What You Need to Know When Buying into an ICO

To understand how an Initial Coin Offering (ICO) works, think of it as an Initial Price Offering (IPO). Both are a sort of crowdfunding effort that receives assets as rewards or their investments. The only difference between the ICO and the IPO is, the former is used to purchase digital coins while the latter, in stock market purchases. With the IPO, a purchased stock allows an individual to own part of the company. The ICO, on the other hand, will enable one to hold company issued digital coins. The value of the currency is directly connected to the value of the company.

Investing in an ICO

Anyone who wants to invest in an ICO needs two things: a cryptocurrency wallet, and cryptocurrency. An ICO will accept varied combinations of wallets and cryptocurrencies. However, there may be instances where specific combinations are required. There are a lot of ICOs being launched but only some of those ICOs that are considered successful. This is why it's crucial to study the company first before making any investment.

One of the things that need to be considered when investing in an ICO is its risky nature. The most common advice given to beginners is to wait for the launching of the cryptocurrency or token before making any purchases. The value of some coins tend to spike immediately; it would be a waste to miss out on this. Long-time ICO investors who are familiar with its risky nature buy tokens early on. Beginner investors often decide to wait for an exchange as a sort of "safety net."

Registration

Those who do not have cryptocurrencies need to register first to invest in an ICO. People who have fiats will need to have that exchanged to a Bitcoin or Ethereum in case the ICO does not accept fiats. Money can be transferred from the bank straight to the cryptocurrency exchange account. Confirmation of the registration will take some time since AML and KYC regulations are strict. Those who are not comfortable with divulging their bank account details may transact through a third party like Coinbase.

Setting up the Wallet

At present, the Ethereum network is the hotspot for a huge percentage of the token sales. For this reason, one has to have an Ethereum wallet to join the sale. MyEtherWallet and MetaMask are the most recommended wallets because of their features. MetaMask is a lightweight and Google Chrome plugin rolled into one while MyEtherWallet keeps the tokens safe but does not store the private keys for maximum security. Both wallets can connect with Trezor and Ledger Nano S which are hardware wallets, if necessary. One can go back to the online exchange account once setting up the wallet is done.

Buying ICO Tokens

An investor must read the ICO's general terms and purchase agreement before buying anything to understand how things will work and what the risks are. Startups usually provide their investors with a step-by-step guide so they know how to participate in the token sale. It is highly recommended to follow the social media accounts of the ICO to stay updated about the token sale and to know what to do if ever there are technical problems. Bank52 does this well: their site has detailed paragraphs that explain everything about their upcoming ICO and why they are an any asset bank.

The token sale starts at a specific time, or it follows a block number that was determined beforehand. A block explorer may be used to know what the block numbers are. It's best to convert values according to your time zone before joining a token sale to ensure that enough funds are available. One may receive the purchased tokens within the day. In some cases, it may be necessary to wait for a few days depending on the company and the network.

Transfer the tokens to a secure wallet once they are received. Make sure that there are extra funds available to cover the additional transaction costs.

Good luck with buying into your next ICO!

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.