Before Participating in an ICO

Once a potential investor feels confident about an ICO, having read the whitepaper, carried out due diligence and joined the relevant social media channels, it can still be somewhat challenging process to participate. In this segment of Blockchain Business we will explain the required steps to carry out before participating in an ICO, some of which are mandatory.

First and foremost, it is extremely important to do in-depth research before investing in any ICO, starting with reading the whitepaper. ICOs are unregulated, high-risk investments and investing blindly, or simply on a recommendation, is never advised. Furthermore, ICOs are carried out using cryptocurrencies and as such it is important to already own the relevant cryptocurrency in order to participate.

The Wallet
Carefully check what type of cryptocurrency wallet will be used for the ICO. Certain wallets will not be suited and participating by directly sending tokens from an exchange is never an option. Doing either of these things will result in an irreversible loss of tokens. Reading about how to participate in the ICO on the official website, or in the ICOs social media channels, will provide the relevant information about which wallets can be used.

Here we will detail the first steps in the process. However, each ICO is different and has its own distinct process for participation, not every ICO will insist on joining a whitelist, for example. Further research into the particular ICO process is an absolute necessity to guarantee a smooth and successful participation. Finally, it is always important to be wary of any phishing scams. Always make sure to only follow official social channels, directly from the website and ask questions in those channels to minimise risks. The community is your first point of contact and is often very eager to help.

The Whitelist

A whitelist is a list of preapproved investors who have signed up to participate in an ICO before the sale to general public. The whitelist will be open for a predefined period of time and generally require some basic details about an interested investor such as a name and email. Although, some whitelists can be more thorough in the information that they ask for.

A whitelist may ask you for your Public Address but never your Private Key. If any website asks you to enter your Private Key it is a scam. Your Private Key is never to be shared with anyone.

Due to the explosion in interest in ICOs in 2017 whitelisting has become a common practise, especially for those that expect to garner the most interest and investment. The primary function of the whitelist is to separate those who have a genuine longstanding interest and awareness of the project from opportunistic investors. A whitelist can also help the team behind the ICO understand the demographic of interested investors and gives ICOs the opportunity to contact any potential investors directly with information such as when the sale goes live.

In order to participate in an ICO it is vital to sign up to the whitelist. Once the deadline for this has passed, the opportunity to join is over and there is nothing that can be done to remedy the situation. It is not uncommon for desperate investors to bid substantial amounts of moneys for places on whitelists, although this is never an advised practise. In order to participate in any ICO it is important to stay aware of all aspects of the process, joining the whitelist being an absolutely key part of this.

KYC (Know Your Customer)

KYC, an abbreviation for Know Your Customer, is a process carried out by some ICOs to better understand their investors, allowing prioritisation and ensuring participants do not break any laws by investing.

Due to legal regulations of cryptocurrencies in different countries, certain citizens are not able to legally participate in ICOs. This is normally explicitly stated on an ICOs website. However, it is always a recommended to stay up to date on the legal standing of cryptocurrencies in your country.

KYC normally begins after whitelisting is complete, however it can be a part of the whitelisting process, and the information gathered will greatly vary. Some of the requirements can include the following:

  • Name.
  • Date of birth.
  • Country of residency.
  • Public address from where investments will be sent.
  • Intended investment amount.
  • Links to social media accounts.
  • A photo of identification such as a passport or driving license.
  • A photo of the investor holding up that same ID.
  • A photo of a recent bill with the investors address on it.

It is worth emphasising that a Public Address can be asked for but never a Private Key. Your Private Key is never to be shared with anyone. Ensure you know the difference between the two as both are random strings of numbers and letters.

With the ever growing interest in cryptocurrencies and ICOs, as well as potentially tightening regulation, KYCs will become more common and thorough to protect ICOs and their investors from legal issues. As mentioned, the information for a KYC can vary and it is important to be prepared before participating, as well as allowing sufficient time for the ICO team to review the information provided as part of the KYC. Similarly to the whitelist, once the window for KYC has closed the opportunity to be a part of the ICO is over and no exceptions are made.

The Presale, otherwise known as the pre-ICO, is a token sale that takes place before the official ICO begins. The fundraising targets are often lower than the actual ICO but the tokens themselves are sold for considerably cheaper. These are done to either cover the cost of the ICO itself or to strategically garner the support of influential investors. There are risks associated with presales. Early investors can instantly sell all their the tokens once they can, as they are already guaranteed to make a profit, reducing the value of the token as a whole.