What are ERC-20 tokens ?
ERC-20 is a standard for tokens build on top of Etherum platform. Understand nothing? So let’s talk about tokens, ICO platforms and other difficult cryptothings. But before we tell anything about the ERC-20 tokens we need to discover what it the tokens itself? What are they for?
Now we have another way to raise money. We may create our own ICO, or Initial Coin Offering – the fund for development, advertising and social network promotion. And this ICO will attract investment using altcoins that are tokens and coins. Despite the fact that people usually use this terms as synonyms, they are far apart. But they both are used for trading and investment.
First thing funders of ICO have to do is write “white paper” – a declaration and describing of a project to proof investor that this ICO is a prospective project and they can give their cryptomoney to ICO founders.
Between two ways of fund-raising, creating new cryptocurrency or issuing tokens majority of developers choose namely the last one. So ICO will produce some quantity of tokens – analogue of securities. After that, they sell these tokens-shares for cryptocurrency (Bitcoin, Ethereum and Litecoin) to obtain money for the project. Quite simple, isn’t it? Saying’s one thing but doing’s another.
What are they for ?
The main place where startups live is Silicon Valley. Now lots of them raise money by using ICO. Here (link: www.coinschedule.com/stats.html) you can find annual stats about biggest ICO and sectors they from. Communications, trading, financial sector are developing rapidly, so the faster they give investment the faster project will start.
But not all of them will win this race. Like any crowdfunding project (and ICO is a form of it) it can’t be fully proved. By some analytic mentions, not less than 70% ICO are falling. Given this, be careful to invest your money into a scram project. Believe no one. Even if your best friend says that some project is wholly win-win, better to you to check all information you may find about it: who are founders, if they have experience in cryptobusiness, how this project will have profit it the feature? Because none of the governments regulates this sphere, and you won’t have a guarantee like in IPO system.
What to look out for ?
There are some tips and tricks for people who want to risk and become ICO investors.
- As mentioned, find so much information about founders and developers as you can.
- Look through their website. Read their white paper attentively. Do you understand everything in it? Read forums like Steemlit, Bitcontalk or Reddit.
- Find if there are some other projects of that ICO founders. Similar to IPO, ICO projects the safer the more projects the same team realized earlier. Better (and sure more expensive) to buy tokens of live projects, which generate profit already.
- If competition in the sector ICO project from is very high, chance to win for this company or team is too low. Especially for little teams. But if the market for their services too small you will wait for profit for a very long time.
The new platform Decentralised Escrow Service (DES) is the first step to streamline chaos and mistrust in the ICO market. They provide escrow services for investors and give them control over funds invested in ICO. You may read more about this platform in this article (link: https://medium.com/@tendaitomu50/decentralised-escrow-service-safer-icos-all-the-way-d419dedc215c).
How to buy ?
- To buy them use Coinbase (link: www.coinbase.com), the biggest USA platform for cryptocurrency trading. You need to connect your bank account and wait for a few days while bank works it.
Since Ethereum platform was developed mostly for using smart contracts and therefore is most suitable for operations with ICO, definitely better to buy ether (Ethereum currency).
NB: ERC-20 is a single standard for Ethereum tokens. All of the tokens on this platform must be based on ERC-20 standard! These tokens could be exchanged into other currency and give investors right to vote. These standard parameters are required in token development, so there’s no need to have an in-depth understanding of ERC20 if you’re not going to program tokens.
Coinbase doesn’t imply the use of a private key (analogue of PIN of your credit card), the integral part of “smart contracts” (link: https://en.wikipedia.org/wiki/Smart_contract).
- You need to send your coins into cryptocurrency wallet (link: https://en.wikipedia.org/wiki/Cryptocurrency_wallet)
For bitcoins you may use convenient portal Blockchain (link: https://blockchain.info/). In the case you’d prefer ether, MyEtherWallet (link: https://www.myetherwallet.com/) site would be quite an appropriate variant. Since you get a wallet you have a public key (something like a bank account number) protected by private key, so token receipt available for you.
2. Choose ICO and buy tokens. Go to the ICO site, find there something like “Join to us” or “Buy tokens”, this would possibly be the biggest button on the site, so you hardly err. Select the currency, enter the wallet address, transfer currency from wallet to ICO account and wait for validation, it takes less than a minute. Check your wallet.
How to use tokens ?
ICO developers specify tokens usage before the issues. After project launching, tokens start to list on the cryptocurrency exchange. Depending on ICO purposes, 3 types of tokens can be distinguished: Equity tokens (like company shares), Utility tokens (give you some benefits, sort of votes, ownership or management functions) and Asset-backed tokens (give you permission to get some products or services from a project). Therefore, investors may either to have a profit from the listing or use company services in addition to the listing incomes.
How to make money trading ICO tokens ?
As already mentioned, ICO is a high-risk investment. Nevertheless, if the ICO will be successful their tokens cost very much and you can get a lot of money on tokens sale. Be careful, you have to be ready to lose the money you invest into ICO because it’s rather a lottery.
You may sell or buy tokens after ICO launching at one of the cryptocurrency exchanges. The biggest ones are Bittrex, Kraken, Binance and Poloniex. Before selling, check the market rate dynamic of your tokens to be sure your bargain is lucrative. Keep in mind that each platform exchanges the determined set of currencies. Thus, before registering on any of them check if they exchange your altcoins.
Even if your token doesn’t cost much, don’t rush to sell it, wait for a few months and check the price again, it could increase several times.
How to get tokens without purchase ?
You may get tokens as remuneration in Bounty campaign. That means you help ICO in their promotion in social networks and they give you tokens per your help. ICO promotion is quite expensive therefore many young start-ups use this permission to spin their project.
Some time ago Google, Facebook and Instagram prohibited advertising of ICO and cryptocurrencies, but still, you have a lot of platforms for promotion. Posts, comments, subscribing, mobile apps development, video, emails and other actions to tell people about ICO platforms.