Initial Coin Offerings: all you need to know
As cryptocurrencies see an increase in popularity, here's how you can use them to invest in start-up businesses
Cryptocurrencies have taken the world by storm over the past year and one of the biggest talking points has been the increasing popularity of Initial Coin Offerings (ICOs).
These ICOs are unregulated ways to raise funds for start-up businesses or other projects through the sale of cryptocurrency.
More than $1bn was poured into ICOs during 2017 – and observers predict this number will rise substantially as more projects become open to funding.
But what exactly are they and how do they work? Here’s what you need to know about ICOs...
How do ICOs work?
An Initial Coin Offering is a digital way of raising funds from the public using a virtual currency. It’s also known as token sales or coin sales. ICO issuers accept a cryptocurrency such as bitcoin in exchange for a token relating to a specific firm or project.
Why are people getting involved?
It’s a potentially exciting area of long-term investment as these digital tokens can represent a share in a firm or a prepayment voucher for future services. In many cases, investors are getting in at a very early stage and stand to benefit if the projects prove to be a success.
What industries are drawn to ICOs?
Potentially any industry can benefit. At the moment, infrastructure, trading and investments, finance, data storage, and payments have been among those to embrace ICOs enthusiastically but this list is expected to grow dramatically over the next few years.
Is it difficult to get involved?
No – it’s relatively straightforward for anyone. First you will need to buy some cryptocurrency, such as bitcoin or ether, and store it in a digital wallet. You can then participate in the ICO by sending your cryptocurrency to the address provided.
What are the risks involved?
It’s a high-risk area so there are plenty of potential dangers. For example, the value of the token bought may be extremely volatile, while early stage projects always carry the risk of running into problems. There is also the danger of being conned so you need to do your homework.
Am I protected?
No. Most ICOs won’t be regulated by the Financial Conduct Authority, which means you’re unlikely to have the protection of the Financial Services Compensation Scheme or the Financial Ombudsman Service. You must treat this as a speculative area of investment.
Should I invest?
As with all such opportunities, the world of ICOs doesn’t come with any guarantee of success. It should be treated as a speculative investment for those who are willing to carry out their own research on potential projects – and who accept there is a possibility of losing their investment.
To invest in cryptocurrencies go to buyvirtualcurrency.co.uk and to keep up to date with upcoming ICOs visit coinlist.me and click on the ICOs section
The value of any investments you make in bitcoins or alternative cryptocurrencies can go down as well as up, so you could get back less than you invested.
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