5 Risks to Know Before ICO Development

Initial Coin Offering (ICO) is the next generation of capital raising methods for startups and businesses. Underlying technology Blockchain technology has offered this efficient methodology to entrepreneurs to be a strong piece of the competitive economy. ICO development brought benefits such as open source platform, low transaction cost compared to traditional methods of, democratize finance, No intermediaries between parties.

Initial Coin Offering development provides unexpected gains if proceeds well and definitively.  One of the motives of entrepreneurs to raise capital through this mean lies with ownership of the business or startup. Traditional methods of fundraising like venture capital distribute the ownership among investors in contrast to ICO. Yet every coin has two sides, ICO despite having benefits as such, has risks in Blockchain market.

RISKS INVOLVED IN ICO DEVELOPMENT

ICO development allows crypto startups, FinTech startups, and others to finance their business or project without a banking system or their services. But before starting an ICO development or opting ICO Development Services one must know every corner of this decentralized technical program. These risks indicate the future of your ICO launch and accordingly, you can create ICO or can assist in choosing best ICO consulting services:

01. LACK OF ASSOCIATED PRODUCT

A cryptocurrency development has to associate with a product or service, tangible or intangible in nature, for example, Ethereum.  This association holds value in terms of trading of cryptocurrencies. And furthermore, investors purchase tokens which are associated with a future promise or future idea. As it worked for Ethereum, many ICOs suffer in the trading market. This lack of associated product/service does not affect traditional business but the extensive cryptographic work and ICO needs developers team to monitor the cryptocurrency trading market. At that time ICO Development Company can come to rescue.

02. HIGH VOLATILITY DUE TO EARLY LIQUIDITY

ICO provides a high level of liquidity unlike traditional capital raising methods. Despite having a low flow of information about ICO itself, investors go for ICO token due to the same liquidity reason. It increases their profit and also the volatility of that particular cryptocurrency token and market as a whole. Unlike a traditional business where liquidity of business takes longer than 10 years which in return assures the fair value of investments to each party involved, ICO is being traded without any reliable information or a regulatory authority making it riskier into the eyes of safe players. But this risk can be eliminated through endless use of Blockchain technology.

03. OPEN SOURCE RISK FOR TRADITIONAL BUSINESS

A traditional business or an already established business may not be able to obtain through an ICO development for fundraising. Crypto business typically uses an open source platform available to those who own cryptocurrencies. Such trading creates security concerns for traditional business owners and employees. As the information related to associated product stored through open source code can be copied at any time. These features can be copied to create new currency not only increase competition in the market but decreasing the value of your developed currency as well. Again this risk can be eliminated through licensing to protect their code of profits and legacy business if copied.

04. LEGAL UNCERTAINTY

Being decentralized market spreading speculation of being illegal in near future. Also, rules and regulation in various countries differ which makes cryptocurrency exchange and buying ICO tokens for investors a complicated procedure. Despite that many ICO Development Services in Alabama provides services in various countries keeping track of legal procedure changes in those countries.  Apart from the regulatory part of ICOs, whitepapers of uncertain ICOs do not follow particular guidelines, are not reviewed and are unaudited by authorities sometimes.  These negative qualities make whitepaper unreliable in some cases.

05. BAD PRACTISES

The year 2017 was of ICO capital raising creating zombie ICOs. Zombies ICO are ICO which were unsuccessful and those developed cryptocurrencies are afloat on cryptocurrency market. Moreover, ICOs with an associated product/service/platform proposes uncapped raises in profit for ICO tokens. It is a major risk for an investor as well as entrepreneurs. Other practices are selling of ICO token prior to the release of underlying protocol or application associated with a token, ICO consulting services suggests to avoid as it holds high chances of failure with no returns.