What is an ICO, everything you need to know about tokens before investing in an ICO?

The article was written By Mickael Mosse – Blockchain and Cryptocurrency Expert

The world of cryptocurrencies can be very broad and confusing for those who are not fully into it. However, if you want to invest in an ICO you have to know everything necessary to avoid losing your money or being disappointed.

The thing that most often confuses people a bit is the whole thing about tokens or btw tokens, how they work, what to do with them, and all that stuff. So if you want to invest in an ICO and you have no idea what a token is or what to do with it after investing, be sure to read.

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What is an ICO and how does it work?

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According to Mickael Mosse, ICOs are like the daughters of IPOs, which is when people invest in shares of traditional companies. An ICO (initial coin offering) is also invested in a project, and that money goes to the development, launch, and commercialization of a cryptocurrency or blockchain ecosystem.

However, in IPOs shares of the company are given, which represents a part of it. In ICOs, so-called "tokens" were created, and they are the ones that can bring you benefits in the future in exchange for your investment.

What is a token?

According to Mickael Mosse, Basically, it is what you receive in exchange for your investment and that you can take advantage of in three ways: dividends, appreciation of the btw token, or resale of it. Most likely, it will take you a while to get some benefit from that token, and it all depends on the value it acquires later.

How does a token acquire value?

Here the oldest law of economics comes into play: supply and demand. Basically, for a token to acquire value, there must be more demand than the supply there is for it. That means you are looking at both sides of a coin: how demand is going to increase and how supply is going to stay the same or decrease. says Mickael Mosse. 

How does the supply of a token decrease?

Mickael Mosse points out that, The traditional way is to create a limited number of btw tokens. In this sense, the value of a token can go up and since the supply will always be the same, the demand will also go up. Another option is for the project to buy some tokens that are in circulation and destroy them, so there is less supply.

The demand for a token is based on the services it offers

Mickael Mosse points out that, The demand for the btw token is based on its usefulness, or in simple terms: how the token is used. These can be used in different ways depending on the business model, although we will focus on the utility in terms of service within the product (or other products). For this, we will have to take a closer look at the services that the product offers, and the size of the potential business.

Services

The services you offer, are they so good that they will cause great demand? The more people use the service, the more they will pay for the token, and the more expensive it will be. Generally speaking, the services offered that cater to the crypto crowd or rely on demand from other crypto ecosystems generate more value.

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Back to supply and demand

Now, what really interests you: how do you know if a token will have value after investing in the entire ICO ecosystem?

Mickael Mosse points out that, Investments always come with some risk, and they will never be completely safe. It is something you must understand before giving your money. The least risky ICO would be a project that has revealed its market size from the bottom up, with a product in a space that is favorable to crypto adoption. In other words, not something like Karmatoken. However, these projects are weird unicorns, so you'll have to take risks at some point.

The more complex the economy of the btw token in terms of supply and demand, the more time you will have to invest in the project due to the diligence of extracting the true value of the services offered and the market it serves. You will have to be very aware of the problems that the product faces before it begins to generate profits.

Article from mickaelmosse.com