This tutorial will give you a brief introduction to what an Initial Coin Offering is and will explain how to join an ICO in a step-by-step guide. If you need more information you can read our in-depth guide where we explain everything you need to know about ICOs.
What is an ICO?
Basically it is the cryptocurrency equivalent of an Initial Public Offering (IPO). IPO is the first time the stocks of a privately held company are released to the public. IPOs are issued by companies seeking to raise capital to expand and also by companies looking to become publicly traded.
An ICO is currently one of the best ways to raise capital or to finance a startup, but instead of stocks, they sell coins as assets. You can use ICOs to crowdfund innovative ideas or to develop a product. The ICO solves the problem of initial coin distribution and acts as a settlement between both sides through smart contracts.
People who participate in ICOs want to invest in a great project in the earliest stage possible for long term investment. The early adopters are rewarded the most if the project is successful. But be careful, since there are no strict regulations some ICOs may look very attractive, but not all deliver on what they promise and some are pure scams.
That’s why you should do yourself a favor and always do an in-depth research of the company and the project, before you decide to invest. Also be prepared and understand that having a 100% success rate is almost impossible and there will be ups and downs in these kinds of venture investments.
How to join an Initial Coin Offering?
1. Create your own Ethereum wallet
You can join and ICO with Bitcoin or Ethereum (Ether). But since more than 95% of the ICOs use ERC-20 tokens, which is a standard to create tokens based on the Ethereum blockchain and smart contracts, an ethereum wallet is all you need to get you started. A big reason for using Ethereum in almost all ICOs is that you can use and program smart contracts to distribute the tokens to the investors. This ensures the delivery of tokens to the investor’s wallets and makes launching ICOs easy and simple.
Because of the information above, you can use an Ethereum Wallet to hold and store all coins and tokens created over Ethereum. Not all wallets support new ERC-20 tokens so you need a wallet that does. The best wallet out there in my opinion is MyEtherWallet. There you can make yourself a wallet for free in few easy steps.
1. Generate a Wallet. Go on their site and do just that. Write a secure password no less than 9 characters. I suggest using numbers too. Then click Generate. Make sure to remember and write your password somewhere on a paper, because if you lose or forget the password, it’s gone forever. MyEtherWallet gives you a platform, that you can use to create a wallet in the Ethereum Network, but they do not hold your wallets or passwords like a bank. That is your responsibility.
2. Save your wallet file. You need a (UTC / JSON) Keystore file so click it and click download. Do not lose it and do not share it anywhere. Make a backup and keep them safe. You can store your Keystore file on a USB stick or a hardware wallet. Keeping your wallet on your pc or laptop is not the safest option, because they are vulnerable to hacking, but you can still do that. The best and safest option is to buy an offline hardware wallet like Ledger Nano S or Trezor. You can use other methods to access your wallet like your private key and Metamask, but for this guide we will talk about (UTC / JSON).
3. Accessing you wallet. You can enter your wallet in a couple of ways. One way is by using your (UTC/ JSON) keystore file. Select the file, write your password and you are in. Another way is through typing your private key, using your hardware wallet or MetaMask. From there you can send and receive ether and other ERC-20 tokens.
2. Purchase Ether or Bitcoin
Next step is to fill that wallet with some cryptocurrencies, so you can invest in an ICO. You can do that by buying some Bitcoin or most of the times Ether and then sending it to your wallets public address. Never send Bitcoin to your Ethereum wallet or vice versa. If you buy Bitcoin and have an Ethereum Wallet, you can easily convert your BTC into ETH by selling it. If you want to buy some, you can use sites like Coinbase.
When buying cryptocurrencies with real money, you need to be sure, that you are doing it from a trusted source. There are many platforms out there, but you may want to buy from the biggest platforms in the market. You want to be sure, that you will get the coins after paying real money for them and you need platforms with already established credibility.
Coinbase is the biggest exchange for cryptocurrencies and provides you with an easy way to buy and sell cryptocurrencies for cash. Though between making your account and buying your crypto may take few days, so make sure you do this at least a week before the ICO. After that you just need to send it from your Coinbase wallet to your own wallet’s public address.
3. Joining an ICO
Having the first two steps completed, you are ready to participate in an ICO. If you have already chosen an ICO to invest in, then you probably visited the company’s website. There you can usually find a lot of information about the project, plans for progression and the team, backers and supporters, behind it all. They also give you specific instructions on how to participate in their ICO.
Every ICO has a beginning and an end. They begin in a certain point, usually an Ethereum block number. Sending your Ether before or after that window will not give you tokens and will be ignored by the smart contract.
Also every ICO has its own public crowdsale address, to which you need to send the Ether you wish to invest. You can do that by accessing your MyEtherWallet and clicking “Send Ether & tokens”. Copy and paste the public address of the ICO. Chose how much to invest, set your gas limit and gwei, then click send and generate transaction.
After you generate and send the transaction to the Ethereum blockchain MyEtherWallet will give you a link bellow. If you click it, you will open Etherscan, where you can check if the transaction, that you issued has gone through. You can also look at other information about your transaction like time stamp, block number, the address that the ether was send from and other. Also you can see how the smart contract behaved.
It’s important to note, that you need to send your Ether from your wallet, not your Coinbase wallet, because you will make Coinbase richer. The smart contract will send the tokens to the wallet you’ve invested from, so use your private wallet.
Also some ICOs have a recommended gas limit. The smart contract you are sending your funds to needs gas to function. Going bellow the gas limit may slow your transaction down and you may miss the ICO window by not getting processed into the ICO.
Bellow that, there is a data field. Certain ICOs require you to write something down on the data field. All of this information should be on their website.
After the ICO ends you should find your new ERC-20 tokens in your wallet or few days later, through the smart contract. Some ICO’s require you to redeem your tokens manually. If you can’t see them in your token balance, you can click “Add Custom Token” and write down the token’s information, provided from the projects team or on their website.
And that’s how to join an ICO in three simple steps! Just remember, that investing in cryptocurrencies is risky and not all risks are in plain sight. That’s why the best way, to increase your chances of getting revenue from cryptocurrencies and decreasing your chances of losing your money is to educate yourself on the subject. Do your homework!
That way, when the time comes, you will know what to do and will not make basic mistakes. If you need more information, you can read some of our other guides on some of the things I talked about and other blockchain-related articles.
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