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What are the Advantages and Disadvantages of Initial Coin Offering (ICO)?

New technologies are being introduced regularly in this industry. Technologies bring advantages, but there are also some disadvantages and risks involved in them. 

This does not only apply to technology; everything in this world comes with its own advantages and disadvantages. 

It is up to us how we take it. Look on the brighter side and make use of its benefits, or just keep on worrying about the risks involved. 

That being said, Initial Coin Offering (ICO) also has some advantages and disadvantages. 

But before diving into it, let’s first take a quick look at what Initial Coin Offering is and how it works.  

What is an ICO(Initial Coin Offering)?

An ICO (Initial Coin Offering) is a type of digital coin that is used in cryptocurrency projects. An ICO is a method to raise funds used by startups wishing to offer products or services related to cryptocurrency and blockchain e-commerce technology. If you also want to participate in ICOs, you will have to buy digital currency and should be able to use them. 

How does an ICO work?
ICO Work

When a cryptocurrency project wants to raise funds through an ICO, the first step for project organizers is to decide how the coin will be built. ICOs can be structured in a number of ways, including:  

  • Static Supply and Static Pricing

Companies can set specific funding targets or limits. This means that each token sold in the ICO will have a preset price, and the total supply of tokens will be fixed. 

  • Static Supply and Dynamic Pricing

ICOs can have a static supply of tokens and a dynamic fundraising target. This means that the amount of funds raised in the ICO will determine the total price per token. 

  • Dynamic Supply and Static Pricing

Some ICOs have a dynamic token supply, but the price is static. In other words, the number of funds received determines the supply.

Advantages of ICO

Reachable for investors and new startups

Investors come from all walks of life, from freelancers to aspiring investors currently looking for college jobs. Each has its own budget when it comes to finding the right investments to grow your portfolio. 

Equities and venture capital are scarce, so companies using cryptocurrencies as investment tokens offer more access to diverse investors at all levels of the economy. This is beneficial for start-up companies that may not yet have the funding needed to launch a project, but may be able to increase its value over time.  

Online availability

 The main advantage of the Initial Coin Offering (ICO) is that all transactions are done online. Everything can be easily researched and tracked online. You must do the research and also check the following things;

  •  A white paper containing key project details such as problems to be solved, solutions, or actions to be taken. 
  • Team background, including team profiles 
  • Community pages on Telegram and Bitcointalk forums.
  • Challenges and upcoming plans for the coming months and years

High liquidity

 High liquidity refers to the ability of an asset to be bought and sold quickly in the market without significantly affecting the value of the asset. Considering that cryptocurrencies are safe, effective, and do not require a physical form of exchange, they can be relatively liquid and move faster compared to other assets. Additionally, investors can monitor their investments more closely by seeing the company’s performance and its price on the secondary market in real-time. 

Less paperwork

Traditional assets such as IPOs, stocks, bonds, and other forms of trading rely on various regulatory filings that are more or less time-consuming and labor-intensive. Even with a string of approvals, these investments may not even get the attention they need to raise money from the crowd. What makes ICOs more attractive than IPOs and other traditional assets is their reliance on blockchain technology to maintain a ledger of various transactions. This keeps the data constantly updated in just a few seconds.

Higher rate of return

Some of his most successful ICOs to date have started at relatively low values ​​and steadily increased their market value. The reason these Initial Coin Offerings were really successful was that they gave investors something new and exciting that other of his ICOs couldn’t. 

Examples include NEO or Antshares, which are considered the Chinese version of Ethereum. NEO is successful because it has exciting features such as: 

  • Digitized assets 
  • Peer-to-peer networking 
  • Secure identification 
  • Decentralized trading format 

 In addition, it is also backed by well-known companies such as Microsoft and Alibaba, making it one of the most reliable and secure ICOs. It also has an advantage over Initial Coin Offerings (ICOs) as it is backed by the government of the People’s Republic of China. The live price of ICO is $ 0.1377511 per (ICO / USD) today with a current market cap of $ 13.78M USD.

Disadvantages of ICO

Volatile

Different blockchain technologies are prone to different changes, especially since different ICOs are also competing in the market. There are so many factors that can affect the current value that investors should expect the price of an asset to change. You can expect rapid change. 

Misrepresentation

 The main drawback of ICOs is that you, the investor, have to carefully look at the profiles of their team members to see if they have the experience, technology, or blockchain knowledge to back up the claims in the whitepaper. However, not all investors have enough information to distinguish between good and bad Initial Coin Offerings. 

Many ICOs do not go through the same regulatory process as IPOs and other traditional assets. This makes them easily available and readily available, but leaves them vulnerable to fraud and other malicious activity, allowing illicit companies to withdraw more or less money from vulnerable investors. 

Lack of responsibility

Many ICOs come from startups and other private institutions with insufficient funding to launch upcoming projects. Investors can expect significant future investment returns, but there is no guarantee that the companies mentioned will deliver on their promises. 

When deciding which of the ICOs to invest in, investors are encouraged to research all aspects of the company, including reputation, key employees, and the number of successful projects.

Conclusion

There’s no doubt that Initial Coin Offerings (ICOs) are beneficial both for investors and companies. It has become the most convenient method of getting paid after offering benefits to investors. Before investing in an ICO, you must take proper precautions and do the necessary research.

We also have our own GDS coin, which is used for cryptocurrency projects and is beneficial for you to invest in. You can use it anywhere, even in your daily life for day-to-day expenses.

You can look into it and make your own decision about investing in the Initial Coin Offering.

Also Read: How to Create an NFT Marketplace in 2022?

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