ico education

ICO Knowledge base

You want to know what you need to know before you make your first investment for an ICO?
Then you are in the right place. Our comprehensive FAQ offers you a good overview of basic questions and answers to the ICO topic which are offered by our experts team.

Nowadays it is not difficult to search for an Initial Coin Offering and to find the most suitable ICO and further information with the help of an external evaluation. Here, our offering also supports you in filtering out selected ICO’s and adding various information and summaries. This not only saves you time yet also gives you third party opinions from the community, which view the ICO from a different perspective and can therefore be very valuable.

You have still questions for ICO Knowledge ?  Then contact us and we will try to answer your questions.


Question & Answers

What is an ICO?

Initial Coin Offerings are all the rage. Dozens of companies have raised almost 1.5 billion dollars last year through this novel fund-raising mechanism. Celebrities such as Floyd Mayweather and Paris Hilton already jumped on the bandwagon. Don’t feel bad though if you still ask yourself the question: What is an Initial Coin Offering?


The acronym probably sounds familiar, and that is convenient – an ICO actually works much like an initial public offering. Instead of offering shares in an enterprise, a company rather offers digital assets called “tokens.”

A token sale is like a crowdfunding campaign, except that it uses blockchain technology to validate transactions. In addition, these tokens are not just placeholders for stocks – they can be set up in such a way as to provide services such as Cloud storage or something similar to the owner, instead of company shares.

Let’s start with the most popular system – Bitcoin. These and other digital currencies are based on a blockchain – cryptographic accounts in which each transaction executed in Bitcoins is recorded. Individual computers/servers around the world which are connected via the Internet check each transaction using this open source software. Some of these computers, called miners, compete for the solution of a CPU-intensive cryptographic puzzle and earn the opportunity to add “blocks” of verified transactions to the chain. In this example, the miners receive Bitcoins as compensation for their work.

A blockchain like Bitcoin needs miners to run, and coins/tokens are the economic incentive to mine. Some coins are based on the new versions of blockchain which have been modified in some ways – examples include Litecoin and ZCash. A popular block chain for companies introducing Initial Coin Offerings is a newer, separate technology called Ethereum. Even brand new tokens, i.e. new currencies, can be built on Ether’s blockchain. Another example is the Neo Blockchain which, like Ethereum, also allows the creation of new tokens.

However, advocates of blockchain technology say that the power of coins goes beyond just inventing new currencies. Bitcoin eliminates the need for a trusted central authority to mediate the exchange of assets – for example, a credit card company or a central bank. In theory, this can also be achieved for other things.

Take Cloud storage, for example. A number of companies are building blockchains to facilitate the peer-to-peer purchase and -sale of storage space. This is a model which may challenge traditional vendors such as Dropbox and Amazon. In this case, the tokens are the payment method for the storage space used. A blockchain checks the transactions between buyers and sellers and serves as proof of their legitimacy. How exactly this works depends on the project.

Some people think that Initial Coin Offerings could lead to new, exotic ways of building a business. If for instance a Cloud storage outfit such as Filecoin suddenly gained in popularity, it would rather benefit anyone who holds the coin or is active as a miner. This would be the core idea of a “decentralised” company.

Someone has to create the blockchain, issue the tokens and maintain the software. In order to start a new project, entrepreneurs can therefore pre-distribute tokens for themselves and their developers. And they can use Initial Coin Offerings to sell tokens to individuals interested in using the new service when it is launched, or to speculate about the future value of same. If the value of the tokens increases, everyone is a winner.

Due to the hype about Bitcoin and other crypto currencies, demand for some of the tokens that have recently come onto the market was extremely high. A small selection of projects that have recently raised millions through Initial Coin Offerings includes a web browser aimed at eliminating digital advertising intermediaries, a decentralised forecasting market and a blockchain-based marketplace for insurers and insurance brokers.

Nevertheless, the future of tokens is highly uncertain because state regulators are still trying to figure out how to deal with it. The other day, the U.S. Securities and Exchange Commission (SEC) warned investors to watch out for fraud. Only recently, China went so far as to ban Initial Coin Offerings, and other governments could follow suit.

Many of the companies that launch Initial Coin Offerings have so far only issued a technical whitepaper describing an idea which may or may not succeed.

How are ICOs created?

In times when crypto currencies were just about to become popular, the introduction of an Initial Coin Offering was sufficient as a self-legitimising action. More recently though, as the Initial Coin Offering concept is taking shape and going to mature, the success of a proposal in the current crypto currency landscape largely depends on how an issuer presents its tasks, builds trust in the community, and is meaning to give investors added value.


The process starts out with the pre-announcement of the project. This is followed by the publication of a whitepaper or equivalent project summary which discusses every detail of the project, including the business model, the development roadmap, the currency’s integration into the project, the team behind it, and the specific benefit to the community.
The pre-announcement will be made on the central community platforms such as Reddit Bitcointalk, Twitter or Telegram Messenger. The community responds to the project and enables the project team to implement improvements in order to increase the attractiveness to investors.

The submission of purchase offers takes place after pre-registration, or investment is done directly according to the instructions provided. This can be done by whitelisting or pre-registrations. Through the project presented, the project team offers a promise which describes the terms of the transaction, the lifecycle of the project, the target investment amount and the project dates. It also includes the financial instrument to be traded – in crypto currency projects this usually is a digital token. The offering also defines the rules for the use of tokens and the rights of investors. The project team announces the start and end date of each respective token sale, which may be done in multiple stages.

A marketing or PR campaign has become key to a successful Initial Coin Offering. Over the past few years, the number of new Initial Coin Offerings has increased dramatically, turning marketing into a real challenge. There are dedicated marketing agencies in the crypto landscape that support companies in marketing their products to target investors.
Upon completion of the marketing phase, the actual sale of crypto currencies or tokens begins. The two popular sales channels of the companies include, amongst others, exchanges. Most companies offer an early bird discount at varying levels, which in case of multi-stage offerings gradually decreases. According to the current market trend, companies accept payments in the form of other crypto currencies, like Bitcoin or Ether, or in some cases even fiat currencies.

What are Tokens?

With the introduction of Bitcoins in 2008 and of Ether in 2014, there was a crypto revolution. Tokens are created for the Initial Coin Offering. They are the breakthrough in Initial Coin Offering and, among other things, make it possible to give each investor or project participant a countervalue. Through the development of blockchains, tokens could help to reverse the centralisation of the Internet, making it accessible, viable, and fair, which could lead to more innovation.

what are ico tokens

What to do with Initial Coin Offering tokens?

Each token represents a tradable commodity. These might be coins, points, certificates, items in the game, etc. This means that tokens can also be used similar to a share in a company. Or they may even be used, as in most cases, as a currency for trading on various exchanges. The tokens are often used to raise money as part of a crowdsale. That is why many people refer to Initial Coin Offering tokens as crypto assets and crypto equity.

The developers of a particular digital token may choose to publish their token on an exchange. In this way, investors are able to sell the acquired token or buy even more if tokens were sold out in the first Initial Coin Offering. Crypto tokens currently still tend to be niche products and are not undisputed. If current trends continue, they will however soon be regarded as a breakthrough in the design and development of decentralised systems. This is possible by combining the social benefits with the financial and architectural advantages of blockchain. They also are a very promising development for those who seek to make the Internet accessible to entrepreneurs, developers and other independent creators.

When do I receive my tokens?

This question can be answered directly by the ICO operator himself. In most cases it is already on the website of the ICO operator. If you don’t find this information, contact the company directly via various social media channels such as Twitter or Telegram. Experience shows that you will only receive your tokens after the ICO Sale has been completed. An early issuance of tokens should be treated with caution as this may result in investors already selling off their token during an ongoing ICO sale and speculating with them, which could lead to a potential price dump.

Basically, you can also wait until the crowdsale is over after you have sent your ETH (or any other digital currency) to an ICO wallet address. Then you “monitor” the smart contract address assigned to the token. Ideally, you should use an appropriate wallet like Parity or My Ether Wallet. The following example refers to the use of the popular and convenient online service Parity. First, you register on the website where you will be asked to send Ethereum (or another currency) to your wallet address. Already at this point you can get an indication on the ICO vendor’s integrity. It is always a good sign if you are asked to send the currency from a private wallet instead of an exchange address because exchanges don’t work with smart contracts. That is why you need a private wallet to purchase ICO tokens.

With Parity, for instance, you create a new account and send your crypto currency from your exchange to Parity and then from there to the corresponding smart contract of the Coin Offering. Then wait until the offering is over and the emitter announces that token withdrawals are available. Log in to Parity (or other similar services) now, go to the settings, select the corresponding contract and choose the option “Watch Token”. You will then be asked for the network address for the contract. The emitter may have already provided it to you. Otherwise, go to etherscan.io and search for the token, go to their page and find the contract address there.

Now you have to copy & paste this address on Parity by adding a new contract with this information. Select the contract, select “Query” and find out if the tokens are contained in your wallet. The process of crediting the tokens could take between 24 hours and one week after the conclusion of the Coin Offering. Sometimes you will find relevant information in the whitepaper on the subject of crypto.

MyEtherWallet offers a similar yet easier procedure. With MyEtherWallet you have the opportunity to create an Ethereum wallet quickly and easily. It is very crucial that you keep safe your private key, which you get when creating a new wallet at MyEtherWallet. Never disclose your private key, and it may be best to print it out for yourself. Only via the private key you have access to your wallet and can send or receive your tokens.

The exchange of values

A token is a unit of value exchange within a given market, which leads to the creation of a transaction economy between buyers and sellers. These are functions that enable users to earn value and use it to spend on services. You can earn it through active work (real work and actions) or passive work (for example, sharing data). The creation of such an internal economy is undoubtedly one of the most important effects which must be maintained over a longer period of time.

The toll

Just as the toll for the use of a motorway, the token can also be the pay-per-use path into the blockchain infrastructure or to using the product. These could be smart contracts that perform a specific function, such as placing a security deposit.

The function

A token can also be used as a lever to enrich the user’s experience, to include basic actions such as joining a network or connecting to users. It may also be used as an incentive if it is spent in return for beginning to use a service.

The currency

The token is a very efficient payment method and a versatile transaction tool. This is the key to smooth transactions within these closed environments. For the first time, companies can be their own payment processors without the tedious or costly aspects of conventional financial settlement options. Tokens have a much lower barrier to the processing of end-to-end transactions within a given market. A fair redistribution of the resulting added value is part of what blockchain-based models can facilitate. Regardless of whether it is about profit sharing, benefit sharing or other benefits (e. g. from inflation), it is expected that all participants will participate in the positive development.

ICO Pre-Sales

As the name implies, a pre-Initial Coin Offering allows investors to buy tokens before the official crowdsale. In most cases, these pre-Initial Coin Offerings generate a much smaller amount of money and offer tokens at a lower price with a significant bonus. More specifically, it is not uncommon to find a pre-Initial Coin Offering with a 40% or more bonus, compared to the Initial Coin Offering price. 


When a project starts a pre-Initial Coin Offering token sale, the project participants have to fulfil their duty of care. Transparency about the funds raised and the number of tokens issued is of paramount importance. A negative side effect of pre-Initial Coin Offerings is that investors often already sell at Initial Coin Offering prices as soon as a token has been listed on a stock exchange. Thereby they still make a huge profit and limit the price of the token. A pre-Initial Coin Offering is an amazing investment opportunity for a quick profit, but it might violate the attractiveness and credibility of the project if large quantities of tokens are sold at low prices.

Disadvantages of investing in Pre-Initial Coin Offerings

An unpleasant side effect of the Initial Coin Offering presale, however, is that early investors or adopters tend to hold tokens as soon as they become tradable on the stock exchange. They then often sell the tokens at the Initial Coin Offering price, although they have received them for less than the price of the main Initial Coin Offering. In this way, they achieve considerable profits, and the value of the project token is subsequently pushed down.

ICO Roadmap

A roadmap is a plan which reconciles short and long term goals with specific technology solutions to achieve these goals. It is a plan that relates to a new product or process, or a new technology.


has three main uses. It helps to arrive a consensus on a set of needs and technologies essential to meet these requirements, and it provides a mechanism for forecasting technological developments and a framework for planning and coordinating technological developments.The technology roadmapping process takes place in three phases: preparation, development of the roadmap and follow-up phase. Since the process is too large for a model, the phases are modelled separately. In the models, no different roles are formed, because everything is done by the participants as a group.

Phase 1: preliminary phase

At this stage, key decision makers need to recognise that they have a problem and that the technology roadmaps can help them solve the problem.

Phase 2: development phase

In this step, the common product needs are identified and agreed by all involved. This is important in order to achieve the acceptance for the process by all groups. In the event of uncertainty about product demand, scenario-based planning can be used to determine the overall product demand. Once it is decided what needs to be included in the roadmap, the critical system requirements can be identified; they form the broad framework for the technology roadmap. The requirements may have objectives such as reliability and cost.

Phase 3: follow-up phase

This is the moment when the roadmap will have to be criticised, validated and hopefully accepted by the group involved in its implementation. This requires a plan developed using the technology roadmap. Next, there has to be a periodical review and update point as the needs of participants and technologies are evolving.

ICO Whitepaper

A white paper is prepared by an operator before a new token currency is introduced. It describes everything that customers and investors need to know about the currency before deciding to invest, buy or use it. This includes commercial, technological and financial details of a new coin in a language which is understandable to someone who is not an expert in the field. The whitepaper is a central part of the Initial Coin Offering.

ICO Whitepaper

A whitepaper is a document that is usually published before a new token is introduced. Typically, this paper explains the goals of a project and the technology it supports. Bitcoin founder Satoshi Nakamoto, for example, published a whitepaper on blockchain technology. Reading the whitepaper helps people understand what technology this project has to offer It also determines the success of the coin.

The term was first mentioned in 1922 by Winston Churchil. These days, the term of whitepaper refers to a short description of the project, the team, the current performance, some links, the roadmap and the way the team plans to enhance the tokens (usually in stages). You can use a roadmap to assess and determine the prospects of the team’s future success.

ICO Bounty

A bounty is a reward given for completing a very specific task. In the “Wild West”, the government put a bounty on the capture of criminals. This concept is often used today in the context of online marketing, software development and consulting.

ICO Bounty

What is a bounty hunter?

In the “Old West”, a bounty hunter was a person who captured fugitives and criminals for a money bonus (bounty). Nowadays, bounty hunters perform tasks in exchange for bounty. The bounty is usually paid in a crypto currency when the bounty task has been completed successfully. Bounty hunters will usually submit work and then receive a payment when the work is approved.

Initial Coin Offering bounty campaigns

In the Initial Coin Offering area, a bounty programme is an offer by many blockchain startups that allows users to receive reimbursement for marketing tasks, reporting bugs or improving a product or service. Blockchain start-ups planning a crowdsale often allocate a percentage of their total tokens to such a campaign or a fixed amount. There are rarely any entry barriers, and the only thing a bounty hunter has to do in order to participate, is to submit a link to his work. This submission is then reviewed by the admin of the campaign who decides whether the submission deserves a reward or not.

Popular bounty tasks

Bounty tasks range from simple social media promotions to technically complex bug bounties. Here is a list of some of the most popular bounties, sorted by average payout in decreasing order.

  • Bug-premiums
  • YouTube-premiums
  • Reward for creating articles and content
  • Translation-premiums
  • Improvement- premiums
  • Bitcointalk signature premiums
  • Facebook-premiums
  • Twitter-premiums


Before participating in a bounty programme, bounty hunters should analyse and familiarise themselves with the project conducting the bounty campaign. There is no point in receiving millions of tokens as bounty rewards if they are worthless or if the team is unlikely to hand out rewards to bounty hunters.

ICO Bonus

These are staggered or one-off additional premiums which are offered within a limited time frame immediately preceding the Initial Coin Offering of a vendor.


Investors who decide to make an investment prior to the start of the Initial Coin Offering phase and contractually agree it with the vendor, will receive a bonus payment which was agreed beforehand, usually in form of additional tokens. The earlier an investment is committed to, the higher the bonus.

How much the bonus can be is depending on which Sales phase (private, pre- or main sales) you contribute. For exampe if a ICO Team offers a Bonus of 30 % then the calculation would look like following

Your Investment: 1 Ethereum (ETH)
Token-Price per ETH: 0,001 ETH
Sub-amount of Tokens to receive: 1000 qty
Bonus of Tokens: 300 qty.
Total amount of Tokens: 1300 qty

As well a example for a investment with Euro or US Dollar:

Your Investment: 1000 USD/Euro
Token-Price: 1 USD/Euro
Sub-amount of Tokens to receive: 1000 qty
Bonus of Tokens: 300 qty
Total amount of Tokens: 1300 qty

Therefore you would receive 300 Tokens on top. As described in the section  “What is a Pre-Sales?” , can be a high bonus a disadvantage due to the fact that big investors will bring on a price “dump” to taking fast profits and this will decrease the token price. In common ICOs the big investors will buyin while the private or presales. Check always how the bonus graduation for each stage is in order to evaluate if there can be a possible price dump. In a better ICO world, a maximum Bonus of 30 % is a good choice, more less is of course better. A higher bonus can trigger a fast sell off the tokens if there is not any vesting period which hold this back.

Soft- & Hardcap

Hardcap is defined as the maximum amount a crowdsale may receive. Most projects set a very high ceiling, which is only rarely achieved. Only very famous projects have ever reached the self-defined limit.


Soft cap is the amount by wich your crowdsale is considered a success. It is the minimum amount required for your project. If you do not reach this amount during the Initial Coin Offering, you will allow investors to withdraw their contribution.

Capped first-come first-served

A specified number of tokens are sold at a fixed price on the basis of “first come, first served” until all tokens are sold. There is an upper limit on the amount raised (expressed as the cap on the number of tokens for sale). Insiders (i.e. foundations, investors and/or developers) and project participants receive a fixed percentage of the total token offer. This is the most common structure used to date in token sales. Some sales offer a discount for a limited period of time to encourage early participation. In the current situation though, this is unnecessary for the majority of token sales.

Uncapped (rarely used method)

An unlimited number of tokens are sold over a longer period of time at a fixed price. Each purchaser can buy as many tokens as they want. There is no limit to the overall amount to be raised. Insiders and project participants receive a fixed percentage of the total token offer.

Capped auction

Buyers offer a convenient price. A variable number of tokens are actually sold at the lowest successful bid price in relation to the total spending of the buyers. This can be a so-called Dutch auction or a blind auction. There is an upper limit to the amount to be raised. Also in this case, project participants receive a variable percentage of the total token offer, depending on how many tokens are sold in free sale.

Uncapped auction (rarely used method)

Buyers offer a convenient price and a convenient number of tokens. A fixed number of tokens are sold to bidders in descending order until all tokens are sold. There is no limit to the amount to be reached. Project participants receive a fixed percentage of the total token offer.

Cap with re-distribution

Buyers bid on a specified total issue number. A set number of tokens are sold at a fixed price, in proportion to the total promised spending of each buyer. Overpayments are refunded, and there is a cap on the amount to be raised – expressed as a cap on the number of tokens to be sold. Project participants receive a fixed percentage of the total token offer. This structure guarantees that everyone can participate to some extent. However, if the sale is oversubscribed, buyers will receive fewer tokens than they planned to buy and a partial refund of the payment.

Cap with bundle limit

A specified number of tokens are sold at a fixed price on a first-come first-served basis until all tokens are sold. There is a limit to the total amount which every buyer can purchase. This is accomplished by limiting the amount of each incoming transaction and making it difficult for a single buyer to submit multiple transactions – for example, by generating unique codes for each buyer in a manner that is difficult for buyers to automate. There is an upper limit for the amount to be collected, here as well expressed as the upper limit for the number of tokens being sold. Project participants receive a fixed percentage of the total token offer.

Invest in ICOs?

Is investing in Initial Coin Offerings the right thing for you? To answer this question, it is important to note that investment styles vary from person to person. First and foremost, investors are influenced by their financial requirements and understanding of the crypto world. If your financial situation is sound and you are planning to invest in crypto currencies, this could be the right opportunity for you.

Here are a few tips for investing in Initial Coin Offerings:

Define your financial expectations

The first and most important step is to ascertain your expectations of crypto currencies. Set yourself an investment target and create a corresponding purchase strategy. For example, some people invest widely and over the long term, while others prefer to invest in a few projects with a short-term investment horizon.

Research and knowledge on Initial Coin Offerings

Initial Coin Offerings are based on blockchain technology, which is relatively new. Therefore, it is important to do enough research and understand what you are actually investing in. Moreover, a full review of the Initial Coin Offering is a must prior to transferring first funds. In order to provide the appropriate support, we have therefore created this knowledge platform for you as an investor. This is what it’s all about. You have to check first to see what’s behind such an ICO and consider whether it appears to be serious and promising. On our knowledge platform we summarise important information in different languages and offer readers the opportunity to give their opinions and assessment.

Legal risks

In contrast to the current regulatory environment of equities, state authorities could review Initial Coin Offerings in the future. Much could possibly change and not be done in the same way as before any longer.

Only invest what you can afford to lose

Do not succumb to the current Wild West fever about crypto currencies and Initial Coin Offerings. Only invest what you can afford. Start with a small amount and move forward slowly.

How invest in ICOs

To buy into an Initial Coin Offering, you need tokens of a crypto currency and a crypto-wallet. Although any combination of crypto currency and wallet can be used for a given Initial Coin Offering, in many cases you need dedicated Ether based ICO’s and for example a MyEtherWallet, because many Initial Coin Offerings are token-based systems built on the Ether blockchain.

It is vital that you send your investment from wallets for which you have the private key, as is the case with MyEtherWallet for instance. Never submit your investment from a stock exchange as this can cause the loss of your investment.

Caution: There are numerous Initial Coin Offerings out there, but not all of them are necessarily legitimate. Of the legitimate ones, only few will succeed. While investing in high market-capitalisation crypto currencies and low market-capitalisation coins is risky, investing in Initial Coin Offerings is even riskier. This does not imply that you should refrain from investing, but it is advisable to do your homework and be prepared for certain Initial Coin Offering investments so as not to lose your money.

General advice on Initial Coin Offerings

With the aforementioned warning in mind, it is a good idea for cautious investors to skip the Initial Coin Offering and hold back until the token/crypto currency is launched and listed on one or two exchanges before buying it. Some coins immediately reach highs, and of course there is a risk for investors to forego substantial gains. Some Initial Coin Offering-based coins, however, lose value or remain steady for months before something significant happens. The price development depends on many factors, and therefore it makes sense to invest in an ICO operating company.

Ethereum itself was an Initial Coin Offering. Ethereum is probably the best example of a successful Initial Coin Offering. But even that took a while to turn the Initial Coin Offering price into a big win. In other words, you could have skipped the first offer to buy early and still performed quite well.

TIP: for Ether-based Initial Coin Offerings in particular, you usually need an ERC20 wallet, which is an e-wallet containing the type of tokens you are using.

All Initial Coin Offerings are not the same. There are no rules carved in stone. Some Initial Coin Offerings are not on the Ether platform, but the overwhelming majority are. For the sake of simplicity, we shall only refer to these here. Put simply, the Initial Coin Offering trade process started out as follows: You sent Ether Coins to an ICO address, and after the Initial Coin Offerings were completed, you received tokens in a quantity proportional to the quantity of Ether you had sent. As the popularity of Initial Coin Offerings increased, however, so did fraud too. A typical Initial Coin Offering will now look like this.

First step

You register for the Initial Coin Offering via the website of the respective project. Some Initial Coin Offerings do not require registration. This could be a bad sign already, although it does not have to be. It may still be a legitimate project. Recently, most of the high-profile Initial Coin Offerings have required users to register at least in some manner. Sometimes even scans of your passport or a similar document are requested. With this approach, the banks’ process of the so-called “Know Your Customer” procedure has been adopted, and in doing so, one is prepared for possible risks or legal changes.

In some cases, you will also be asked to provide an address at which you wish to receive the Initial Coin Offering tokens. Make sure you enter a Parity/MEW Ether address where you know the private key personally.

Second step

When the Initial Coin Offering starts, send some Ether to the address on the Initial Coin Offering website. The Initial Coin Offering website usually has a countdown and a clearly stated date and time from which you can send coins. Do not transfer Ether Coins before or after the Initial Coin Offering is completed. Sometimes Initial Coin Offerings are limited to a certain amount (for example, 10 ETH per person). Be very cautious when sending your coins. Check the Initial Coin Offering address three times before sending anything. Some high-profile Initial Coin Offerings have thousands of people sending Ether at the same time. The Ether network may be congested, and transactions could take a while. You can check the status of your transaction by attaching the address of the Ether you are sending to this address: “https://etherscan.io/address/”.

Make sure you set the correct gas price and limit – gas is the extra Ether you have to pay for an Ether transaction to get through. These are usually shown on the project website. Don’t lose your head and invest too much. Gas is just another name for Ether, and the bigger these numbers are, the more Ether you pay for a transaction. Always adhere to the ICO operator’s instructions on how high your gas and Gwei (price per gas unit) should be most appropriate.

Third step

According to the Initial Coin Offering conditions, you will now receive the tokens on your address. This can take a while. Sometimes the tokens are sent immediately, sometimes it can take weeks, months or even longer, but usually right after the end of funding. When you receive the tokens, they may not be tradable immediately. This depends on the smart contract within the token. These details are normally published on the project website.

However sometimes something goes wrong – or seems to have gone wrong. During an Initial Coin Offering, delays may occur, and dates may be deferred. Consult other investors in social channels. If it really appears that something is wrong with your investment, please contact the Initial Coin Offering Team directly via Telegram, email or Twitter, who can help you. On the other hand, there are examples of Initial Coin Offering websites being hacked, or even whole Initial Coin Offerings being a scam.

How risky are ICOs?

Most whitepapers require a contribution rather than an investment. This terminology is used because investors have certain rights whereas the contributors have none. Contributors make a donation, which means they do not expect anything in return.

1. Tax risk

In terms of taxation, the topic of crypto currency is not yet 100% defined, which raises many questions for the ICO founders and investors, such as for example:
Is contributing to an Initial Coin Offering a taxable event in your tax domicile? What kind of tax event occurs when contributors part with an Initial Coin Offering? Conscious investors avoid problems with the tax office. Should VAT be paid when receiving dividends from a crypto-token? Can losses incurred from the Initial Coin Offering contribution be offset against tax? What happens if investors resident in a particular jurisdiction contribute, even though they were legally not allowed to invest? Are returns from Initial Coin Offerings suitable as investment incentives in start-ups?

2. Initial Coin Offering – risks sssociated with regulations

At some point, regulators are likely to regularise Initial Coin Offerings, but what happens to tokens already purchased from previous initial coin offerings? Will investors find it difficult to sell their Initial Coin Offering Tokens to others when the new rules become effective?

3. Do Initial Coin Offering documents have a legal basis?

Most Initial Coin Offerings are similar to an “investment prospectus”. This is done in the form of a website, a whitepaper and FAQ’s. But are these documents like a contract between the token issuers and the holders of tokens? Which court would accept such documents as a basis for litigation? Under which jurisdiction would a particular Initial Coin Offering fall? The whitepaper and the website can be modified in no time at all. Only a few implement a version control. This could lead to difficulties in legal disputes. Can holders of tokens legally challenge the authors of the whitepaper if the whitepaper and roadmap are not honoured? Is a token a security with a different name, and in this case, what is the responsibility of the token issuer and what are the rights of the holder of the token?

4. Relation between the holders of tokens and the issuing company

Which laws protect investors in the jurisdiction in which the emitters are registered? What happens if the company that issued the tokens is sold? Do the owners of tokens have any rights under the new management? Can the Board reject the statements made on the website and in the whitepaper at the beginning, during or after the Initial Coin Offering? Can the token creator issue more tokens even though he had indicated that he would not? If more tokens are issued nevertheless, can the issuing then be challenged in court by the holders of the tokens?

5. Business risks with Initial Coin Offerings

Intellectual property is not adequately addressed in whitepapers, and the inventions and assets for which the trademark owners are paid, are often not protected by law. The competitive situation in most whitepapers is characterised as a passive structure that will not respond to competition. This is unrealistic, especially if you compare the business model of whitepapers with companies that have existed for decades. These companies have the systems to develop counter-strategies to any threat that occurs in their market. Many Initial Coin Offering projects underestimate the regulatory challenges and financial burdens that are required to turn their business model into a viable operation Failure to address these aspects should be a warning to the potential Initial Coin Offering participant.

6. Risks to investors and participants of Initial Coin Offerings

A major risk is the lack of an investor’s knowledge of how to evaluate, purchase and sell the Initial Coin Offering tokens. Investors who do not have the entrepreneurial acumen with respect to business model, industry and team can misjudge the true opportunities and risks of a particular Initial Coin Offering. The fear of “not being part of it” is also a decisive factor. This feeling diminishes the ability of participants to make rational investment decisions. The idea of digital scarcity and being omitted can lead to wrong investment decisions and losses. Participation in an Initial Coin Offering means that these funds are not available for other Initial Coin Offerings or investments.

7. Initial Coin Offering structural risks

Initial Coin Offerings include a founder’s premium in the distribution. The investor pays this fee to the founder for the idea, the Initial coin Offering and the launch and operation of the project. The founder’s reward is the number of tokens received from the Initial Coin Offering. The founders do not pay for these tokens. For example, if an Initial Coin Offering issues 100 tokens, 90 of these will be available to contributors, and the founders will often receive the remaining 10 tokens for free. This is the reward for the founder. This is a dilution of the contribution, as a fee for the idea and the setup of the project.

But sometimes there is confusion about how the founders will use Initial Coin Offering funds. The founder’s bonus, for example, can be mixed with other topics, such as marketing and salaries for employees, which makes it more difficult to estimate how much money actually works for the participants and how much money is going into the founder’s pocket.

The matter of “undeclared salaries” is also of importance here. To date, not a single whitepaper has fully disclosed the founders’ salaries. This could be a form of “covert” second reward for the founders. Undisclosed financial documents are a further grey area. This makes it difficult for the holders of tokens to analyse the events behind the scenes.

8. Initial Coin Offering team risks

Teams with no real business experience organising an Initial Coin Offering remind you of the dotcom bubble. There is a difference between creating a crypto project and a real company. Most whitepapers are based on the future potential of tokens rather than on past performance. The only link to the past is the reputation and experience of the founders, industry statistics and the success of companies operating in the same market. Anonymous team members have the luxury of claiming a variety of services that are difficult to verify or disprove.

9. Initial Coin Offering token risks

The tokens may be stolen or get lost. Online and offline wallets could be hacked and the tokens contained within be stolen. The used online wallet may be hacked. The smart contract on which the token is based (Ether, Waves) could face a variety of challenges such as denial-of-service attacks, high fees, regulatory challenges.

10 risks after the Initial Coin Offering

Many token issuers reduce their communication with the holders of tokens after the Initial Coin Offering. Every day that passes without news, reduces the value of the issued tokens. The products which develop could also become obsolete because other Initial Coin Offerings might have a better idea.

Which wallet for ICOs?

Here is a clear warning: Do NOT invest in Initial Coin Offerings through a stock exchange/exchange. You would lose your money.

Why? This is due to the way smart cntracts work in Initial Coin Offerings. The address through which Ether was sent to the Initial Coin Offering contract address is the same address which will also receive the ERC20 tokens, and your funds are not stored in a permanent wallet on an exchange. You will need to use your own wallet address whose private key you have, and not the exchange, to send Ether to the Initial Coin Offering contract address if you wish to receive any tokens. For example, the MyEtherWallet is very well suited, but there are many others who are just as good or better for this purpose.

Tip: You need a ERC20 wallet where you own the private key. Never send your private key to anyone. This is your secret access.

How detect SCAM ICOs?

Important warning before starting: Initial Coin Offerings are a very risky type of investment. Never invest anything you can’t afford to fully lose. Remember that – due to a lack of regulation – you may have trouble getting your lost money back in the event of mistakes.

1 – Composition of the team

Learn all about the team, especially the development team and the advisory board. Learn more about each member of the team. Do a Google search for the names. Visit their LinkedIn profiles. Search for famous names on the advisory board of the project. Find out if the team has any cryptographic experience and more importantly, which projects or Initial Coin Offerings they were involved in and what impact these had.

2 – Bitcointalk.org

A good starting point is the announcement thread (ANN) of the project on BitcoinTalk.org, as Bitcointalk is the largest forum for Bitcoin topics and crypto subjects. It is strongly recommended to read the messages carefully. It is a bad sign if the developers do not answer certain questions or do not cooperate at all. It’s also a good idea to send personal messages to developers to see how responsive they are. Each message on Bitcointalk includes the rank and activity level (number of past messages) of the sender. Watch out for newcomers and subordinate authors. The reputation has become very important and significant. Also pay attention to experienced authors and look for negative news; sometimes this could be a warning sign.

3 – Project phase and VC investment

Evaluate the project phase. Is there only a whitepaper? A beta version? Is there a product with limited functionality? Prefer projects that have “some lines” of functioning code. However, many Initial Coin Offerings have already proven that they can be written with no code. VC’s (venture capital) invest in and support projects usually in the early stages. This information is usually found on the main page of the project website. It is probably not without significance whether it is a renowned crypto VC, such as Blockchain Capital or Fenbushi.

4 – Community and media

It is crucial that there is a wide, open, and supportive community for all investors. Openness is just as important for gaining our trust as the Github code. Try to understand the atmosphere within the community. Look at the size of the community and its activities. Other sources such as Reddit, Twitter or Facebook may be relevant to the evaluation of the project. Watch out for bounty posts. It is common practice to introduce a bounty thread to reward users for spreading positive information about the project to increase media coverage or help with translations. These bounty threads can stimulate the hype surrounding the project but are not particularly objective.

5 – Unlimited / hard cap?

In the early days of crypto Initial Coin Offerings, the difference between unlimited token issuance and hard caps did not have the same effect as in today’s Initial Coin Offerings. An open cap allows investors to send unlimited funds to the Initial Coin Offering wallet of the project. The more tokens are in circulation, the less unique your tokens will be for subsequent trading – due to the lower demand.

As Initial Coin Offerings are becoming mainstream within the crypto world, enormous amounts are acquired. Take a look at Bancor – this project earned an amazing 150 million dollars in as little as three hours. This did not result in any percentual gain for investors. Be aware of this when you participate in Initial Coin Offerings without a cap.

6 – Token distribution – when and how?

Greed can be defined by a high token distribution to team members – more than 50% of the tokens is suspect. A good project will link its token distribution to the roadmap. After all, every phase or milestone of the project requires a certain amount of funding.

Pay attention to the token distribution level. Some projects do not release their tokens until hours after the Initial Coin Offering ends. Some projects need to develop a beta version before sending the tokens. Considering the percentage increase of Ethereum (one year between Initial Coin Offering and token distribution, about 500% increase), Augur (1+ years, 1,500%) and Decent (8 months, 350%), this break sometimes produces a very positive hype about the project.

7 – Evaluation of the whitepaper

Most typical investors do not actually read the whitepaper, although it contains all necessary information about the upcoming project and the Initial Coin Offering.  Don’t hesitate to read it, or at least the most part of it. Write down the strong and negative aspects and add some of your own research results. In the end, the whitepaper is the silver plate for potential investors. After reading, you should be able to answer a simple question: What value does this project have to our world? It also tells you in what you will be investing in.

8 – Code quality

If you have some programming experience, you should use it here. The quality of a developer can be understood when analysing a part of his code. It is still possible even for a non-technician to assess its quality by the consistency of the code. Another good indicator is the use of proper comments. Avoid messy developers. A piece of code reflects the attitude of its developer. Next, the length of a function is another characteristic. A function containing more than 50 lines of code should raise a red flag. Modularity is important and makes the code more readable and maintainable.

Crypto projects usually use open source code. This creates trust in the project community and encourages community developers to contribute suggestions or improvements. An open source project gives the opportunity to view the commit logs. Commit is essentially developer jargon and means to push a piece of code into the Github code repository. Thus you can check any kind of change. The insights tab gives you a more general summary of the developer activity. This tab displays a graph of the daily commits. Below the chart you can see the activity of each individual developer. This information is crucial when assessing the development team. It’s even possible to see the popularity of the project by looking at the number of stars it receives.


Initial Coin Offerings are more and more becoming mainstream as a method of fundraising and financing. There will be a variety of projects to choose from, so that it becomes even more difficult to assess these projects. It is vital to research and read as much information as possible and to write down all important positive and negative aspects before making an investment decision.

Trade with ICO Tokens

One of the most popular options for trading tokens from Initial Coin Offerings are exchanges. Before beginning to trade on these platforms, you should consider the respective transaction and withdrawal limits, transaction and exchange fees, and the reputation of an exchange.

If an exchange has had multiple security breaches, find out how it has been handled, and to be on the safe side, find an alternative. Some of the most popular exchanges are listed below:

  • Bittrex
  • Binance
  • Poloniex
  • HitBtc
  • Kraken
  • Bithumb
  • Bitfinex

etc. With over 800 cryptocurrencies on the market, you should only trade with new tokens if you understand the industry.

So, how do you find the best exchange for your Initial Coin Offering investment?

We will try to answer one of the most frequently asked questions on the subject. Well, actually, the solution is simple: An Initial Coin Offering Token can be traded on any exchange, but only if the exchange accepts it. This means that for instance a token is listed on poloniex.com, but not on bitfinex.com because the ICO operators have to meet certain, sometimes strict conditions to be listed on popular exchanges. In many cases, most tokens are tradable on Etherdelta. Etherdelta offers very fast access to token trading,and access for investors can be set up directly via an ERC20 compatible wallet (MyEtherwallet for example). With Etherdelta, the ICO operator does not have to complete a complex registration process, and the tokens can be traded there quite quickly.
TIP: It’s best to wait until your tokens are traded on the larger exchanges, where the volume of trading determines the interest in the token. Here, a pattern of supply and demand is then formed and, as a rule, demand predominates, resulting in an increase in the price of the tokens.

Find the exchange for crypto currencies which best fits your token in just four simple steps:

  1. Go to coinmarketcap.com
  2. Look for the currency you would like to trade.
  3. Click on “Markets”.
  4. Select the exchange on which the desired crypto token is traded.

Now all you have to do is register on the exchange, and you will already be able to trade your tokens from the ICO. If you wish to sell the token, simply find the highest priced exchange (step 4) and sell it there. Alternatively, in step 4, you can also choose the exchange with the highest trading volume if you plan to trade the Initial Coin Offering token more than once.

How can i know on which Exchange my ICO has been listed?

The best way to find out where your tokens can be traded is to ask the ICO Team directly. This can be done via social media channels like Twitter, Telegram or Slack. In most cases the ICO Team shows the a basic information about the post ICO Sale token trading. Common exchanges for a first token listings are Etherdelta or HitBTC which has often less trading volume.

Tip: Always check the trading volume on exchanges where your tokens are traded! The trading volume is a important indicator how the token price will be in short and long term. So, just wait till your tokens are will be listed on exchanges with bigger trading volume which will give you a better realistic price feeling in which way your token value will go.

What is Crowdfunding?

In 2016, the start-up companies of the crypto scene fetched around 200 million dollars through their Initial Coin Offerings. Initial Coin Offerings are a new form of crowdfunding based on blockchain. This figure may not be much compared to the billions generated by other crowdfunding campaigns, such as Kickstarter. It already demonstrates an enormous growth though on the previous year.

Some of the start-ups have accrued millions of dollars based on little more than a promise and a website; some have also failed to deliver on those promises. As with the blockchain itself, the expert opinion is highly polarised about the cryptographic crowdfunding hype, its reliability, legality and future.

How does it work?

In a nutshell, companies start ICO projects by having an idea or an already existing business model. This gives early investors the opportunity to acquire shares in the business model through tokens in exchange for coins or fiat money. Initial Coin Offerings are usually limited either in time or by the total amount to be generated. The value and number of floated tokens may be static or calculated on the basis of the funds raised.

Tokens have become an easy way for blockchain start-ups to fund their projects early in the development cycle, and for regular users and enthusiasts to invest in projects of potential value and have a say in shaping their future.

What is a Crowdsale?

Ideas don’t cost anything. The implementation is the valuable and mostly expensive part. It takes effort and skill to turn an idea into something useful, and both are costly.

In recent years, crowdfunding has emerged as a way to generate the money needed to realise ideas. Websites such as Kickstarter and Indiegogo have proven to be suitable means for raising contributions. Now however, the world of crypto currencies brought forth another form of fundraising: the crowdsale.

Crowdselling vs. Crowdfunding

Unlike the traditional crowdfunding method, a crowdsale does not sell a widget or promises to put your name in the credits of a movie. Instead, it sells you something you may not know much about, unless you have some knowledge: a token. A token is a component in a next generation crypto currency application. Like Bitcoin, it’s not something you can physically hold. It rather is an electronic record – a type of digital poker chip – stored on your computer or mobile device.

The tokens are designed to allow you to participate in the project, which will eventually be launched as a result of the crowdsales. Depending on which service the project offers, the token serves as a kind of access ticket to this service. If the project is a software application that allows you to find carpool partners, for example, without using a central website, you can pay for your rides with tokens. The tokens are thus a kind of currency for use within a given service framework.

Why Crowdsales happen

The crowdsale usually takes place before the official start of a project. It is designed to generate funds for the development of the project to finance software developers, marketing budgets and all the other things a start-up needs. It can also be used to measure interest in a particular project. If nobody buys the tokens, then the company developing the project should rethink its options.

The really interesting part of a crowdsale is what happens later on to the tokens. In many cases, they are bought and sold on the open market, irrespective of the application for which they are used. This is another way to encourage early entrants. They can purchase tokens because they have faith in the potential of a particular vendor. If the project will be successful as they anticipate, the tokens could gain in value and at some stage yield a decent profit.

The Legality of Crowdsales

However, this is one of the dangers associated with the crowdsale concept. There is still no adequate legal framework. If a company sells a bundle of tokens and then collapses due to poor management – or even worse, it just disappears – what happens to all the unlucky people who have invested their money? In the conventional investment world, there are rules on how to invest in a young startup company. Yet the rules for crowdsales are still unclear. The regulatory authorities have strict rules governing the issuing of financial instruments such as shares in a company.

Crowdsales are however still a very new concept that just a few companies have implemented. Do tokens have to be classified as securities and thus regulated? The position is not yet clear, and each case will probably be judged on its own merits. Here, however, the same rules apply as elsewhere: Understand what you buy, why you buy it, and the risk you incur. Do you buy with speculative intent? Or do you buy tokens because you really want to use the application? Are you ready to accept the loss should the service never start? Never invest anything you are not prepared to lose.

What is ROI?

The return on investment (ROI) measures the profit or loss of an investment in relation to the money invested. The ROI is usually measured as a percentage and is typically used for personal financial decisions, to compare a company’s profitability or to compare the efficiency of different investments.

The return on investment formula is:

ROI = (net profit / investment costs) x 100

How it works:

The ROI calculation is flexible and can be manipulated for various purposes. A company may use the calculation to compare the ROI of different potential investments, while an investor can use it to calculate a yield on a stock. For example, an investor buys €1,000 worth of shares and sells the shares two years later for €1,200. The net profit from the investment would be €200 and the ROI calculated as follows:

ROI = (200/1,000) x 100 = 20% (yield)

The ROI in the example above would be 20%. The calculation can be adapted by deducting taxes and charges to obtain a more accurate picture of the total ROI. The same calculation can also be used to calculate an investment of an enterprise. However, the calculation is more complex as there are more inputs. For example, in order to calculate the net profit of an investment, a company would need to be able to track exactly how much money went into the project and how much time staff spent on it..

Why it matters:

Due to its flexibility, ROI is one of the most frequently used profitability indicators. One of the disadvantages in ROI calculation though is that it is manipulable, so that the results may differ depending on the user. When using ROI to compare investments, it is important to use the same inputs in order to get an accurate comparison. It is also important to note that the ROI basic calculation does not take time into account. Obviously, it is more desirable to get a +15% return over one year than over two years.

Token price after ICO

Before and after an investment in an ICO, every investor asks himself the question of where the price will go in order to estimate the profit or loss. There are several factors that can be checked in advance before a token is traded on an exchange in order to estimate potential price development and investment risk.

 The main drivers of the price of a token after successful completion of ICO sales may be as follows:

  • Limited supply and demand
  • The benefits of the currency, and how easy it is to use and store it
  • Perceptions about its value in the public
  • Price of Bitcoin
  • Media
  • Investors
  • Market dilution
  • Innovation
  • Trust in conventional systems
  • Legal-/government matters.

Supply / demand

Precious metals gain in value due to their usefulness and limited supply, and the price is often linked to the principle of supply and demand. This principle is a simple economic factor which affects the price of many things. In some countries, Bitcoin and other crypto currencies are classified as assets, in others as currencies.

Bitcoin, for example, has a maximum of 21 million whole units, 100 million times divisible. With more than 7 billion people in the world, it is true that even if only 1 billion people were to purchase Bitcoin, 21 million whole units would without a noteworthy price not spread very far.

The supply is also purchased at a constant pace and cannot be changed due to the rules. This creates a supply which is limited, and therefore people will pay more to get coins that are expected to rise in value according to their view. The regular halving of the block reward, such as the 50% cut in 2016, causes a price increase. This may have an impact on the price of many other crypto currencies.

Utility programme

A key factor to the price of each crypto currency and Initial Coin Offering is its benefit. If you cannot use it for anything, be it an investment or for payments, then an Initial Coin Offering would have no or little perceived value. As far as Bitcoin is concerned, they can be used for payments on an increasingly large scale, which means that their use is high. The high degree of difficulty and the high energy consumption cause a high price and can therefore be used for an investment. Shifts in the utility value could cause price volatility. In the case of Ether, this is a practical tool as it is an intelligent contract platform, which has increased the price of Ether over many other alternative crypto currencies.

Public perception

The public perception of a crypto currency has a major influence on its performance. The impact of this public perception within the context of media coverage can, however, have both positive and negative consequences. Driving factors for example may be people’s positive reaction to the innovations associated with crypto currencies. Many also see digital currencies as a legitimate way of forcing the — in their view — largely corrupt banking sector into a competition that could not otherwise be manipulated in the traditional way. Critics of digital currencies, on the other hand, often refer to negative reactions and associations with crime.

Hacks in important crypto currency exchanges such as Mt. Gox could also adversely affect the reputation of digital currencies and crypto tokens as well as their price. On the other hand, innovations such as multi-signature security for e-wallets or for payment gateways can generate a positive response. Many crypto currencies reuse the Bitcoin code and change only some of the specifications, such as the coin supply, the operating algorithm or other features.

Price of Bitcoin

Bitcoin are often seen as the “reserve currency” of the crypto currency world. If the price rises or falls, this often has an effect on other crypto currencies. Namely Litecoin often has price responses that are proportional to the increase and fall in price, but without the difficulties which Bitcoin encounters in terms of power to secure the two blockchains. Since Bitcoin was the first crypto currency and is most widely supported, the price of Bitcoin can impact the other crypto currencies.


The media reporting on Bitcoin in a positive or negative way can influence the public perception of Bitcoin and the price. This can even be used as a way of manipulating the price, since many media companies are owned by a few people, and it is an important factor for potential price manipulation if positive and negative aspects of the currency are reported, which can cause the price to fluctuate.


With all crypto currencies, especially the smaller, lesser-known ones, investors can manipulate / inadvertently influence the price in the following manners:

  • With a large amount of capital, a large percentage of tokens can be purchased. These major investors can then try to promote good news about the tokens to drive up the price and sell the tokens quickly with profit.
  • Investors who make a large investment in a small Initial Coin Offering may cause accidental price increases and losses.
  • Investors who have confidence in a crypto currency can encourage other investors to also invest, and the more investors and demand for a particular currency, the higher the price.

Market dilution

This is not so much true of Bitcoin, Litecoin, Peercoin or Ether, all of which had a unique purpose at the time of development. There are plenty of new crypto currencies that are launched every day. Due to the many crypto currencies, which often saturate the market without any practical benefit, alternative crypto currencies can find it difficult to gain ground in an already diluted market: Bitcoin was the first to stand out with good development, Litecoin shone as silver against the Bitcoin gold, Peercoin used an innovative combination of POW and POS (Proof of Stake). Ether had a handy tool to be a smart contract token that enables distributed, secure execution of intelligent contracts at the cost of what the Ether token is, which very few crypto currencies can do.


Since many crypto currencies are a clone of Bitcoin, innovation is another thing that can have an impact on price. Sometimes this leads to a currency gaining ground, what in itself is sometimes not sufficient, but it is a price factor. Innovation on its own does not always suffice. However, innovation can be a driving factor when it brings something unique and highly useful to the table.

Trust in conventional systems

If confidence in traditional systems increases, such as the price of the Euro, this can lead to some people relying again on the storage of assets with traditional currencies. This can have an impact on the price of Bitcoin in particular, and thus on the other crypto currencies, where Bitcoin is de facto the reserve currency of the cryptographic world.

Legal and regulatory matters

Legal and governmental matters can have an impact on the price. Legal steps that are positive for a crypto currency, such as its official function as a currency, can have a positive effect, while a country that prohibits it could create an adverse effect. Ecuador banned the currency, while some other countries officially recognise crypto currencies as a currency for tax purposes. The lack of a legal framework in many countries continues to be an obstacle, as the precedents for crypto currencies are not yet complete. Due to the limited control over crypto currencies on the open Internet, it can even be used against the will of a government.

Volatility of the crypto currency

Since the crypto currency is an emerging market and due to the changes it imposes on the financial system, the market is still volatile. In conjunction with many of the factors mentioned above, the price of a token can rise and fall rapidly. The volatility decreases over time though, which hopefully will lead to lower fluctuations in the prices of all crypto currencies.