ICO Survival Guide: Everything You Need to Know

ICO Survival GuideEVERYTHING YOU NEED TO KNOW ABOUT IT

ICO SURVIVAL GUIDE: EVERYTHING YOU NEED TO KNOW ABOUT IT 2 / 21
Contents
1. What Is An ICO?
2. Why Would Anyone Fund Or Invest In An ICO?
3. How Impactful Are ICOs, Really?
4. Security, Regulation, and Related Concerns
5. How Are ICO Coins Bought, Stored, And Sold?
Contents

What Is An ICO?
What Is An ICO?
An ICO, or “Initial Coin Offering,” allows investors to support new initiatives using cryptocurrency
and principles of crowdfunding to raise capital for new ventures and projects.
ICO
Each ICO features its own unique, project-specific crypto token, which becomes available
for public purchase when the ICO begins. During an ICO’s crowdsale, individuals purchase this
project-specific cryptocurrency tokens (or “ICO coins”) as a form of investment in the company.
Just like an IPO, an ICO represents the first stage of a project going public.

ICOs are similar to crowdfunding in that they use digital networks to aggregate financial support from multiple funders.
But ICOs have several features that don’t apply to traditional crowdfunding platforms.
“ In just over a year,
they’ve raised over
one billion USD,
and their popularity
keeps growing “
The idea of an ICO is to get a high number of people to participate, raising as much capital as possible by distributing the tokens
through blockchain technology.
INVESTORS
ALL AROUND
THE WORLD
STARTUP
FUNDS
ICO COINS
ICO
What Is An ICO?

What Is An ICO?
The primary incentive for purchasing ICO coins is that coins can appreciate in value. Indeed, this is a primary incentive for
purchasing ICO coins. Beyond that, ICOs present a variety of new legal, ethical, and safety considerations. The concept of using
blockchain technology to facilitate early-stage project funding has no functional precedent. Therefore, practices around policy,
regulation, and security are still very much under debate.
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policy

Why Would Anyone Fund Or Invest In An ICO?
ICO coins represent financial value, although the specific types of assets they can represent vary.
A major benefit of ICOs is that their developers have a great deal of freedom to determine
the exchange rate and functionality of coins. For example, a mobile app company might
develop ICO coins that can be used to make in-app purchases once a new tool is launched.
At the time it is released, those who participated in the ICO will already have currency
to spend in the application. This currency can gain in value over time, in which case
participants may wish to sell their coins to other app users, or simply enjoy the benefits of
having more money to spend than that which they initially spent.
Depending on the stipulation of the ICO, coins might also be traded for other crypto-tokens,
like Bitcoin or Ethereum.
$ $
ICO
ICO COIN

ICO funding can be thought of as paying in advance for a tool
or service that is still in beta, with the potential to capitalize
on the risk inherent to any new project. Because there is always
the possibility that a project will fall short of expectations,
potential ICO investors are encouraged to learn as much
as they can about an initiative before they fund it.

Luckily, there are many ways to do this. In the case of virtually all ICOs, developers
provide a white paper at launch time, so that potential investors can review
technical specifics before spending their money. ICO developers also frequently
build investor trust by posting their code on an open platform like Github.
ICOs are almost exclusively used by technology initiatives — and mostly blockchain-based projects. But for obvious reasons,
ICO offerings have so far been embraced by the community that already believes in the power of digital currency.
The ICO concept gains traction worldwide, a growing number of non-blockchain and even non-technology sector projects
become interested in how ICOs can help them.
ICO
White papper
start
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How Impactful Are ICO Crowdsales, Really?
Past ICOs have demonstrated a promising margin of success, although they have not been without their drawbacks.
The largest issue with ICOs has been security breaches. Luckily, technologists have learned quickly from past oversights.
The most noteworthy security breach was the attack on the DAO, which served as a case study in the complexities of running an ICO.
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000,000,058$raMmargeleT
000,000,052$naJOREZt
000,000,581$nuJSOE
002,370,49$naJsotsalE
000,000,05$raMnioCdaeL
Total Raised By Month (2018)*
Jan Feb Mar
0
300,000,000
600,000,000
900,000,000
1,200,000,000
Top 5 ICO NamedesiaRlatoThtnoM
Tezos 000,000,232$luJ
000,000,502$peSnioCeliF
000,000,381$tcOnioCnogaraP
Finney 528,588,751$ceD
Bancor 000,000,351$nuJ
Total Raised By Month (2017)*
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0
150,000,000
300,000,000
450,000,000
600,000,000
Top 5 ICO Name
*all statistics provided by icowatchlist.com

Despite their attractiveness to hackers and the notoriety of the DAO hack, the success
rate of coin offerings has grown significantly over time. Ethereum was one of the
first notable projects to be funded by an ICO, raising eighteen million dollars in forty-two
days. Ether, the Ethereum crypto-token, has since gone on to be the second most popular
cryptocurrency in the world. Following their launch, a number of successful blockchain
initiatives, including many ICOs, have been built on the Ethereum platform.
Other ventures, include The Golem Project — a tool for harnessing idle computer
power. Golem’s token sale raised over eight million dollars in under ten minutes;

The current success rate of ICOs is just as encouraging. The August 2017 token sale for Filecoin, a tool that rewards participants for
hosting files with the Ethereum-based Filecoin token, raised two hundred million dollars in an hour. There is a wide variety
of resources to investigate recent, current, and upcoming ICOs, such as ico-list.com and icoalert.com. These demonstrate
that the trend toward ICOs is spreading at a very promising rate.
Aragon — another blockchain platform that supports autonomous,
decentralized businesses — was able to amplify it’s success with coin
offerings as well. Aragon raised twenty-five million dollars in twenty-six
minutes.

Security, Regulation, and Related Concerns
With so much excitement around ICOs, the fact that there are few established conventions for their governmental oversight and
general security needs to be addressed.
As mentioned, the biggest concern is hacking and the best anti-hacking strategy is strong
defense. One good thing to implement at the beginning is a login system for every
investor which should feature both email authentication and google authentication.
To access an investor’s funds, a hacker would have to hack both this methods.

Another must-have security feature for any ICO is a script (usually
a smart contract) that generates multiple address from one funding
address.
A single ICO funding address provides one centralized point
of attack. Attacking and changing that address enables hackers
to route any incoming funds away from their intended destination.
Creating different addresses for every investor spreads minimizes
that risk because a hacker needs to secure multiple addresses
to acquire a large amount of funds.
SMART CONTRACT
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m7EHbsMECSVtfDiHKsME
fMY60ZKf9KxvM6jcnIOf
kqwg4aIT3gA38Hvjwq1x
6Bg6VCr60DfEYhj
h2PiXlXfJVgUzRp
6Bg6VCr60DfEYhj
676DBn5oJI118m4

Unfortunately, it’s possible to hold an ICO as a scam: proprietors
collect the money raised with crowdsales and never return it.
The best way to protect yourself against fraudulent ICOs is to
conduct research on the holder, checking to see if the company is
registered and if there is proper identifying information. Crucially,
the ICO holders should implement KYC (know your customer)
verifications, proving that they are committed to complying with
anti-fraud laws.
ICO

The legal and regulatory status of ICOs is another complex issue. The fact that ICOs are
unregulated by state and national governments is frequently noted as both a concern and
potential benefit. So far, ICOs have been conducted without government intervention. However,
networks that support Bitcoin and other cryptocurrency exchanges have not been without legal
attention entirely. In a handful of instances, they have come under scrutiny for their capacity
to facilitate money laundering and the sale of illegal goods and services.
“ This was the case
of the Silk Road,
which used the built-in
anonymity of Bitcoin
to protect the identity
of its users. “

LAW
Thusfar,thecapitalgeneratedfromICOcrowdsalesisnotsubjecttothesametaxation
laws as traditional investments, including those made during an IPO. Because they
are inherently transnational, the policy that governs ICO taxation will be difficult
to develop. Nevertheless, it is very possible that they will be more heavily regulated
in coming years. In the United States, policy advocates such as the Chamber
For Digital Commerce have been working with government officials to discuss
how this might unfold. Meanwhile, in terms of ensuring the utmost diligence in terms
of how ICO coins are used, the owners of an ICO are urged to follow KYC processes.

How Are ICO Coins Bought, Stored, And Sold?
The first step to buy ICO coins is to first purchase Bitcoin or Ether. Future ICOs may accept traditional currency, but the norm
has been to exchange these popular digital currencies for ICO coins. Although BTC is more widespread, ETH is commonly accepted
by ICOs, in part because many ICOs run on the Ethereum platform.
ICO

The next step is to make sure your digital currency assets are held in a wallet that you
entirely own and control. Many popular digital currency wallets, such as the Coinbase
wallet, do not offer users private keys. Therefore, if you invest in an ICO from Coinbase,
your ICO tokens will flow into the entire Coinbase system as opposed to your personal
storage.
Wallets that offer private keys include Parity and My Ether Wallet (for ETH) and the blockchain.info wallet (for BTC).
At this step, it is essential to make sure you do not lose your key information, as it’s necessary to gain access to your ICO coins after
you’ve purchased them. Losing key information could mean losing all of your investment money. ICO service providers can provide
key loss prevention tools, such as an account recovery system to cope with that.
CONTROL

When you find an ICO that you wish to participate in, you invest by sending cryptographic information associated
with your digital currency to an address posted by the ICO. The ICO holders receive BTC or ETH at this address, typically publicizing
the amount of capital they earn on their website. It is common to incrementally raise the price of an ICO coin as more money
is earned, and displaying earnings can help rapidly accelerate interest in the ICO.
ICO

After you purchase ICO coins, it is advisable to use cold wallet (offline) storage to hold the cryptographic information necessary
to cash in on tokens. This is one of the simplest and most effective ways to protect ICO coins and other digital currency assets.
Here, it is essential to make sure that the address to which you are
sending your information is legitimate. Hackers can drain ICOs
by establishing false addresses as the real ones for an ICO. It is also
possible to automate your ICO investment with a smart contract.
ICOs can operate very quickly, generating huge amounts of capital in
minutes and potentially bottlenecking the system. Automating your
investment may be wise if you are interested in acting rapidly —
while the price of an ICO coin is still at its most affordable.
hacked

If you want to read more about ICOs
and cryptocurrencies please visit our blog:
https://www.draglet.com/blog
Interested in launching your own ICO?
Check out our services here:
https://www.draglet.com/ico
draglet GmbH
Leonrodstr. 68
80636 Munich
Germany
+49 89 235 168 07
info@draglet.com

ICO Survival Guide: Everything You Need to Know

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