There is no doubt that ICOs have many benefits for investors and companies. There are also some risks and disadvantages that should be considered before investing in an initial coin offering (ICO).
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What are the Advantages and Disadvantages of Initial Coin Offering (ICO)?
Initial Coin Offering (ICO) is the mechanism of raising funds to do business. The Initial Coin Offering is an unregulated process undertaken by start-up companies, especially in the fields of technology and information technology, with the aim of raising funds to finance a technical project by offering a token or cryptocurrency.
ICO is used by start-up companies that find it difficult to obtain appropriate financing for their projects through banks or official financial institutions. ICO is similar to Initial Public Offering to raise funds, but ICO is based on cryptocurrency and blockchain technology.
An initial public offering (IPO) is the process by which a private company issues shares to the public in a new stock issuance. IPO is a traditional method of issuing stocks and raising funds.
Here, we will let you know the pros and cons of investing in initial coin offerings.
Advantages of ICO
The benefits of investing in Initial Coin Offering (ICO) are as follows.
- It is a great way to invest/save/secure your cryptocurrencies.
- Anyone can buy tokens.
- Tokens can be sold globally.
- It is possible to get rich returns.
- High token economic liquidity premium.
- There is less barrier to entry.
- You can use ICO tokens to enjoy the newly developed services.
- You can invest directly in companies and projects that you are optimistic about.
- There are no blocks or middlemen between coin buyers and sellers.
Disadvantages of ICO
Despite the various benefits of investing in ICOs, there are also disadvantages of ICOs that you should be aware of.
- Many ICO projects have a low success rate.
- If the ICO project fails, the tokens will lose value and become worthless.
- ICO-related regulatory mechanisms are not fully available.
- There are a huge number of scam possibilities.
- It is easy to be used by malicious companies to cause uneven ICOs.
Conclusion:
There is no doubt that ICOs have many benefits for investors and companies. This is a convenient way to get paid in return for offering exclusive benefits to investors. To reduce the risk, you must do proper research and investigation before investing in ICO.
Conduct a comprehensive study of the company's background, previous records, etc. If you solve all these problems, you can get a great return on your ICO investment.
Read this article for more details: Pros and Cons of Investing in Initial Coin Offerings