There are around thirty new ICO’s launching onto the market every single day.
With average returns of around 1,300%, it’s no wonder that more and more people are sitting up and paying attention to what’s happening in the world of cryptocurrencies.
If you’ve never heard of an ICO, or just want to find out a bit more about the process of Initial Coin Offerings, this is a very helpful post.
The benefits of this revolutionizing method of raising capital are clear for both sides of the coin.
For companies, it holds the potential of raising millions of dollars in a short space of time, something which, previously, would have been completely unimaginable for smaller, private entities.
For investors the benefits are threefold:
However, with so much going on in the market it can be difficult and intimidating to know where to start.
Here’s how to invest in an ICO in 3 simple steps.
Step 1: Open a cryptocurrency wallet
A cryptocurrency wallet, similar to an actual wallet, enables you to securely store digital tokens, either on- or offline.
Typically, ICO’s will only accept Ether or Bitcoin in the token sale, so make sure the wallet is compatible with the required cryptocurrency.
Saying that, with the development of the ERC-20 protocol, most of the ICO’s up till now have launched on the Ethereum Blockchain.
This is because it provides a standard, templated contract which makes it easier for companies to issue, distribute and manage the token in a controlled manner.
Therefore, when you are starting out, look for an ERC-20 compatible wallet. MyEtherWallet is one of the more popular ones because of its user-friendly interface and security, but there is a whole list of ERC-20 compatible wallets you can choose from.
Step 2: Purchase Ether
We are using Ether as an example but the steps would be exactly the same for Bitcoin (by using a Bitcoin compatible wallet).
When you first buy Ether, you will need to do so from a cryptocurrency exchange. This is similar than a fiat currency exchange, which lists all the different currencies and exchange rates.
Again, similar to fiat currencies, there are various exchange platforms (some reputable, others not so much), with different exchange rates. Therefore, before you jump in, it’s always a good idea to shop around a bit for the best rates.
The more reputable crypto exchanges include Coinbase, Kraken and Poloniex.
You can buy Ether in one of two ways. Either directly with fiat currency (such as USD and EUR) or by trading Bitcoin, if you have any. Once you’ve purchased your Ether, you will need to transfer it from the exchange to your personal wallet.
The good thing about MyEtherWallet is that it includes a widget that allows you to connect directly to Coinbase, arguably the most popular crypto exchange. This makes it much simpler and more secure to transfer the Ether to your wallet.
Step 3: Purchase ICO token with your Ether
You are now ready to invest.
There will often be two distinct periods of an ICO: the pre-sale (or multiple presale stages in some cases) followed by the actual crowdsale. The benefits of a pre-sale are that it provides discounts to early investors.
Each stage will last for a set period of time.
The token sale website will often provide you with information on the ICO, such as how much money has been raised, number of investors that’s taken part so far and maybe even an updated exchange rate relative to Ether/Bitcoin.
Once you’ve selected to take part in the crowdsale, make sure you follow the specific instructions provided on how to invest. It will tell you the minimum contribution, the Gas limit (in case of an Ethereum-based token) and most importantly, the contract address.
This address is where you will send your Ether to in exchange for the token you have invested in.
Next, go over to your Ether wallet and send the amount of Ether you want to invest to the ICO address.
This address is similar to a bank account and consists of a long line of letters and numbers. It is therefore very easy to get wrong if you type it out manually.
If you make a mistake, you will send your Ether to the wrong place and it will be lost forever. Therefore, always copy and paste the address into the correct field.
Same goes for when the company asks you for your personal wallet address. Make 100% sure it’s correct. If it’s wrong, someone else might end up with your investment
Once the company distributes the tokens, you will be able to see the updated balance in your wallet.
And that’s it, just like that you’ve become a cryptocurrency investor!
Of course, as with any investment, there are risks attached, so always do your homework.
But by starting small and following these simple steps, you’ll be well on your way to become part of this $3 billion phenomenon.
(Image Source: TOKENISATION: IMPLICATIONS FOR THE VENTURE CAPITAL INDUSTRY)