Though Initial Coin Offering or ICO is the unregulated means by which a start-up raises funds to start, develop or complete its cryptocurrency, it is emerging as a popular investment opportunity for an investor. On one hand it gives a method for an entrepreneur to receive funds for his business, investors receive an opportunity to make money from investments.
ICOs Are Similar to IPOs
Investors know the importance of investing in IPOs. Similarly, in ICOs which are identical to IPOs there is huge opportunity for investors. However, unlike an IPO, where shares represent a stake in the company, in an ICO the tokens are usually new digital currency units.
Risk and Reward Ratio in ICOs
ICOs can be traded for other currencies or for the purchase. In some cases, some ICOs issue their tokens on existing digital currencies. Investors can buy these as the tokens represent voting powers in the invested project. The success or failure of the business idea will determine whether the investment is worth million or goes to zero.
Transparency and Regulation
When an investor is buying ICOs he should keep certain factors in mind, always. Whereas the owner of a business idea receives funds through ICOs by avoiding the difficulty and the rigorous and regulated processes, the investor is risking his capital.
For instance, the startups release tokens on a new cryptocurrency, that investors buy through existing digital currencies, usually Bitcoins or Ethers, or legal tender. However, can be huge risk of failure. However, rewards are equally great and mouth watering.
Investors receive documents presenting the service, product or solution concept, characteristics, added value, etc. to know where the project heading. They can make decisions if the project meets their requirement and invest accordingly.