Everyone is talking about cryptocurrencies and ICO’s. Whilst Bitcoin has been in the public consciousness for years and everyone understands how they can be used and what they do, the new cryptocurrencies can be a bit of a confusing matter.
To understand it a little better, let’s go through the process of making our own “ICO”.
The first step with an ICO is to actually develop the coin based technology. Whilst the blockchain and Satoshi Nakamoto are still somewhat shrouded in mystery, it is no longer necessary to invent the wheel in order to make a coin. Creating a coin is not challenging technically, and an experienced coder can make it easier. In fact, most of the coders that have made cryptocurrencies, indicate that this aspect is the least intensive activity involved in an ICO. Nowadays it is possible to use an open source code to create your coin, and with an active knowledge of C++, it is possible to make the code in one day.
The next step is to be able to sell the coins. The easiest method is to create a website that allows the coins to be traded and sold. The costs and activities are basically to design the site, again not too hard, but it does require a method that allows for the coins to be traded.
Now that the coin is available to mine or purchase and there is a place that this can be done, the next step is simply to drum up interest for people to trade or mine the coin. Developing the community or cutting through the noise of other coins is a particularly challenging aspect, with new coins being developed all the time, creating a market for your coin is becoming increasingly difficult.
At the basic level, therefore, all that is needed to launch a coin is the technical know-how to create a coin and a site to sell or distribute the coin. Hosting, a domain name and advertising is the entire outlay.
This is not necessarily all that is involved in an ICO, but it does point to a glaring difference between an ICO and an IPO, to which ICOs are commonly compared. In the case of an IPO, the shares represent a part ownership in a business. This has surrounding fundamentals, regulatory implications and the like. For an ICO that is not necessarily the case. The coin may have nothing to do with equity in an underlying business. If the amount raised is small enough, there need be no filing with a regulatory body, and chances are it would be too small for a regulatory body to even bother.
For the larger ICOs, millions of dollars are raised and the companies that created the coins will likely go through the process in a similar way to a publically listed company. Lawyer’s fees of hundreds of thousands of dollars will be spent to ensure that the company is compliant with securities laws. The ICO might be more attractive for a variety of reasons for these companies, but those that are looking to raise significant funds via an ICO are generally responsible and substantive companies.
If you are looking to get in on the ground level for a new ICO, knowing what it is that you’re are investing and understanding how an ICO forms is essential.Get the 5 most predictable currency pairs