Understanding the risks of selling iCOs and token: Tale of Caution
The growth of cryptocurrencies has led to an increase in the initial coin and token sales called the new era of decentralized finances. However, there is a network of risks behind the hype that investors must be aware of before they get into this exciting space. In this article we are immersed in the world of selling ICOs and token, exploring potential pitfalls and providing guidance to navigate the unknown area.
What are ICOs and token sales?
The initial coin supply (ICO) is a fundraising mechanism where the individual or company creates a new cryptocurrency or token and gives it to the public in exchange for investments. This process generally includes conditions that must be followed before the sale, including regulatory approval, security measures and publication requirements.
Token sales, on the other hand, is another type of fundraising mechanism where investors buy tokens from an issuing company or individual, which is then used to buy goods or services. Token sales often do not have the same level of regulatory level as ICOs, so they will be more prone to manipulation by unscrupulous operators.
Risks related to ICO and token sales
While sales of ICOs and token can result in significant return on investors, there are many risks associated with this space:
- Regulatory uncertainty : Many countries do not have clear regulations on cryptocurrency and token sales, which creates uncertainty to investors.
- Safety Risks : Due to the decentralized nature of blockchain technology, hacking and computer attacks can cause significant financial losses.
- Market volatility : cryptocurrencies are very volatile and market fluctuations can lead to a rapid drop in prices or profits.
- Lack of transparency : Token sales are often lacking with transparency, which makes it difficult for investors to justify the legitimacy of the offer.
- Token redemptions : Investors cannot access their tokens in the event of a redemption and leave them unlikely.
General types of selling ICO and token
There are many types of ICO and token sales that investors should be aware of:
- White-Label ICOs : These ICOs are creating and listing new cryptocurrencies or tokens in the existing exchanges, often with the intention of innovating their brand name.
- Security Token Offers (STOS) : Stos are similar to ICOs, but include the sale of security tokens, which represent ownership of the company or operation.
- tokenized securities : These include the sale of ICOK tokenized securities that may include shares, bonds or other types of assets.
How to protect yourself
Although there are risks related to ICO and token sales, investors can take steps to protect themselves:
- Gently research : Before investing in an ICO or token sale, you should conduct a thorough research in the field of issuer, products or services and regulatory environment.
- Check regulatory compliance : Make sure the issuer meets all the necessary regulatory requirements before continuing the fundraising mechanism.
- Understand tokenomics : Learn yourself with the token economy and understand how to use tokens in different contexts.
- Diversify your portfolio : Do not put all your eggs in a basket as ICOs and token are inherently shaky.
Conclusion
Although the world of cryptocurrencies is exciting and rapidly developing, investors should be careful to approach the sale of ICOs and token. By understanding possible risks related to such fundraising mechanisms and taking the steps to protect themselves, investors can navigate more securely in this unknown area. Keep in mind that it is always better to be mistaken on the side of caution when investing in new markets.
