What is an ICO?


KNOWN as a digital currency used to function as a virtual medium of exchange, cryptocurrency does not depend on any central authority.

An Initial Coin Offering (ICO) is a source of funding that uses cryptocurrency.

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Cryptocurrency is a form of digitized money

Before proceeding, enthusiastic investors should know that cryptocurrencies are not a guaranteed way to make money and you could lose all the cash you invest.

Cryptocurrencies are highly volatile and can have large changes in value without warning.

Crypto companies are also not regulated in the same way as other financial companies, which means you have no protection if things go wrong.

What is an ICO?

An initial coin offering is simply a way to raise funds for products and services in relation to cryptocurrencies.

Know how cryptocurrency is exchanged
Everything you need to know about cryptocurrencies

Often used by startups, ICOs can be a form of capital.

Due to flexible regulations, ICOs can allow startups to bypass rules that prevent them from direct investment opportunities.

The first recorded ICO took place in July 2013 for Mastercoin, a form of digital coinage and communications protocol.

Some countries have banned ICOs entirely, including China, Nepal, bangladeshand South Korea.

When do initial coin offerings happen?

When a company is interested in creating a new currencyapplication or service, an initial coin offering can be used as a way to raise funds.

Investors can purchase an ICO as a way to receive a new cryptocurrency token offered by the company in question.

The token may be related to a product or service offered by the company.

With the lack of regulations and security laws, ICOs have been known to be used in scams and fraud.

Bitcoin is a popular form of cryptocurrency

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Bitcoin is a popular form of cryptocurrencyCredit: Reuters

How are cryptocurrency transactions recorded?

cryptocurrency exchanges are saved through block chain.

Essentially, a blockchain is a collection of electronically stored records.

The blocks that make up a chain of blocks are those that contain valuable information.

When a block reaches its storage limit, it is linked to a new block in a “chain”.

However, there is no blockchain in a singular place.

Because cryptocurrency is decentralized, transaction records are not stored with a bank or with the government like a typical exchange would be.

To access one’s cryptocurrencies, a crypto wallet can come into play.

A crypto wallet keeps one’s private keys, a term that essentially means password, accessible and secure.

5 risks of investing in cryptocurrencies

BELOW we round up five risks of investing in cryptocurrencies.

  • Consumer protectionNote: Some investments that advertise high returns based on crypto assets may not be subject to regulations beyond anti-money laundering requirements.
  • price volatility: The significant volatility of crypto asset prices, combined with the inherent difficulties of valuing crypto assets reliably, places consumers at high risk of loss.
  • product complexity: The complexity of some crypto-related products and services can make it difficult for consumers to understand the risks. There is no guarantee that crypto assets can be converted back into cash. Converting a crypto asset back to cash depends on the existing demand and supply in the market.
  • Charges and fees: Consumers should consider the impact of fees and charges on their investment, which may be higher than for regulated investment products.
  • marketing elements: Companies may exaggerate product returns or underestimate the risks involved.

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