Why is Wirex not an ICO?
Initial Coin Offerings (ICOs) have received a lot of media attention, but not always for the best reasons. Despite the fact that they have helped to grow and widen the range of cryptocurrencies on offer in recent years, they are sometimes considered a risky form of investment, and experts estimate that over 80% of ICOs have fraudulent intentions. Unfortunately many people tend to associate any company that works in the crypto space with ICOs, and this may have a negative effect on the entire industry. So, it helps to understand a little about how ICOs work and how to assess them, and why Wirex is not an ICO.
What is an ICO?
ICOs are similar to IPOs (Initial Public Offerings), which most people in the investment world are familiar with. Instead of companies selling shares to raise funds, ICOs are start-ups that accept cryptocurrencies in exchange for their tokens. These tokens work a bit like shares, in that investors buy them hoping that their prices will rise and result in future profits. Essentially, it’s a kind of crowdfunding.
It’s important to note that a token is different from a coin; digital coins need a blockchain protocol to support them, tokens do not. The ICO kicks off when a start-up has an idea for a blockchain-related enterprise. They reveal the idea to their community, and if they get the right kind of feedback, theyll draft a whitepaper that contains all the details investors might require. This is like a business plan and it will usually include details like the team working on the project, its technical aspects and revenue projections. The team will also decide how many tokens will be available for distribution, what each token will cost and how they will be used.
Next, they’ll advertise the upcoming ICO launch date, which is when the token sale will actually begin. Take note - it doesn’t go on indefinitely, as there’s usually a defined time period during which the start-up will raise their funds, or a specific target amount. Once the ICO is closed, it’s up to the team to elect how they will deploy the investment raised. This is usually disclosed in the whitepaper, so that investors are clear on how and where their money is being used. The team can hold any currency in its original form, convert it all to fiat, to BTC or ETH, or whatever currency they’ve elected to use, and drawdown based on capital requirements.
How is Wirex different from an ICO?
Wirex runs on a completely different business model. We are simply a platform that allows you to buy, store, exchange and spend your crypto and traditional currency seamlessly on one open platform. We’ve never held an ICO to raise funds; instead we were funded by reputable financial organisations like Tokyo’s SBI Group. We have a six-year track record and serve 3 million customers in 130 countries.
How can you avoid ICO scams?
While some ICOs have raised impressive amounts of money and given their investors great returns, there are also plenty of highly-publicised situations where ICOs collapsed or never had an intention of delivering a legitimate product. So, it’s vital to do your homework if you’re considering investing in an ICO. Here are some pointers to help you assess the viability of an ICO:
- Research the team you want to be sure they have the required skills to see the project through
- Read the Whitepaper. This is your best bet for making an informed decision. Make sure you understand exactly what the idea is, how the team plans to execute it, what the future scope of the project is, and how your token will serve you
- Look for an active community. You can usually find them on platforms like Telegram, Slack and Reddit, where you can talk to the people there and learn more about the project
If you want a simple way to invest in and spend both traditional and cryptocurrency, Wirex offers a secure platform from which to transact. Wirex is licenced and regulated for activities relating to our traditional currency, and adhere to the highest standards where regulations don’t exist for cryptocurrency activities, meaning that customers can rest assured that Wirex adheres to the highest levels of diligence and integrity in its business operations. You can read more about this here.
With the cryptocurrency space developing rapidly, governments are increasingly becoming more open to it as a legitimate form of currency and payment, and seeking to provide frameworks that individuals and organisations, including ICOs, must abide by in order to legally use them. Regulations such as this will only help to develop consumer confidence in cryptocurrency, and ensure that cryptocurrency is only used for legitimate purposes and ICOs with the right intentions.