Statistically speaking, investments in tokens increased by 1300% in 2015-2016, and by 6600% in 2016-2017. No other industry has experienced such rapid growth. And the reasons for that are pretty easy to see: ease of raising capital, efficiency of transactions & possibility of minimal investment.
It may sound a bit far-fetched but by investing in ICO projects, some investors have been able to receive a net profit margin of 1000%. That has prompted financial experts to refer to ICO as a fast and relatively hassle-free way of raising funds on fairly short notice. However, there’s been a decline in ICO activity in the second half of 2020. Why is that?
Why is ICO mainly associated with startups?
ICO is usually associated with start-up projects. The idea behind is to raise money for their implementation. Lack of funding - the main problem that projects’ instigators face during the initial stages of implementing ICO projects - can be easily solved by issuing & selling tokens to investors for fiat currencies or cryptocurrencies.
Maintenance of ICO projects
Launched at an early stage of a project’s implementation, ICO is mainly used for attracting additional funds. However, once the full-fledged infrastructure of the project is formed, there is no longer a need to issue tokens. Thus, it is clear that for novice entrepreneurs, the issue and sale of tokens is a quick & relatively trouble-free way of quickly attracting investors & raising funds.
Why does ICO attract investors?
What makes ICO particularly attractive is that Investments in a project can be minimal; hence , a large number of people can take part in them. When it comes to acquiring shares of newly created companies, investors can buy tokens at a minimum price & resell them for a profit later on (sometimes, a profit margin of 1000% can be expected).
However, it should be kept in mind that more than 60% of ICO projects end up being unprofitable. Participation in ICO projects can cause problems to investors, including those of a legal nature.
The key to success is having an indepth knowledge of all legal & financial intricacies involved in ICO, compliance with all regulatory requirements & timely conduct of legal analysis of the structure of a token.
Looking to launch an ICO? Need legal advice on regulation of ICO in your country? Why not reach out to IQ Decision UK? Our legal advisors will be happy to lend you a hand with any legal challenges you might be encountering in that regard.