I speak of Initial Coin Offerings, or ICO of course.

When I learned of the wonderful world of cryptocurrency second quarter of last year, investing on ICO immediately had its appeal on me. Most would say that ICO investment is on the riskier side of the already high-risk world of crypto.

From my experience, higher risk with higher rewards also. One of my most recent immediate big wins from ICO investing is with the Bounty0x project, a decentralize bounties network that launched its crowdsale on December 15, 2017.

The highest I saw BNTY tokens for was at 57 times from ICO price on the second week of January 2018, a little less than a month from when the token sale was concluded.

Now, mind you, this isn't always the case. There would be instances where coins would come out in the market at 3x or 2x of ICO price, or at times would even be less than the ICO price. There are some scam projects altogether where the investor wouldn't even be able to receive anything back from their investment.

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High risk and high rewards.

The risks can be mitigated, if one knows how to filter the projects to support from the hundreds of ICO's that seem to be coming out from everywhere.

For starters, it would be a big help to understand these terms most commonly known to ICO-Investing Enthusiasts.

1. ICO

INITIAL COIN OFFERING is a way to crowdsource funds for brilliant projects by different teams. An investor would send in ETH, BTC or whatever crypto the project accepts and the investor receives project tokens in return. It can be viewed as the earliest time one can invest on a project. ICO can be likened to IPO or Initial Public Offering in stocks exchange, except that the investment can either grow exponentially quicker, or be lost just as quick- exponentially. Plus the decentralized nature of it of course.

Sample Use

Investor A: Hey man, I bought Brilliant Coin at 1000 satoshis last night. It's now at 2500 sats! I hope you were able to get some yourself?

Investor Super B: Oh I'm holding some.

Investor A: What was your entry price?

Investor Super B: About 200 sats. I bought from ICO three weeks ago.

Investor A's jaw drops.

2. ERC20 WALLET

Most ICOs are built over the Ethereum network, and would require an ERC20 compatible wallet. These are wallets that can be created via Myetherwallet, Metamask, Mist and Parity. I have tried both Myetherwallet and Metamask, and am a bit partial to MEW (yep, mew = MyEtherWallet) becase of its ease of use. For ICO contribution of ERC20 projects, it is a must that contributions would come from these wallets only.
Never ever ever ever send funds from exchange, unless the project specifically says it is ok to do so and would ask a manual input of token-receiving address, or if the project would have a wallet of its own that would entail investors to manually move the tokens from there.
Why not exchange wallets? Most of the ICO would have a process in place where tokens would automatically be sent back to the contributing address. Now, as this is a new token, it is highly likely, with a 99.99999999% probability, that a wallet for this token does not exist in exchanges yet. So, having an exchange wallet as a receiving address for ICO contributions would result to token loss.
In space.
Never ever ever ever send contribution from exchanges. Ever. Never.

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3. WHITE PAPER

This is possibly the best way for a project to promote its product or technology- by creating a bad-ass white paper. The white paper outlines the product usability, highlights the problem it solves and challenges it addresses. This include project timelines and business model in most cases.
ICO review relies heavily on white paper review as these are designed to be able to answer any investor potential query, and would be a big factor in influencing investor decision.
White papers can be short with some having only a few pages, or extensive big papers. See ADA white paper here as an example.
Though it hurts my brain to read through massive data (note: I am as un-techy as it gets), it is always best practice to review the white paper and thoroughly assess first where your money goes.

Sample Use

Investor A: So, your money on Boscoin has been tied up for more than half a year now...

Investor Super B: Yeah, all good still. I was planning to hodl it anyways.

Investor A: As soon as it hit exchanges I'm sure good money will come from Korean exchanges.

Investor Super B: Not just that, the project is solid. Read from the whitepaper that Boscoin being a self-evolving cryptocurrency platform for trust contracts. Trust Contracts are securely executable contracts based on a decidable programming framework called Owlchain, which consists of the Web Ontology Language and the Timed Automata Language. source

Investor A faints from info overload.

4. CAP

Cap, by definition, means a ceiling point or placing a limit or restriction.
An ICO can either be capped, meaning the project team is setting a maximum contribution amount they are willing to receive. An uncapped ICO though would welcome all the amount the investors would want to throw in. Most ICO's are capped, while a few like TEZOS and MOBILEGO are not.
ICO's would normally have a SOFT and HARD CAP as well.
SOFT CAP is speculative, some projects would measure the fundraising's success on the soft cap. Some would set this target as the baseline in deciding to proceed with the project. Contributions would still be welcome after the soft cap is reached.
HARD CAP would be the absolute upper limit for funding that the team is willing to receive. Any amount received after exceeding the hard cap would most likely be refunded back to contributors.
Within the ICO game, good projects with low cap would sell like hotcakes, as they have the capacity for quick growth.

5-7. PRIVATE SALE, PRESALE and CROWDSALE

These three are ways to buy tokens into the ICO phase.
PRIVATE SALE would be for groups, companies, or institutions who can invest a significant amount on the project. This would entail both parties to sign a SAFE Agreement and discuss the terms such as bonuses, discounts, token lock period (if any), as well as token distribution and release dates.
A PRESALE can be opened both to private investors or to the general public, and would be done prior to the actual crowdsale date. Investors would send in their contributions at an earlier period, and in return would normally receive discounts and bonuses as well.
CROWDSALE would be the third stage of the fundraising, and investors may or may not have bonuses and discounts at this point. Crowdsale may not proceed as well should the hardcap is reached in the private and presale stages.

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8. WHITE LIST

This is the elite list, the set of people who will be able to participate in the crowdsale. The team would normally set a limit on whitelist acceptance. This process started last quarter of 2017, where interested investors should first express their interest on the project by joining the white list. To be whitelisted, an investor either would enrol their email account or ethereum address, join a slack, wechat or telegram channel. The investor is usually notified via email on a successful, or failed, whitelist application.

9. KYC

KNOW YOUR CUSTOMER/CLIENT this is another process that has been in recent adoption within the ICO space. As some ICO's would have restriction on participating countries, investors would need to prove their identity and country of residence by submitting photos of accepted government IDs. Some would require for an investor's selfie photo, as well as proof of billing.

10. FCFS

An acronym for FIRST COME FIRST SERVE. This is used within crypto/ ico communities when discussion is on capped ICO's that do not guarantee a specific allocation for contributors. As the phrase itself connotes, contributions would be accepted based on the chronology of receipt.

11. GAS WAR

The phrase GAS WAR would be closely attached to FCFS. Gas war means contributors would normally increase their transaction GWEI and Gas Limit, thus effectively transmitting their contributions faster at higher gas costs.
GWEI is the GAS PRICE and increasing or decreasing this has a proportional effect on the transaction speed. Higher GWEI means faster transaction.
GAS LIMIT basicaly is your way of saying that, yeah you are willing to pay for this GWEI but only up to a certain total price limit.
Note that for FCFS ICO's, increasing the gas and gwei still does not guarantee a spot on the crowdsale, and any failed transaction would still result to gas fees.
Fun fact: Someone paid $6000 gas for BAT ICO last year, for a failed transaction. Good bye $6000.
This Gas Calculator can be used to check how much it will cost for transactions using specific gwei and gas.
My personal high is 400,000 gas at 600 GWEI, a transaction cost of $150. Luckily, I was able to get in on the ICO.

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12. SMART CONTRACT

The project team would create a smart contract where funds are to be sent to during the fundraising. Imagine receiving hundreds or thousands of contributions and the tedious work needed should the team be sending the tokens manually. Smart contracts would do this task for the team, where tokens are automatically distributed to the sending address.
ICO's would have different timelines on token distribution and release, and it is always best to read through these details first prior to contribution.
Always, always be wary of scammers. Others would put an effort into trying to con investors by providing fake addresses in various ways during crowdsale. Make sure the smart contract address source is legitimate prior to sending in your contribution.

There are many more terms to be learned in the ICO space, but these are some of the most important ones. For Filipino ICO enthusiasts, we have a telegram channel where a few of us have gathered to share what little knowledge we have on ICO's. Feel free to join us on telegram.

Allow me to define one last term.

PHICO- where the cool, Filipino ICO enthusiasts are. Wink, wink!

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