What is an ICO: all the risks and benefits you should know before investing?

by Rashis C. Article writer

With Bitcoin fever, terms such as blockchain, virtual currency, cryptocurrency, mining or ICO have surfaced in the media at all hours, arousing much confusion and many questions.

Of course, many have been curious to investigate cryptocurrencies seeing that they were before a new chicken with golden eggs, throwing their hands to their heads when thinking of all they could have earned.

What is an ICO?

One of those terms is precisely the ICO, an acronym that comes from the English Initial Coin Offering, which translated to be Initial Currency Offer. As El Economista details, it is an instrument for financing new protocols in a generalized manner, and a cryptocurrency in particular.

We insist on something: although it started to create virtual currencies, today they can be used for other tasks of the most varied that have in common the technology of the blockchain, that is, a chain of information protected by cryptography and shared by a community that registers your transactions. For example, cloud computing, the creation of repositories, etc., as you can read in Engadget.

Of course, in all cases, there must be a linked currency to finance the project.

In a simplified way, it could be said that an ICO is something like when a company goes public or when crowdfunding a project. Obviously, the objective of developers is to raise money and also do it with more favorable conditions than asking for a loan from the bank. Without going any further the Ethereum managed to raise 18 million euros, something that helped to take off.

Why invest in an ICO?

We have already seen that the purpose of developers is to make money for their project, but why should anyone value invest their money?

For starters, it is the most direct way to finance very innovative companies and in theory with great possibilities of achieving success. The money in the bank does nothing, but who would not have liked Jobs or Zuckerberg himself knocked on the door of their house to ask them for some money to start the now giant Apple and Facebook. It is not easy to be in the crucible of the development of great projects that will be the successes of tomorrow and the ICOS give us this opportunity and here you can check out the top ICO Toplist. Normally, reaching these areas corresponds to people or holdings with large capital and many contacts.

The risks of ICOs

Now that we are clear about what an ICO is and why it could be a great investment, it is time to read the fine print. But what could go wrong? Well, without going any further, the project itself. I do not need to tell you that owning a thousand tokens of something that is worth zero is zero.

As we can see in the web of experts in financial advice EMindSetLaw, the ICOs are investments subject to great speculation. And is that if you want your investment to go into traditional currencies, it must first be changed to cryptocurrencies that, as you know, have fluctuated and fluctuated enormously over time.

In addition, depending on their structure, they may not be framed within the regulations of the European Union or other jurisdictions, and in case of problems, be left out of any protection. Obviously, this is not to the liking of governments, which stop controlling money and taxes, in addition to distrusting the true destination of this money invested, which could be impaled for criminal activities such as financing terrorism or money laundering. Keep in mind that these instruments manage to raise a lot of money anonymously in a short time. This is the reason why countries like China have already banned them.

Finally, we have security. It is relatively common to read in the media attacks by hackers that manage to break the layers of security and achieve the money. Of course, those who are left with nothing are the investors.