Digital Fundraising

The latest abbreviation in finance and crypto-world is ‘ICO’. A word that gives both local and global financial authorities like the U.S. Securities and Exchange Commission (SEC) nightmares for several reasons.

Not to be confused with Initial Public Offering (IPO) which is used by firms to raise cash through the issuing of shares to the public. An ICO (Initial Coin Offering) serves the same function and works like crowdfunding , but for digital currency and tokens only.

We recently covered a feature on raising funds and capital for a business but missed out on one relatively new method. More and more companies are using ICOs to raise capital for their businesses.250x250

The concept of an ICO works similarly to how a company raises capital through shares in that it is all based on contrived value.

Funding raising in effect boils down to sales! If your actual product or service has nothing substantial or intrinsic to offer a client base, then it is nothing more than a scam.

Launching an ICO is quite easy, and to an extent, many tech companies are now catching onto it.

An ICO is the cryptocurrency space’s rough equivalent to an IPO in the investment world. ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO — Investopedia.

If you still do not believe it is possible, just listen to this testament from someone who did it after unsuccessfully knocking on doors of conventional funders – the angel investors, venture capitalists and banks.

The alarming spurt rate of ICOs often brings with it a scourge of potential scammers. The SEC and other institutions have to step in to monitor and regulate them.

Social media Platforms like Facebook and Google – which house a bounty of users (potential investors) have banned ICOs ads due to possible prey on unsuspecting investors; exposing them to con artists.

Basically, the scammers use fancy websites, laden with impressive figures and terminology to con users into buying into their coins or tokens.

Though the tokens barely even cost a cent, it adds up if they have millions of people buying in.  Once they have reached a certain amount in funding – they close shop and disappear!

Hypothetically speaking if one wanted to create a new coin called ‘DebunqedCoin’, these are the steps:
  • Create a product concept or Business Plan for the coin or what is called a Whitepaper. This describes in great detail what the coin or token aims to do; the core technologies behind it; the team and their qualifications; the product’s lifecycle/growth path etc.

  • Once completed and water-tight, the whitepaper would be submitted along with an application to one of the best Cryptocurrency Exchanges for review.
  • Naturally, the business would need some initial working capital for liquidity. Some of this is raised by the owners and other institutions (through loans) etc. These will serve as collateral/insurance that there is indeed genuineness in the venture for all stakeholders.
  • You must then assure your investors of a solid return on investment (ROI) and deliver – which goes back to sales and growth. Unless your offering is a scam you actually need to do some work! This comes with regular updates (marketing campaigns can have a tremendous or adverse impact on the uptake and price) on milestones reached.
  • The above is necessary to keep the investors abreast with progress and in the process, getting them to possibly increase funding. Growing interest and addition of more funds creates demand for the coin/ token which, in turn, drives up the price and market capitalization.
  • Voila! you would then be in business!

Here are some of the most successful ICOs of all time

NEO:

Known as “China’s Ethereum”, and backed by Microsoft, Alibaba and the Chinese government, NEO uses smart contract applications. It does so, however, with the addition of decentralized commerce, digitized assets and identification.

It enjoyed a considerable hike in token value from $0.03 to $88.20, NEO has big things coming with a 294,000% ROI.

Ethereum:

Unlike Bitcoin, the second-most valuable cryptocurrency in the world has more functionality than just being a coin. Its ledger technology is used to build and deploy decentralized applications a.k.a. “smart contract” technology.

Ethereum’s ROI has been nothing short of jaw-dropping at 230,000%. Having sold its tokens at $0.31, an Ether token now sits at a whopping $713, second in value only to Bitcoin.

Spectrecoin:

The “premier privacy-focused cryptocurrency” enables users to send and receive currency worldwide with total anonymity. It is currencies like SpectreCoin that have most government tax offices quaking in their boots.

If you had repurchased a token in November 2016, that puny $0.001 would be worth $0.64 today, or an ROI of 64,000%.

Stratis:

This UK-based start-up has craftily created a platform that is compatible with .NET and C#. As a result, the product appeals to veteran users of Microsoft products.

Raising 915 BTC in 5 weeks, those who cashed in on the low investment of $0.01 per token have seen a titanic ROI of 56,000%.

Ark:

With Ark, collaboration is the name of the game. The platform’s SmartBridge is a lightning-fast ecosystem designed to integrate other cryptocurrencies into its blockchain.

Investors were eager as any to buy in, and they have made a 35,400% gain given today’s token price of $3.54.

DigixDAO:

DGD, which stands for Digix Decentralized Autonomous Organization, is a self-governing community. It gives out grants to different projects which will promote the growth of the DGX network.

At a current value of $346.88 per token, this gives them a return of 10,722%.

Quantum (QTUM):

QTUM is an open-source value transfer platform which focuses on mobile decentralized apps or Dapps. QTUM is the world’s first proof-of-stake smart contracts platform.

They hosted a highly successful ICO in March 2017, and since that time has seen an ROI of 6,400%.

Source: investinblockchain.com

The prospect can be daunting for a cryptocurrency investor looking to make money off new investment opportunities, while remaining cushioned from fraudulent ICOs and dodgy coins and tokens.

As there is no guarantee that any cryptocurrency or blockchain-related start-up will be genuine or successful. One simply needs to be vigilant and take steps such as getting to know the core team, poring over the whitepaper with a big magnifying glass. Naturally you should be monitoring progress of the token sales.

Most importantly, one must  just using common sense to gauge just how feasible the project is to ensure that you’re not falling for a scam.

Remember, if it’s too good to be true, then it isn’t true!

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250x250You can still tap into the pool of 17-odd million Bitcoins that is now in circulation. You can even purchase them in the fiat currency equivalents.

But where do you get them then? After all, Cryptocurrency is this dark and mysterious transaction system used only by criminals and drug addicts.

So you acquiring them would naturally be in a shady place like the dark web – where it is used to acquire illicit things – right?

Not quite and there are publicly accessible marketplaces where one can securely purchase Bitcoins.

Find out more via A peer-to-peer Crypto marketplace

Forex on steroids!

With all the negative and positive commotion surrounding the Crypto market – it still begs the question, for those still curious. What does it take to engage in the trading of Cryptocurrency?

And by trading, we are not referring to the price speculation in a portfolio as one would with the price of a company’s shares or even CFDs. 

We are rather referring to trading it as a commodity against other ‘Cryptos’ in a properly regulated online market setting. Similar to how a Foreign Exchange (Forex) market operates.

As with trading traditional fiat currencies, the price is purely determined by good old supply and demand for the currency and monitored by the availability versus volume traded.

It is therefore just a medium between traders where they can set limit orders to buy/sell Bitcoins for a certain price.

So, in the true approach of Debunqed, we will decipher Crypto-exchange trading by looking at what you need to do to get into it, and what you stand to gain.

Here are the quick steps:-

The first step would be to open a secure Crypto wallet to physically purchase (own) some altcoins. Bitcoin, Ethereum and Litecoin are the main coins offered by Crypto wallet providers.

They hold the most value and can thus be broken down into smaller denominations (Altcoins). The same way the dollar is used as the main exchange for other fiat currencies.

This example helps to put things into perspective.

Make sure you do your research into which wallet you will use. Obviously if you are mining a certain Cryptocurrency you would naturally purchase them directly from that software provider of the Altcoin.

Using Ripple mining as an example, the platform is supplied by RippleNet and naturally, it follows that the Ripple company mines all the volume and controls its supply.

Getting the digital currency into a wallet can be a quick exercise. It can take as quickly as between 5 – 20 minutes via a peer-to-peer Bitcoin marketplace connecting buyers with sellers like at Paxful.

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Make sure you deal with reputable sellers.  This wallet provider rates suppliers based on how reliable they are so only deal with sellers of the highest ratings.

The actual purchase (mostly conducted via online chat) can be made via a Credit/Debit Card, online banking or convenient money transfer facilities like (Europe-based) N26 Bank, Skrill or PayPal.

You can even purchase and send gift cards from Amazon for instance, to the seller (to the value of the currency being purchased) for the seller to release the Altcoins.

Security and storage

The actual coins are stored in as an alpha-numeric key code – with the currency value in the wallet once acquired.

This after the wallet-broker takes a small fee for the transaction. This code/key needs to be kept secure – backed up online and offline (highly recommended). This is possible on special flash-drive (Crypto wallet) like the Trezor or a Ledger Nano. The device would hold the deposit key if you were transferring it to another wallet or to an exchange to trade.

Time to go shopping!

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Finding a good exchange

The next step would be then to source a robust and user-friendly platform to trade your newly acquired currency on.

The best cryptocurrency exchanges would allow you to swap fiat currency such as dollar/euro for the digital currency directly. Naturally, you can  trade one digital currency for another as well.

There are quite a few to choose from so it is good to read the reviews. You should then select one based on the number of deposit/withdrawal methods, the fee structure level, number of countries served, availability of security tools and features.

The last aspect is a huge determining factor exchanges can be prone to hacking, or loss from outages. Lastly, their margins and exchange trading functions are good to observe too.

Binance

For serious and equally secure trading, you will likely need to use an exchange like Binance that requires the user to verify their ID before being opening an account. Make sure you have all your documents ready and up to date!

Trading

When it comes to the actual trading, let’s take a scenario where two people want to sell an altcoin but not for the market price. One sets a limit order for lower and the other for a slightly higher price. So, the best price to purchase Bitcoins, in this case, would be the median of the two prices.

If the buyer wants to purchase more than one altcoin, they will continually take the lowest price available. By doing this, the “price” of the altcoin will increase as the lower-price sell orders are no longer available.

You will then, as with Forex, purchase pairs of where you think your digital currency will be stronger against another e.g. BTC (Bitcoin) vs XRP (Ripple).

This combo would look like this on the exchange: BTC/ XRP – 0.00011960. What this means is that one Ripple coin is worth that much Bitcoin for instance.

The little details

This type of trading, like commodities or forex, requires constant attention and the monitoring of prices. But there are tools that can also help you set prices and have the trades auto-execute.

So, a platform which provides such tools conveniently allows you the time to do other important things. Like paying attention to your spouse, formal job or family and friends. Tat would be ideal.

If you have the cash, time, expertise and financial clout, it is even possible to run you own Crypto Exchange!

This is another benefit of a decentralized currency system that will allow you to earn some cash by charging for the usage of your robust platform.

Well, this maybe until the fiscal authorities’ crackdown on all of the platforms with restrictive legislation.

Finally, like many platforms that provide opportunities to purchase a something, the software must be stable and be cost effective to use.

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The not-so mysterious world of cryptocurrency

Warren Buffet once correctly referred to financial derivatives as “weapons of mass destruction” and warned that they are detrimental to the global economy and financial markets.

Cryptos have a way of creating something supposedly of intrinsic value out of nothing. That is as dangerous as propaganda that leads to conflict or promotes struggle.

They are backed up by a cloud of non-transparent and possibly non-regulatory policies by states who themselves, still traditional monetary policy measures.

And this is despite their full understanding of the instruments of financial wizardry.

In economics, the term creative destruction, however, has a paradoxically positive meaning and perfectly suited to the new form of “crypto”-currency (Bitcoin) that is not as mystic as it seems.

A brief history

Money is a concept that probably also met up with resilience when it was first supposedly introduced by the Chinese. They started carrying folding money during the Tang Dynasty (A.D. 618-907).

The instability generated by uncontrolled usage and denomination, however, soon led to rapid inflation. This prompted the Chinese to drop it only for it to be taken up again later when it got stabilized by the adoption and use by the West.

They developed paper money as an offshoot of the invention of block printing. Block printing is like stamping.

Ironically that very same term ‘block’ is the foundation behind the Bitcoin – which is generated using blockchains (digital public ledger).

We won’t get into the mechanics of Bitcoins.  We will, however, attempt to increase awareness on why and how this new payment method could cause positive ripples in the financial global system.

What is a Bitcoin?

As per Wikipedia, and as simple as it can get in terms of a description: Bitcoin is a cryptocurrency and a digital payment system.

It was supposedly invented by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto in 2009.

Though the anonymity creates an element of distrust about the agenda of its creators, it is surprisingly more transparent than derivatives.

Cryptocurrency uses a system of cryptography (encryption) to control the creation of coins and to verify transactions.

These transactions a basic movement of funds between two digital wallets and gets submitted to a public ledger and awaits confirmation through the encryption.

This video is a great and simple way to understand the above because it is best understood when explained as a larger picture. Check out this useful and basic video on Bitcoins.

Now 2009 was not long ago considering the Bitcoin (currently traded in what is still considered the most stable currency, the US dollar) is now ‘worth’ well over $3500 each.

That is quite a feat worth acknowledging because 8 years of existence is nothing compared to gold’s multiple century reigns.

For centuries Gold has been the standard of trade or backing of all types of currency until it was ‘uncoupled’ by Nixon in 1971.

The future of trade and commerce is in the digital sphere – are you in the know?

Potential currency?

For something to become the standard measure or mode of trade it, however, needs to be stable. So, while the technology behind the Bitcoin (the Blockchain) is relatively sound, its actual price needs to find its firm nesting.

Established currencies trade on markets via exchange rates with relatively minuscule increments of change in price and value. In comparison, the Bitcoin can jump in value by $100 within hours (or minutes) – prompting scepticism about its stability.

Google Engineer Ray Kurzweil, who is revered as a “prophet” for his mysterious predictions, such inconsistency undermines the cryptocurrency’s value as a currency.

The aim is nevertheless to relieve dependency on money or more so, the iron grip and often abusive control that some banking institutions have over consumers.

You could even argue that the recent surge in its price is being fuelled by agents of traditional banking industry. They naturally feel threatened by the fact that they may not fully understand it and its inherent potential. So they (cash-flush) would inflate it for an inevitable ‘burst’.

But the currency though very volatile in its movement has remained buoyant. It has now held for well above $2000 for sustained periods since its inception (gold is now approx. $1,300).

Bitcoins provide more guarantee than financial derivatives especially because of its open-source approach to its existence and use.

The tricky part is simply getting to grips with the vastly abundant information about it and how you could even generate it.

“Providing greater transparency, and blockchain does provide that, could be something adopted by leading currencies like the existing national currencies,” Kurzwei said.

It is still a great backup ‘of a backup’. We rely on technology and more specifically the Internet for transactions and the associated traffic for our daily lives.

A simultaneous crash of a few major servers, however, could send it all tumbling back into the digital abyss. But as with money and other forms of currencies, only time will tell.

Bitcoin will just have to further prove its resilience.

Getting attention

It is certainly not a ‘fly by night’ thing because it has sparked the interests of both public and private institutions globally. The ever-conscious China even made a bold move to block the Bitcoin market from trading within its borders at some stage.

China is notorious for blocking things that stem from the ‘West’ only to later introduce it under their own control to protect their own similar offering for public consumption.

So, we can be rest assured that the creator is not Chinese! Sweden has allegedly passed legislature to make it an accepted form of currency.

Currently, banks and governments are frantically creating their own sets of blockchains to ensure they are not caught off-guard.

Read more about the implications of Cryptocurrency on the financial sector.

Bitcoin also gets its collective strength from the limitation of the number of it in circulation (only 21 million).

Spill over effects

It has also paved the way for others such as Ethereum, (mostly used for smart contracts and by developers) which is also seeing good growth.

Then there is Litecoin, which were formed as part of a controversial yet civil split from the originators of Bitcoin to use ‘variant technologies’.

All these platforms (companies) now use the blockchain to create all types of cryptocurrencies to capitalise on the spoils of this digital revolution.

There are also several institutions that are offering late-comers a chance to benefit from the spoils of using and investing in digital currency.

Naturally, all these schemes with their investment packages would require a ‘buy-in’ and some form of marketing to attract more takers.

Such Crypto ‘companies’ are likened to a pyramid scheme and subject to many investigations by fiscal and criminal authorities.

But that is how the Bitcoin, its promoters, and market were initially treated.

Interested? Check out the following useful links to their official websites to help you get started. You can learn more about them, about mining them or simply buy some Bitcoin here.

RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK WHEN INVESTING IN CRYPTOCURRENCIES.