With the growing number of investment opportunities, it has never been harder to choose which project to invest in. It is almost impossible to predict whether an ICO will become successful or not, what often results in investors losing their money. Moreover, such issues as fraud and high volatility make it difficult for new traders to enter the market.
Nick Evdokimov, an experienced entrepreneur in the blockchain industry, explains in his new videos how to analyze ICO startups, what to pay attention to, and shows which factors usually signal a high demand. With a broad experience in the blockchain industry, Nick is now a leading expert in the sector of blockchain technology and Initial Coin Offerings. He is also the founder of ICOBox, the world’s biggest ICO solutions provider.
Today, an investor can use venture capital, which is a more traditional investment model. It implies the purchase of shares in a startup in exchange for equity in its future performance. Typically, investors are ready to buy shares and wait a few years, expecting a return on their investment. Each investor is entitled to a certain amount of dividends from the revenues based on the percentage of shares they own.
An initial coin offering or an ICO is a blockchain version of this funding method that has become widespread among fintech startups. By acquiring virtual tokens issued by a project, investors expect them to rise in value.
Both funding methods are similar to each other, but the real opportunity is in their differences, Nick says. When analyzing potential risks in an ICO, one of the things to consider is the uneven distribution of dividends. The tokens can either grow or decrease in value depending on the number of investors holding tokens, the amount of tokens destroyed or sold.
Unlike traditional venture capital, ICOs give more flexibility due to their fluid investment structure. Besides, the initial buy-in value of tokens changes within time relative to the level of risk an investor wishes to bear in the market. Another advantage over traditional investment methods is that ICOs generally take a few days to complete, while venture capital funding can last for a month or even more.
“Here is the difference between investing through the venture capital mechanism and investing through the ICO mechanism,” Evdokimov said. “You can understand that the threshold of entry into cryptocurrencies can literally be $5, or $100, or $100,000. It’s absolutely not significant. The threshold of entry into a venture deal is measured at a minimum of hundreds of thousands of dollars, and frequently in millions, and we understand this perfectly.”
However, it’s worth noting that traditional venture investments are still much safer due to proper regulation, and security remains to be the key weakness of ICOs.