ICO Initial Coin Offering image

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What is an ?

An Initial Coin Offering is a method by which Founders can raise money for a new venture. Unlike conventional investments such as shares or bonds the investor has no call on the assets of the company, rather they have coins that can be used to buy services that the company produces.

For example, suppose I wanted to build a new burger restaurant called GuruBurger. Rather than risk my own money I could sell tokens (or coins) to “investors” that were worth One GuruBurger when I open up.  I sell you tokens for $1 but I promise that when the GuruBurger restaurant opens (at some time in the future) I will be selling burgers for $2 and your coins will have doubled in value!

Being a savvy investor you can spot a problem. I need $7M to start GuruBurger (made from the vapour of pure thought) and you are interested in buying 1000 coins at $1. You cannot possibly eat 1000 GuruBurgers!

“No problem” say I. “You will be able to sell your GuruBurger coins to other people on a major coin exchange like CoinBase or Bitfinex. The demand for them is certain to be huge and you will be able to sell them for not the $1 you paid, or even the $2 that a GuruBurger is worth, but even more. What could possibly go wrong?”

What could go wrong?

These are just a few of the risks of “investing” in an ICO,

Scam risk

The GuruBurger team could take the money you pay for coins and disappear

Execution risk

This is an early stage venture, even if the team are honest they might find that they cannot actually make a burger from “the vapour of pure thought”.

Market risk

If no-one actually wants to buy a GuruBurger then the coins will not be worth very much

Liquidity risk

If the GuruBurger coin is not listed on an exchange then you may not be able to sell them

Regulatory risk

Many teams are marketing ICOs as get-rich-quick schemes to retail investors. This is illegal and they could be closed down and their coins made worthless

What might go right?

There are upsides to ICOs

and finally,

  • the team might create a good product that delivers values to customers and a fair profit to investors

The CryptoIndex Guru list of ICOs

Here I give a list of ICOs that might be of interest to the Guru’s disciples. Click the link to see his posts.

This site has great resources to help you learn more about passive investment in cryptocurrency indexes, funds and how manage your own portfolio.

Disclaimer

This site provides educational material only and nothing herein constitutes investment advice. You must conduct your own due diligence before buying any cryptocurrency related product and should consider taking professional advice.

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Warning

Cryptocurrency investment is very risky and you may loose all your money. Risks include but are not limited to, theft, fraud, exchange failures, and technical errors leading to partial or total loss of funds. Never invest money you cannot afford to lose.

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