Should I invest in an ICO??

Blockchain has opened up a lot of previously unimaginable opportunities and one of them is the token economy. The global token economy was estimated at around $800 billion as of January 2018 and shows no sign of slowing down. Startups are sprouting up in the blockchain space building dapps (Decentralized application) of the future leveraging the unlimited possibilities of crowd funding reimagined on blockchain. Instead of relying VCs, angel investors or banks a start-up can directly go for an Initial coin offering or an ICO-as they are popularly called.
Unlike an IPO which gives investors stock ownership of the company, ICO raises fund by giving out tokens with the promise that the tokens can be used in the network once it is built. The utility of the token determines the value of the token and investors buy the ICOs with the hope that the token value appreciates when the network is functional. Startups are raising billions of dollars on initial coin offerings or ICOs. The most recent and one of the most intriguing ICO was eos.io by a company named Block.one who raised $4 Billion. Some of top ICO fund raisers are Telegram, the messaging app ($1.7 billion), Dragon Coin ($320 million), Huobi ($300 million), HDac ($258 million), Filecoin( $257 million), Tezos ($232 million) etc.
Most of the ICOs start with a simple white paper describing what the start-up/ company intend to do. Anyone who is convinced with the offerings can take part in the ICO and buy the tokens. This opens up possibilities of fraud for example, cryptocurrency start-up Confido disappears with $375,000 from an ICO, and nobody could find the founders. So, there is no about the fact that investing in ICOs pauses huge risk not only because of the possible fraudulent claims but also because of factors like
• An ICO can be issued by anybody who can create a token. So investor due diligence is of utmost importance in determining the trustworthiness of the start-up and the potential of the idea itself.
• Unlike traditional scenarios where the inflow of the cash happens as the company grows, cash inflow happens at the beginning itself and hence the question of incentive for better product development and product enhancements exist.
• Sometimes even the good products fail- adopting to the decentralized applications would require a mindset change and hence understanding the market sentiments towards the product since the market would be challenging.
• The international community is still formulating regulations over ICOs.
Even amidst all the uncertainties and risks, the global community has taken ICOs very positively which is a sign of acceptance of decentralized applications. This positive attitude reflects in the startup space as well, which is buzzling with activity and better applications are on their way to take on the established centralized applications. The changes that these new trends bring in are most likely to be positive given that there are no external factors that hinders these developments such as governmental regulations or pressure from centralized entities. Fingers crossed.