Crowdfunding was not a very popular name a few years back. But with cryptocurrency hitting the market and the investors like a sudden arrow of opportunity, crowdfunding through Initial Coin offering became a relative term with investment.
However, the latest news of multiple ICO scams has dismayed the people on their faith on such opportunity. Well, do not lose hope. Not all ICO offered are fake. You need to learn to distinguish between a false and a genuine ICO.
You must collect information about the nature and kinds of ICOs. Yes, there is more than one kind of ICO. In fact, there are three different types of ICO tokens about which we are going to discuss.
So that you know, that if a company is offering some another type of ICO token, it’s not necessary a fraud, it can only be just another type of coin offering.
ICO UTILITY TOKEN: Utility tokens are a safe game. If you are not sure how the public with accepts the offer, it’s advised to make the ICO like utility token. It’s a very logical thing to do. The utility token alternatively called the app token gives the users the privilege to use specific product or service.
So how does it works? Let’s understand, say you created a product like a cloud storage, and you want it to become a business plan, but you need funds. So you offer utility token type of ICO. That means each user who contributes to your ICO will be allowed to use that product( in our case cloud storage) ones the project is launched in the market. Given, that the tokens are issued in limited quantity, the prices will rise if the project succeeds. So the investors benefit monetarily as well.
ICO EQUITY TOKEN: With Ethereum offering the startup’s to issue an equity-based token for ICO, scaling up for these newbies is one easier. Equity token allows the small companies or projects to enter the financial market easily. Contrary to this, the investors in the equity-based token ICO get the right to participate in the management of these startups. Since these are based on the blockchain, transparency between the investors and the company stakeholders is maintained.
ICO SECURITY TOKEN: when the value of the cryptocurrency offered is based on any external tradable asset, then it is summed up as a security token. You need to understand the critical element of regulations in such case of crowdfunding. Since this investment is based on tradable asset, it is generally, regulated by the trade Market of the concerned country.
Like in the USA, the security token is controlled by the SEC. However, there is much to understand about such kind of ICO. We cannot discuss everything here in depth; you can check out the ICO calendar for details on this kind of ICO token.
Hopefully, you would have got some understanding of the types of ICO token. So next time you come across a new kind of ICO token, don’t be afraid, it’s not necessarily fake. Right!