ICO, Explained

5.

There are many possible benefits to taking part in an ICO. The obvious one is: you are helping the company launch its product. There is also an opportunity to make a profit selling ICO tokens after you’ve purchased them.

Just like with Kickstarter, the key goal for every ICO participant is to help fund a project that they personally consider interesting and appealing. However, there is an additional opportunity to make a profit in the process.

In most cases, the crypto-tokens released during an ICO are sold at a fixed price denominated in Bitcoins or US dollars. That price isn’t backed by anything but the community’s faith in the development team to release a finished product at some point in the future, so it’s usually pretty low. After the project is developed and launched, the tokens’ value becomes secured by a real, working product. And that almost always leads to an increase in price. When this happens, the original backers may sell their tokens for a substantial profit.

For example, during the ICO of Ethereum in 2014, the tokens were sold at a price ranging from $0.3 to $0.4 per token. After the project’s main platform was released in July 2015, the price of each token has risen significantly, reaching as high as $19.42 at one point. This means that some of the luckiest participants were able to claim an ROI of over 6000 percent.

However, you should keep in mind that any profits aren’t guaranteed. An ICO campaign may fail and in that case, all contributions will be returned to their senders. Even if it does succeed, there is a chance that the developers will not be able to deliver a final product and the price of tokens will never go up. This is a risk that all ICO participants have to take into account when they decide to contribute to any campaign.

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