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Benefits and Risks involved with Cryptocurrency ICOs

Technology has advanced so much fueling mankind’s dream for a more connected yet decentralized world. Blockchain and the cryptocurrencies have enabled us to move a step forward in this direction by envisioning a decentralized system of financial transactions. It offers enormous possibilities and the true impact of these innovations are yet to assess completely. But, cryptocurrencies will remain a trending topic for some time and more people are going to experiment with the technology and its possibilities. This article will help you generate a basic understanding about the idea of Cryptocurrency ICO and the benefits as well as risks associated with it.

What is Cryptocurrency?

A cryptocurrency is a computerized or virtual cash intended to fill in as a medium of trade put away electronically in blockchains. It utilizes encryption methods to control formation of money related units and to confirm the exchange of funds. Essentially, digital forms of money are restricted sections in a database that nobody can change unless particular conditions are satisfied, making it exceptionally secure. It has no physical existence and isn't redeemable in another product like gold. Its supply isn't controlled by any national bank or a central agency and the system is totally decentralized. Bitcoin, Litecoin, Ethereum, Ripple are few notable examples of cryptocurrencies.

What are ICOs?

ICO is the abbreviated form of Initial Coin Offering .The idea of selling the crypto currencies in advance has gathered a lot of interest and is helping in development and fund raising for other applications. It implies that somebody offers speculators a few units of another digital money or crypto-token in return against cryptographic forms of money like Bitcoin or Ethereum. Since 2013 ICOs are regularly used to subsidize the improvement of new digital forms of money. The pre-made token can be effortlessly sold and exchanged on all digital currency trades.

Advantages of Cryptocurrency ICOs

  • In a conventional systems, restrictions are placed on the buying and selling of shares. A decentralized system will help to eliminate these hurdles, enable anyone on the planet to take part in the process and help companies to raise their profit margins.
  • ICOs are cheap when compared to the conventional pricing mechanism and thus it becomes affordable for more people to take part. Also, anyone can easily generate customized tokens using popular cryptocurrencies such as Ethereum.

Dangers associated with ICOs

Even though the potential of block chain technology is evident, ICOs are vulnerable to fraud and manipulation. ICOs are generally structured in a way that they fall out of any financial regulation and therefore investors are not protected by law, in case of any fraud. Anonymity and cross border nature enables the possibility for a traditional pyramid scheme that is hard to recognize.

Investors without proper knowledge or expertise about the whole technology and its implications might get cheated by exaggeration of expected returns and hidden risks associated with the project. Anonymity, which is central to the whole setup, is also an ideal cover for criminal money. The point here is not that ICOs are evil. But, just like any other technology or idea in a developing stage, there exists chances for fraud and manipulation which can only be identified and eliminated by close market watch and a deep understanding of how-it-actually-works.

There are more than a thousand cryptocurrencies available in the market and only four or five of them may be doing some path breaking innovation while few others are genuinely trying innovate and the rest of them, the majority, may not even be able to answer the basic question: ‘Who do you have a Cryptocurrency of your own?’. So, be careful before making your move. Or you can be a victim of the next ‘dot-com bubble’.

At last, it's difficult to anticipate where Web 3.0 will take us, and that is exactly the point. By opening the web from the hands of a couple of central and powerful players, this will definitely empower a surge in technology and development. Decentralization is going to change the future of web and we better be ready to utilize it to the fullest.