ICO Bonus – Complete Beginner Guide
Quick inner navigation:
ICO, which stands for initial coin offering, is quite similar in definition to the conventional initial public offering (IPO). ICO also works on the same principle as an IPO but instead of issuing shares for money, investors buy tokens or coins that the blockchain company offers. The purchase of this token is usually through the based coin of the platform the technology was developed on or use of FIAT in some very rare cases.
In 2017, about 2.3 billion dollars worth of tokens were sold through ICOs and the number is showing no sign of slowing down if going by the number of ICOs taking place every month and the huge amount of capitals being raised from each ICO. However, studies show that 47% of the ICOs launched in 2017 failed.
This hasn’t stopped enterprise from making use of this easier version of raising funds since it doesn’t involve many regulations and also the company gets to control and influence valuation in some cases.
ICOs are easier to organize than IPOs because of blockchain technologies such as the ERC20 Token Standard. This technology simplifies the process of development needed for the creation of a blockchain asset. ICO allows more freedom for the company and although there is quite very little investors can do to vet out the frauds and scams ICO program which is just one of the downfall of this innovative technology.
What is an ICO bonus?
An ICO bonus is an incentive given to investors who buy tokens of a crypto asset during the crowd sales. The ICOs bonus is usually in a percentage of the actual investment being made by an investor, something the bonus is not fixed, it also increases with the amount of money being invested i.e. the more the investment the larger the bonus ICOs being given. The bonus and the token bought are usually the same things since it’s more of an extra to the original amount of coin or tokens bought.
ICOs try to attract people by offering large amounts of bonuses. This has been viewed as an effective way to gain attention not only from the side of the public but also from the investors who can potentially finance the given ICO.
- ICON (ICX) 15% presale bonus
- Shping ICO 20% bonus
- CSA Estate ICO 25% bonus
- Brickblock ICO 5% bonus
- The Waves ICO 20% bonus
These are just a few examples of ICOs that gave out bonuses to participants. Not all Cryptocurrency crowd sales come with a bonus offer especially if there is a ready-made channel of investment and investor ready to fund the ICO process. Since little funding from the public is usually needed in such cases these types of crowd sale do not attract any form of bonus whatsoever. This type of blockchain technologies is considered to have more potential since it already has seasoned investors backing its idea and they must have done their research and thorough background checks on the company in question.
However, just because a company does not offer a bonus for it ICO does not mean the company is fraudulent in its actions. You as an investor need to always run your checks before committing money to such operations.
Can generous ICO bonuses indicate a scam?
Since it has been established that majority of these ICO bonuses are essentially marketing strategies the chances of it being overused are high. The ICO is basically a way of sourcing funds for the business and since most of the companies offering it are not yet publicly traded on exchanges, the investor becomes stuck with the bought token until the coin makes it to an exchange. So the investor is technically at risk of being scammed if the company has bad intentions.
Since the bonus is usually having the same function as the token bought in most cases, the size of the bonus doesn’t always mean a scam signal but it could easily be if the technology fails to provide a valid and credible solution and not some technical jargon to confuse non-tech savvy investors. If you have done your due diligence on the bonuses ICO you plan on buying into, the ICO bonus size might just be a marketing strategy which is quite common with anything that has to do with sales. What we are saying is that large bonus is not a clear-cut way to ascertain a scam ICO operation, but it is still a very likely factor put in play by scam ICO founders.
You need to do a lot of research yourself, go through the white papers and forums, and ask the team questions. This is your hard earned money and if the teams or the white paper can’t provide answers to some of your basic questions they are no point in investing into such project as it might just lead to loss of money, time and effort for you in the long run.
Where do the bonus ICO tokens come from?
In a normal scenario, the bonus ICO token and the actual token on sale are meant to be of the same value and use. Any other reasons for the brought token and the bonus token to be different in use or value is a clear red flag, that means the ICO or Coin needs to be avoided at all cost. So now the question is since the bonus and token are meant to be the same, and the ICO normally has a maximum supply of coin available, where does this bonus come from? In order to know the actual market value of the coin after the ICO, the total number of Token purchased during ICO is usually being divided by the amount raised.
Since not every investor is entitled to a bonus, the early birds that got the bonus are usually being paid by uniformly and evenly deduction the bonus token from the total investment pool. This means the original total amount of tokens created will not be exceeded since the token will be divined and the bonus tokens will also come from the total token supply.
If the total token creates for an ICO is just 1,000,000 and you have about 100 investors with different investment amounts, if 15 out of these 100 investors happens to be early birds with varying or even bonus amounts, the bonus token is usually being deducted from the other 85 investors evenly, strictly based on the size of their investment. Which mean an investor who bought 10,000 tokens will not have the same deduction in the value of Token as another investor who bought 100,000 tokens. The deduction is only uniform in terms of percentage but not in value deducted.
However, it should be noted that there is no real defining rule put in place for bonus distribution, each ICO crowd sales operator are entitled and allowed to determine their bonuses sharing or valuing formula.
In a Nutshell
ICO bonus is great ways to capitalize on a good investment opportunity with the maximum return on investment possible. The early investor bonus is usually more than enough to set you up well in the case of a positive outcome. However, you should always be careful when selecting ICOs with large bonus offers. You should always have it in mind that this so-called bonus has to come from somewhere. If the bonus is too much, it might just be a signal that the company is all about marketing its ICO rather than caring much for its actual blockchain product. As a rule of thumb, investors and blockchain experts such as Vitalik Butterin, Ethereum co-founder, are advised that it is better to stay clear of ICO that offers more than 20% bonus. The actual reason for this was not given but it seems to be based on common sense of how the blockchain technology should work and function.
Thanks for going through this article. We hope you had a nice read. Kindly check the website for other blockchain related articles you may find interesting to read.