Learning the friendly way

ICO is an abbreviation for Initial Coin Offering, a term coined supposedly in 2013 yet only gained popularity in 2017. ICOs were created as a method of raising funds for cryptocurrency projects in a crowdfunding manner. When people partake in an ICO, through funding it, they receive "shares" of that project in the form of cryptocurrency tokens.

This method is set up to help new projects find funding to build their project, platforms, or products. It's very similar to investing in a start-up in the hopes of a project becoming bigger and better through your investment contribution.

Mastercoin was the first ICO recorded back in 2013, raising a grand total of 5,120 BTC. Shortly after, Ethereum followed, and in 2014 raised roughly $18 million to build their project. There is clearly a great deal of success to be seen through ICOs, so let's see what all the fuss is about.

ICO vs IPO vs IEO

Let's look at IPOs, or initial public offerings, to learn more about where ICOs originated.

Similar to ICOs, IPOs were created as a way of gaining capital to better the businesses' infrastructures. While they are similar to a crowdfunding aspect,the primary distinction is in how investors are rewarded. IPOs will offer their investors shares, while ICOs offer digital currencies that can be used within their ecosystems or can be sold when the price increases.

Now that we understand how ICOs and IPOs work, let's discuss the differences when it comes to IEOs, or Initial Exchange Offerings. Again, this is another method used to raise funds for upcoming projects, but there are some key aspects that make IEOs different to IPOs and ICOs. While IEOs are also a crowdfunding method in the cryptocurrency industry, they use an exchange. Anyone can generally buy tokens from an ICO page, whereas IEOs use exchanges as the distribution mechanism.

In order to take part in an IEO, you must be a registered user of the exchange that the project is utilizing. While IEOs may be more transparent, they do push us towards a more centralized approach. There are also IDOs, Initial Dex Offering, Dex standing for decentralized exchange (increasing the data privacy aspect), but that's a topic for another day.

How they work

So now we know what ICOs are and how they differ from their counterparts, but now let's delve deeper into how ICOs actually work. As stated, ICOs are a way for cryptocurrency projects to raise money. When a project decides to launch an ICO it will generally underline the sale dates, the participation rules, and the buying process.

Usually, investors will need to choose currencies they are happy to accept in exchange for their tokens, such as Mastercoin accepting Bitcoin. There are some ICOs who will also accept fiat currencies as payment.

The projects' core purpose, its timeline, and how much money is needed to succeed should be released in their whitepaper. If the project does not raise enough money to meet the minimum funds needed, the money should be returned to those who contributed. This would classify the ICO as unsuccessful.

If the funding goal is met, the project will continue to pursue its original goals and contributors will be able to claim their tokens further along. Tokens will either be listed on notable exchanges later on or will be distributed using smart contract technology,This is something you should do more study on before contributing to an ICO.

Advantages and disadvantages

While ICOs have proven to be a massive benefit to project developers, there are some underlying issues and risks that may come into play. In order to give you the best chance of understanding ICOs we will need to cover all the pros and cons that come with ICOs. So let's see what you have to look out for:

Pros

        High potential profits

        Accessible to anyone (unlike IEOs)

        Money returned if unsuccessful (smart contacts)

        Transparency on fund usage (Blockchain)

        High liquidity

Cons

        No intrinsic value

        No legal guarantees

        Potential fraud

Frequently asked questions

Now that we have covered the basics, there are some additional questions the internet has and we thought we would take the time to answer them for you. These are the most frequently asked questions about ICOs, and while we have answered some here is a more TL;DR breakdown:

What does ICO mean?

ICO stands for Initial Coin Offering, a phrase coined by the cryptocurrency industry.

What is the purpose of an ICO?

ICO is a method used to raise funds for up and coming projects, think of it as an early investment phase.

How do I get an ICO?

That depends on the ICO you want to partake in, you will generally need to sign up to the ICO, deposit funds, and wait for the tokens to be distributed either through an exchange or smart contract. This differs depending on the projects' ICO parameters.

Is Bitcoin an ICO?

No, Bitcoin required no funding, tokens were mined and sold without the need for crowdfunding.

How many ICOs are there?

There is no definitive number out there but consensus shows that there have been roughly over 7,000 businesses that have attempted ICOs.

Are ICOs safe?

This is a tricky question and depends greatly on the individual project that is hosting an ICO, whether they are using smart contact technology, and how legitimate the team behind it is. ICOs can be safe, but they also carry risks, it is always best to do your own research before investing.

As there is no universal authority on ICOs there is certainly a lack of regulation in the space so be sure to do thorough research before parting ways with your money.

Closing Thoughts

That is all the essential information you need to grasp in order to better understand what an ICO is. From the textbook definition to its competitors, how it works, and everything in between. ICOs are popular for a reason, they offer a range of benefits to both projects and investors, but you should keep in mind that there is no benefit without risk.

While we can explain what an ICO is, we can not tell you whether to invest in an ICO. It's important to vet the project for yourself and see if it aligns with your interests, and more importantly if it has all the key components for a legitimate project and token.

While the world is increasingly accepting of ICOs from both businesses and retail investors standpoints, there are several alternatives available. We briefly discussed IEOs and IDOs, but more crowdfunding methods have flourished from the origins of ICOs, so be sure to explore those out too. At the end of the day, we hope we helped you better understand what an ICO is.

Risk management involves identifying and analysing the risks involved, and then choosing whether to accept this risk or make changes to avoid the risk. This process is one we carry out daily, from crossing the street to engaging with a stranger, however, in this realm we’re looking at it from a finance/investment point of view. 

If you have a fund manager or financial adviser, they will generally be responsible for calculating and communicating the risks associated with any type of investment. This will cover the potential returns as well as the potential risks to your capital. 

For example, investing in an emerging asset will hold a lot more risk than buying the stocks of a well-established institution. It’s worth noting that high risk doesn’t necessarily equate to a negative, typically assets with higher levels of risk bring about higher levels of return (high risk, high reward).

Each person’s level of risk will vary from one to another and should be decided prior to making any investments. Once this is established, your investment portfolio will work within those realms so as to manage that level of risk. 

‍

We are delighted to announce the listing and support of Balancer (BAL) on Tap!

BAL is now available for trading on the Tap mobile app. You can now Buy, Sell, Trade or hold BAL for any of the other asset supported on the platform without any pair boundaries. Tap is pair agnostic, meaning you can trade any asset for any other asset without having to worries if a "trading pair" is available.

We believe supporting BAL will provide value to our users. We are looking forward to continue supporting new crypto projects with the aim of providing access to financial power and freedom for all.

Balancer, a popular choice for traders and liquidity providers in the crypto space, is an AMM platform built on the Ethereum network that functions as a self-balancing weighted portfolio, liquidity provider, and price sensor. 

Balancer allows users to create liquidity pools of digital assets using smart contracts. These self-balancing index funds automatically adjust the proportion of assets in the Balancer pools to maintain their desired ratios, even as individual coin prices fluctuate.

The BAL token is the native utility token for the Balancer protocol, which is used to govern the platform and incentivize liquidity providers. The token was launched three months after the initial platform launch following the success of the COMP token on the Compound network. 

Get to know more about Balancer (BAL) in our dedicated article here.

We are delighted to announce the listing and support of Ethereum Name Service (ENS) on Tap!

ENS is now available for trading on the Tap mobile app. You can now Buy, Sell, Trade or hold ENS for any of the other asset supported on the platform without any pair boundaries. Tap is pair agnostic, meaning you can trade any asset for any other asset without having to worries if a "trading pair" is available.

We believe supporting ENS will provide value to our users. We are looking forward to continue supporting new crypto projects with the aim of providing access to financial power and freedom for all.

Ethereum Naming Service is a branch from the original blockchain network which aims to make the crypto space, particularly within the DeFi and Web3 sectors, more user-friendly and accessible. Similar to how Domain Name Service made the internet more accessible, Ethereum Name Service aims to do the same and become a fundamental component of these sectors.

Users can register a name through various ENS domain registrars or directly through the ENS manager. Once registered, the name is added to the Ethereum Name Service Registry, and the user becomes the owner of that name. ENS uses a hierarchical system of domains similar to the DNS system used for the internet. 

Once registered, the user can then set the resolver, which is a smart contract that provides information about the Ethereum wallet address associated with the ENS name.

The Ethereum Name Service (ENS) system is similar to the DNS (Domain Name System) used on the internet. Users can register an ENS domain name under the .eth top-level domain and associate them with their Ethereum addresses by using the platform's smart contracts.

The Ethereum Name Service (ENS) did not have its own token until recently. In 2021, the ENS team announced the launch of a new governance token called ENS, which is separate from the old ERC-20 token with the same name.

Get to know more about Ethereum Name Service (ENS) in our dedicated article here.

We are delighted to announce the listing and support of Compound (COMP) on Tap!

COMP is now available for trading on the Tap mobile app. You can now Buy, Sell, Trade or hold COMP for any of the other asset supported on the platform without any pair boundaries. Tap is pair agnostic, meaning you can trade any asset for any other asset without having to worries if a "trading pair" is available.

We believe supporting COMP will provide value to our users. We are looking forward to continue supporting new crypto projects with the aim of providing access to financial power and freedom for all.

Built on the Ethereum blockchain, the Compound protocol provides liquid money markets offering services such as lending and borrowing. Supporting a number of crypto assets, the Compound protocol allows users to deposit crypto into lending pools providing capital for borrowers on the network and allowing them to earn interest in return.

The COMP token is the Compound platform's native token which mainly serves as a governance token, with a built-in incentive for users holding the token. Holders of COMP tokens are able to vote on all important decisions pertaining to the protocol, including interest rates. Much like the cTokens, COMP tokens are based on Ethereum’s ERC-20 token standard.

Get to know more about Compound (COMP) in our dedicated article here.

We are delighted to announce the listing and support of Kyber (KNC) on Tap!

KNC is now available for trading on the Tap mobile app. You can now Buy, Sell, Trade or hold KNC for any of the other asset supported on the platform without any pair boundaries. Tap is pair agnostic, meaning you can trade any asset for any other asset without having to worries if a "trading pair" is available.

We believe supporting KNC will provide value to our users. We are looking forward to continue supporting new crypto projects with the aim of providing access to financial power and freedom for all.

Kyber Network is a decentralized multi-chain liquidity hub that provides instant, secure transactions on any decentralized application (dapp). Its main goal is to provide deep liquidity pools that offer the best rates for DeFi dapps, decentralized exchanges (DEXs), and other users. Kyber Network is built on the Ethereum blockchain and makes use of intricate smart contracts.

Kyber Network seeks to solve the liquidity issue in the DeFi industry by allowing developers to build products and services using the platform's protocol, while KyberSwap acts as the trustless trading platform that also provides rewards for liquidity providers. With over $1 billion in total volume from over 1 million user transactions, Kyber Network is a growing player in the DeFi space.

Kyber Network Crystal (KNC) is the native coin for the platform and acts as both a utility and governance token. KNC holders can participate in the DAO and governance proposals by staking their assets or delegating their vote. Users can stake KNC to vote on upgrades and policies or delegate their tokens to other validators and earn a portion of the block reward.

Get to know more about Kyber (KNC) here in our dedicated article.