ICO is a concept that is only entering the business vocabulary but while one part of entrepreneurs is studying this phenomenon, the other one - the most active and advanced - are becoming successful ICO traders. How do these companies work, what do they offer and what benefit does their activity make? It would also be interesting to know how to become a representative of the new generation of businessmen.
Table of content:
- ICO and tokens, their legal background
- Trading in tokens within the project
- ICO trading on the cryptocurrency exchanges
- EtherDelta as the best platform for ERC20 tokens trading
Investments and profit
Before discussing the heart of the matter, it is necessary to find out what ICO is. Of course, all projects in this area are related to cryptocurrency and blockchain technology, and the main idea is attracting investments to the particular project. An ICO company sells its coins which are also called tokens to anyone who sees the prospect of the business idea or is keenly interested in services (goods).
Tokens as the main subject of interest
From the technological point of view, a token is a cryptocurrency, the emission of which is managed by a specific project. In a closed system it serves as a full currency, is an evidence of the investor's participation in the enterprise and plays the role of a share. After the release of the project on the exchange, tokens can be sold for a cryptocurrency. The Ethereum blockchain is the basis of most tokens. The source code for the platform is indicated by the ERC20 index.
Tokens play the role of the domestic currency of the enterprise. They can be used to pay for goods or services, as well as to trade on stock exchanges. ICO founders attract financing by exchanging their tokens for the most popular cryptocoins or fiat money, for example, dollars or euros. Successful ICO provides an opportunity to organize the infrastructure at the initial stage. Obtained money allows realizing the tasks in marketing and making contributions to development funds for further support of the project.
Legal status of transactions
The considered business option as well as the cryptocurrency does not have a clear legal status nowadays, but the active work in this direction is being carried out all over the world. The old system inevitably outlived its own, became dependent on many factors and restricts the development of innovations. Legal relations between the participants are not yet defined, since they are not financial from the point of view of the classical scheme. The main value is the reputation and trust in people who launch a particular project, the real possibility of implementing the idea and, to some extent, the intuition of investors.
What opportunities ICO opens for traders
Traders in the Initial Coin Offering area are people and companies that implement tokens by promoting and popularizing the project idea, directly attracting investors, and by offering these digital assets on exchanges. Traders can be both among the founders and the intermediaries.
Selling tokens for ICO
The goal of the startup, the reality of its implementation and the receipt of income in the short term - potential investors see beyond the surface of each project. However, in order to attract attention to its ICO, it is not enough to generate brilliant business ideas. It is necessary to be a person whom potential partners will entrust their funds whether it is a cryptocurrency or fiat money. The personality of an organizer, his experience and background, as well as a reliable reputation and successful projects - to these characteristics maximum attention will be drawn.
The team, which organizes the Initial Coin Offering, must be highly professional and constantly improve their skills, as the market of cryptocurrency is in dynamics, new challenges and solutions arise. Specialists in various fields - IT, PR, sales, finance, and brokers – must be involved. A competent and detailed Whitepaper, the website, the license agreement and other nuances that are necessary for the presentation of the project, should be implemented. In many cases, starting capital is not as important as advertising and thoughtful presentation of the idea.
The investor who approves your project will get tokens easily online if you implement the options for a fast access to the payment section with a choice of currencies. The payment form must contain a special option for entering the address of the cryptocurrency wallet. The founders of the ICO are required to regularly report to each owner of the tokens through a personal account, inform on current events and changes. A good option is to distribute bonus tokens for registration on the platform or a subscription to the news.
ICO trading on exchanges
Cryptocurrency exchanges are real sources of quick income for the owners of tokens. After an open sale, the value of a share is determined by the purchase offer and sale price. There are resources that carry out a large amount of trading and actively work with popular tokens. In this case we are talking about Bittrex and Poloniex. Others, such as YOB and LiveCoin, readily deal with new coins.
EtherDelta as the best environment for ICO traders
There are services that offer the ability to work with any tokens of the ERC20 standard before they reach most exchanges. Let's look at this case using the EtherDelta example.
- EtherDelta is an exchange with a decentralized system and based on smart contracts in the ETH blockchain.
- When working with the resource, its users won’t have any risks and restrictions as for the identity.
- A smart contract directly conducts a P2P transaction between buyers and sellers of ERC20 tokens.
- EtherDelta does not need registration. A browser is necessary ( Google Chrome is a good idea) and an ETH wallet.
- All transactions are generated in the local space inside the browser, which is directly linked with the ETH blockchain.
- Only the signed transactions go to the network - private keys of the wallets are not transmitted anywhere
- Users have an opportunity to get the source of EtherDelta themselves from the GitHub and launch its code in the browser.
- The exchange is integrated into the ETH blockchain; here one can trade any ERC20 tokens of this network.
- Trading begins first on EtherDelta when the ICO is closed and its tokens are not yet presented on the traditional cryptocurrency exchanges
With such a large number of advantages, the exchange has certain drawbacks. Slow speed of transactions is one of them. What happens when the net is overloaded? All operations are executed within the Ethereum smart contract and the confirmation of your transactions on the exchange will take much time. Orders are not done in automatic mode. Trade is held out in the P2P system and you actually display your personal Ask / Bid order or close someone else's exposed order. Setting up Bid / Ask orders is the time after which the order is automatically deleted from the order book. In EtherDelta, the order removal is not in the usual days-hours-minutes mode, but in blocks of the ETH network from the time the order is published.
On EtherDelta users are unable to specify the value of the tokens and set the order amount in ETH. You need to identify the number of tokens in the order yourself. On the traditional exchanges, traders can either specify the number of tokens or the total amount that you are going to receive or spend. On the exchange it is necessary to outline cost and quantity of tokens. All transactions run on the Ethereum network require the payment of a so-called gas fee. The work of the EtherDelta Exchange demands it when performing a number of operations, in particular, depositing, withdrawing, and trading.
Nobody wants to get extra expenses, so the experienced users of the exchange advise MetaMask to lower them. MetaMask is a wallet integrated with Google Chrome browser and greatly simplifies the transfer of ETH and ERC20 tokens. Important information for new ICO traders who are only planning to use EtherDelta: placing an order is not a transaction in the ETH network, so you do not have to pay for gas. The only fee, which is set by the rules of the exchange, is 0.3%. It is paid by the person who executes the order.