ICO benefits for real business

ICO benefits for real business

Today we decided to remind you what the ICO is and how it differs from other options for attracting investments. If you don’t remember it, of course.

What is ICO?

ICO is considered as an alternative form of crowdfunding, in other words — attracting investors to finance a particular project. This form of investment was born outside the traditional financial system and that’s why it’s so attractive.

Speaking about cryptocurrency, ICO (Initial Coin Offering) is the issuance of coupons or tokens. They are created to pay for site services in the future using cryptocurrency. That is a way to bring a new cryptocurrency or asset to the market.

It’s worth to notice that unlike IPO (Initial Public Offering), where the shares are purchased, tokens purchased at ICO don’t allow the investor to be entitled to a share in the company. Any investor can receive a certain part of the issue of this new cryptocurrency at his disposal. As the currency is popularized, an investor can earn on the growth of the price of the token. The beauty of it is that such investments can bring the profit which is 5 or even 10 times more than the initial costs.

Legal Aspects

Until recently, there were only two ways of attracting financial resources, excepting their own investments: a bank loan against assets that doubles the borrowed amount, or the help of an investor who was interested in gaining a considerable share in the business. Such a share usually turned the initiators of business not into owners, but actually into managers.

Unfortunately or fortunately, at the legislative level, the blockchain is not regulated in any way. As for the risks for depositors, they are standard, just like in any business: currency fluctuations at the exchange rate, failures within business processes. However, work on developing the effective blockchain-based solutions for the real sector of the Russian economy has already been launched. As an acknowledgement, we can recall cooperation in the field of promotion of Waves and Gazprombank Digital ICO blockchain. The project on developing a non-metallic quarry BazCoin is also negotiating with various law firms on legal regulation. Lawyers offer different options. The idea initiator of the project, Ruslan Okhrimchuk, has already rejected the option of regulation in Russia only. The option with the fundraising in Cyprus didn’t fit also, as, for example, ZrCoin did.

What are the benefits of ICO technology for the real sector of the economy? In this case, investments are made through the purchase of tokens, based on ICO blockchain. Investors don’t receive a stake in the company and don't influence management decisions. In this case, ICO is an effective tool to attract the attention of potential investors.

ICO founders apply a multifaceted marketing policy and announce the beginning of the collection of the necessary amount of money. When it’s done, we issue and distribute cryptocurrency proportionally to all the investors. In other words, future cryptocurrency is sold for current virtual money.

This way many companies, even little-known, raised their funds. Chronobank is one of the successful organizations which have effectively taken advantage of the ICO mechanism and managed to raise $5.4 million.

As for the real sector of the economy, the farms "Kolionovo" and "Family Capital" are worth to mention. “Kolionovo” raised over $500 000 thanks to ICO. “Family Capital” is the leader of the cooperative movement in Russia and they have recently announced about the issuance of their own cryptocurrency. In such projects as, for example, banancoin, sandcoin, bazcoin the token price is related to the real price of the product. In our case, bazcoin will be related to basalt price, which is being extracted in the Arkhangelsk region.

Why is ICO becoming more and more popular?

ICO is often run at the early stage of the projects, long before the project infrastructure is completed. The raised money is used to finance the final stage of development. This is one of the easiest and most effective ways for companies to raise funds for cryptocurrency.

During the ICO, the project allocates a certain number of coins, which are sold to investors at a fixed price, and the cost doesn’t change during the entire process of fundraising. The more coins will be bought in the process, the higher will be the price at the start of trading on the stock exchange. There is a high probability that investors will be able to sell the purchased tokens very profitably immediately after the ICO.

Is it profitable to invest in ICO?

First of all, it is the support of an interesting project, assistance in its development.
If the project "takes off", it will be very easy to get profit by reselling the tokens. Tokens will be sold at a higher price after the end of the fundraising, during the trading at the stock exchange.
You can use tokens for an intended purpose and receive the claimed services at a lower price. For example, you can buy 5 cubes of basalt and fill a garden or a road to it with it.

How can you be sure that the "soap bubble" will not burst?

It is possible that the creators of the project have got only one goal: to collect money and ride off into the sunset. As it often happens to the new trends, it is easy to face unscrupulous players in the world of ICO.

There are no laws which regulate the running of the ICO directly — although the major world powers are in an urge to control this area very actively as well. Recently, ICO was banned in China, and before that, in July, the US Securities Commission also imposed strong restrictions. Many projects make an automatic ban on the purchase of their tokens for American citizens. This is a transaction based only on trust by the buyer. The project you’ve chosen may not survive till the stage of the product production and turn into a complete disappointment for you. Moreover, the ICO can be run for a project no one was going to develop.

How to choose a trustworthy project and not to lose your money

The variety of different ICO may easily confuse potential investors. It’s really hard to choose because everyone wants to invest finances in a project with good prospects. First of all, you need to study the sale agreement carefully (Token Sale Agreement).

Let’s highlight the main traits of project founders’ good intentions:

Clean reputation of the people working on the project.
Competently composed whitepaper as well as the other documentation.
The company must be officially registered.
Ready-made project work plan and