms before committing their funds.
With numerous information flying around, investors should be active enough to do their own research before backing any project, either for the short or the long run. In case you need some advice, then make sure to book our advanced crypto trading course and follow us on LinkedIn or Facebook.
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FAQs on how to buy initial coin offerings
Can US citizens buy ICOs?
Yes, US citizens can participate in ICO, but you’ll have to find the right exchange or platform offering the ICO and the format in which the token is sold. Utility tokens are faced with less regulatory pressure compared to tokens classified as securities. If a US-regulated exchange is conducting utility token sales, Americans may be allowed in. The bulk of the ICO activity going on, however, are often with restrictions for US citizens and residents.
What is token sale in cryptocurrency?
Token sale in cryptocurrency is a way in which a blockchain startup raises funds from early investors through the issuance of a token. It is similar to IPO in mainstream markets and the tokens issued may either constitute a security or act as a utility token to power protocol functionalities.
Token coins for sale are now popular and have evolved in complexity over time.
What is the purpose of ICO?
The purpose of an ICO (initial coin offering) is to raise funds for a crypto product or service. Usually, it’s related to cryptocurrency. It can be done by exchanging fiat currency, other cryptocurrencies, or by offering services. It’s a new way of initial public offerings (IPOs), crowdfunding, or crowdsourcing.
Is ICO legal?
Yes, ICO is legal. Initial coin offerings are new forms of securities offering. Regulations are still formed around ICOs. Some countries such as the USA (SEC), the European Union, or Switzerland (FINMA) have approval regulations in place. In some countries, an ICO is an unregulated means.
Where to invest in ICO?
If you want to invest in ICOs, then you should look at some launchpads such as CoinList, Binance Launchpad, LCX STO Launchpad, Polkastarter, Solanium, Launchpool, or DeFiDrop. There are also some IDO Launchpads around if you prefer to invest in Metaverse crypto projects. Some notable Launchpads are FireStarter, BSCPad, GameFi, TrustPad, or Seedify.
Where to participate in ICO?
If you are ready to participate in ICO and to start to diversify your crypto portfolio, then you can check existing ICO and IDO platforms, called Launchpads. There is for example CoinList or the Launchpad provided by Binance, the world’s largest crypto exchange platform. Furthermore, there are also some brokerage platforms such as SoFi invest.
To be the very first investor, you’ll have to search the internet and find the ICO company’s website. They provide the address of the crowdsale contract and you simply follow the instructions.