First of all, the developer issues a limited amount of tokens. Keeping a limited amount of tokens allows to ensure that the tokens itself have a value and the ICO has a goal to aim for. The tokens can either have a static pre-determined price or it may increase or decrease depending on how the crowd sale is going.
Tokens are basically native currencies that can be used in an environment
The transaction is absolutely simple one. If someone's willing to purchase the tokens they send a definite amount of determined currency to the crowd-sale address. When the contract acknowledges that this transaction is done, they receive their corresponding amount of tokens.
So, that’s a general idea on how ICOs works.
Let's consider the main 4 features that make an ICO to be a really valued financial project but not a hyped scam :
Icon #1: Cryptography
The most apparent difference between fiat currency & cryptomoney is cryptography. The technology of cryptography based on hard/soft fork phenomena is equal to water-marks used in fiat currency. So, basically different types of tokens are developed on the same basis of fork by using it special programming algorithms.
Icon #2: Economical background
This part is what we call “economic skeleton”, i.e. the value basis for issued tokens to be appreciated by the crowd. If the skeleton is solid and transparent for the potential investors, the tokens become valuable and reliable.
All these things are usually stated within “White papers” section of any ICO project. The more reasonable and reliable white papers are the less inflationary tokens occur to be. That means if an ICO project has no such a background it turns to be a simple bubble.
Icon #3 : Utility
What is understood under utility ? A smart concept becomes an essential core for the ICO project with tokens given to community of participants. As the ICO has finished and scheduled funds were raised the end-customer gets a definite amount of tokens. A benefit the end-customer can gain while using fetched tokens is so-called “utility”.
For the ICO developer utility means “extra value tokens can bring to the business”.
Icon #4 : Security
Having completed a prominent ICO the beneficiary becomes a potential victim for those guys called “hackers” just due to his success. Besides, all the co-investors could get a zero if the ICO ecosystem is rather vulnerable.
The crimes can happen mostly can be referred into the following 3 categories:
3)Mismanagement of keys
If you are a developer, then one of the many doubts and fears that you will face from your investors is what is stopping you from running away with all of their funds? Which is a very valid question. The way that you can allay these fears is by using a multi-signature wallet.
So next time you are about to hold an ICO please make sure that you are taking care of your security.
Thus, to conclude the 1st part of our ICO issue, we'd like our audience to raise the following question before get into ICO rush :
Why are you doing your ICO?
Is your token something that will bring genuine value?
Are you sure you are not doing this just to make a quick profit?
If you cannot convincingly answer any of these questions then please, do not do your ICO.
Don’t contribute to this “bubble”.
Make something meaningful. Make something that will add to the environment, not exploit it.