Guide to Investing in an ICO

ICO Basics

  • ICO stands for initial coin offering and is essentially crowdfunding a new startup.
  • In exchange for funding the startup, the investor receives a token (the startups own currency).
  • These tokens are not considered shares of the startup company and only hold real value when the company starts to take off.

These investments are risky, therefore only invest in ICOs that you have done your due diligence in.

Stage 1 of Investing in an ICO: Buying Ethereum

Example Cryptocurrency Exchange: Coinbase

  • Coinbase is a secure cryptocurrency exchange where you can buy, sell, transfer and store digital currencies like Bitcoin, Bitcoin Cash, Ethereum and Litecoin.

How to Buy Ethereum (Coinbase)

  1. To buy Ethereum on Coinbase, sign up for a Coinbase account
  2. Add your debit/credit card or bank account directly to Coinbase
  3. Visit the buy/sell page and select Ethereum as the cryptocurrency you wish to purchase
  4. Select the amount of ethereum you would like to buy, click buy ethereum with credit card, debit card or bank account and confirm.

How Much is Ethereum?

Like the stock exchange the price of Ethereum fluctuates throughout the day. At the time of writing (30th January 2018), 1 ETH was = to $1,127.95

Coinbase will display the current Ethereum price prior to purchase.

Stage 2 of Investing in an ICO: Create Ethereum Wallet

What is an Ethereum Wallet?

Unlike coinbase where you can buy, sell, transfer and store digital currency, an Ethereum wallet allows you to use your Ether on the Ethereum blockchain. Holding an Ethereum wallet allows the user to participate in ICO’s and also to carry out token buying or selling.

What is the Best Ethereum Wallet?

While no Ethereum wallet has officially been titled as ‘the best’ in terms of user satisfaction or as a safe Ethereum wallet, a good example of a popular Ethereum wallet would be MyEtherWallet.

MyEtherWallet is open source and completely free to use. When you set up with MyEtherWallet, you receive your public key (address) and private key.

  • Public key – allows someone to send you ETH or tokens.
  • Private key – possession of this key allows complete control of the account

Another Example of an Ethereum wallet is MetaMask

  • MetaMask has the same basic functions of any Ethereum wallet, like interacting with the Ethereum blockchain, but it can also be used to access Dapps and initiate smart contracts.
  • The Ethereum blockchain is accessed through their Google Chrome extension and avoids having to run an Ethereum node.
  • A major benefit of the Metamask Chrome extension when compared to MyEtherWallet is that it is less likely to be affected by phishing sites.  

How to use Ethereum Wallet (MetaMask)

  1. Locate and install the MetaMask Ethereum browser extension in the Chrome store
  2. Once downloaded,
    • click the MetaMask logo in the extension bar
    • read and accept the terms of service
    • create a password
  3. Your 12 word private key will then be shown to you.
    • Do not share this key with anyone as possession of this key gives complete control of the account. It is completely unrecoverable if lost too, so keep it safe.
  4. Create you first vault. Once you have created a vault, you can buy Ethereum to fund your metamask account through a cryptocurrency exchange.

Stage 3 of Investing in an ICO: Transfer Ethereum Online

How to Transfer Ethereum from Coinbase

  1. Visit the accounts page and click send
  2. To transfer to another wallet, enter the wallet address
  3. Enter the amount you wish to send, continue, confirm and complete

Before sending the full amount, as a test, it is a good idea to transfer a very small amount to and from accounts.

Ethereum not Showing up in Wallet

  • Copy the transaction hash (TX# or Txhash) from the sending wallet (e.g Coinbase)
  • Visit Etherscan to view all Ethereum transactions and paste the transaction hash into the search bar
  • Etherscan will then provide information regarding the transaction status, timestamp, amount, value, the account it was sent to and where it came from.  

Stage 4 of Investing in an ICO: How to Invest in ICOs

  1. Before you decide to invest into an ICO, make sure you have read the whitepaper, read the ICO terms and fully understand the token purchase agreement.
  2. Create an account with the company hosting the ICO
  3. Once you are satisfied and your metamask wallet is funded you can send ETH by entering the wallet address of the ICO you wish to invest into followed by the amount and clicking accept.

It is very important to follow the ICO’s you are investing in on social media. This way you can stay informed on the ICO progress and be notified if they encounter difficulties along the way.

Once you accept and complete the transaction, there are a couple of outcomes.

  1. Tokens will be transferred immediately into your Ethereum wallet once the sale ends. (Tokens could take a few days to arrive)
  2. You will have to manually collect your tokens

The ICO website will provide further information regarding their own tokens and how they will be distributed.

Best ico to invest in?

Check out the rest of our site for information around upcoming, current, and past ICO’s and honest ratings.

Stage 5 of Investing in an ICO: Ethereum Token List

How to View Tokens in MetaMask

You can view tokens within MetaMask by clicking the ‘tokens’ tab. At this stage if you can’t see your token, you can click ‘add token’ and insert the token address to see your token investment.

  • As recommended by MetaMask, for a more comprehensive review of the tokens you hold, you can connect your MetaMask account with MyEtherWallet.

Stage 6 of Investing in an ICO: Using ICO Tokens

  • The tokens received for investment into an ICO can be used on services or products offered by the company once they are fully established and functioning.

OR

  • They can be sold in an attempt to make a profit

**Tokens received from participation in an ICO can only be sold when the token has been listed on a digital asset exchange.**

How to Sell ICO Tokens

  1. To find out if the token you have is listed on the exchange, visit coinmarketcap.com.
  2. When here, simply use the search bar to lookup your token and click the markets tab. You will then be shown the exchanges this token is listed on.
  3. Visit the exchange you feel has the best volume/price, create an account and start trading.

This can be a difficult experience for first time traders, so gaining knowledge through a guide to cryptocurrency exchange is highly recommended

Different Cryptocurrency Exchanges

What is the difference between a centralised and decentralised cryptocurrency exchange?

One main difference is that:

  • Centralised exchanges like Binance.com or Bittrex.com, will allow you to create an account you can directly send tokens to from your cryptocurrency wallet (like MetaMask)

and

  • Decentralised exchanges like EtherDelta, will allow you to connect your cryptocurrency wallet (like MetaMask) directly to the exchange site.  

Now that you know how to invest in ICOs, why not take a look at a guide to launching your own ICO?

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