What is ICO? Why to do it and how to make money on it.

ICO, or Initial Coin Offering (the primary location of the tokens) is the release of any cryptocurrency project designed to pay for site services in the future.
Unlike IPO, customers of cryptocurrency do not receive a share in the company and can not influence internal management decisions. ICO is the realization of a crowdfunding model, where participants finance the development of the company now in order to benefit from it in the future.
For example, for tokens of the project https://storj.io/ you can buy the amount of disk space in Storj or increase the bandwidth of the channel. Tokens also can be earned by renting a space on their hard drive.
By issuing its own cryptocurrency and exchanging it for one of the common crypto-currencies (Bitcoin / Ethereum) or even for real currencies (dollar, euro), the project can secure the financing necessary for launch or development. Issuing a digital currency for the project, you can accelerate the development of the project itself (as the introduction of money in ancient times increased trade turnover) and thus solve the problem of future monetization of the project.
Why do many people talk about ICO?
In 2017, according to https://www.smithandcrown.com/icos/, during the ICO, $ 180 million was raised, and it’s more than in 2016 ($ 101 million).
And the amount of attraction is constantly growing.
Many people talk about the transition to a new economy. Someone directly points out that many of the projects that have passed through ICO have turned out to be fraudulent schemes.
The author of the article in CNBC compares the boom of the cryptocurrency markets and the growth of the fashion on the ICO with the explosive growth of the shares of the companies of the Internet industry in 1999 and the accompanying IPOs of dotcoms. This comparison is partly true: like the Internet, crypto-currencies are just a tool. In the case of Internet companies, many projects entering the ICO, try to make money only on the excitement around a new topic. Others offer interesting solutions, which, perhaps, someday, will change the economy of some markets.
Is it needed to invest in tokens issued on ICO?
When buying tokens for ICO investors expect:
• benefit from reselling the tokens at a higher price in the future (hoping that they will be in high demand, for example, because the project’s success);
• use their tokens in the future, receiving services at a lower price;
• support an interesting for themselves project.
If I invest in ICO, how can I be sure that I will not be deceived?
No country in the world yet has laws governing the conduct of the ICO. ICO by the buyer is a transaction based on trust. As with crowdfunding, the project may not survive to the stage of product appearance, or, having appeared, can become a complete disappointment for you. Some enterprising fraudsters conduct an ICO for a project that they didn’t intend to develop.
The cryptocurrency enthusiast and head of Runa Capital's San Francisco office, Nick Tomino, wrote in his blog about the unreasonable behavior of many investors during the ICO in 2016. Projects that have only a website and a concept of a business model sketched on their knees (White paper) attracted millions of dollars in a matter of hours or days. At the same time, many really working, promising projects with cash flows and customers can not attract similar amounts.
Tomino believes that a conscientious project should:

1. prove to potential investors the real validity of the ICO and the real reasonableness of the issuance of their own cryptocurrency;
2. disclose all plans for the development of the project and conduct an open dialogue with potential investors;
3. implement a test version of its own protocol before ICO;
4. provide the possibility of direct "extraction" of currency to involve new users and provide the network with the necessary resources for processing transactions;
5. enter the ICO only if you understand how much you need to attract;
6. The team of founders must own from 10% to 50% of all tokens and shouldn’t exchange them during the first three years of operation under no circumstances.
   There are projects that conduct ICO, which attract a third party - a sort of arbitrators who can rely on the confidence of investors, acting as an intermediary between them and the project. Others form legal entities and associate themselves with restrictions on the possibilities of spending funds received through the ICO.
   It is good if the project has the disclosure of the identity of key participants (there are usually some participants who are active users of the crypto-exchange community). And no significant ICO can be complete without a published description of the idea, a business plan for the development of the project and the publication of expert assessments.
   Most projects collect depositors under their banner under the slogan "X will create a decentralized Y". Is there an advantage in decentralizing this service, what is it, whether the company will be able to compete with its centralized counterparts, gaining momentum - these are important issues that future buyers of tokens on the ICO should definitely ask themselves.
   How to find a project for investment
   An investment in any project can be made on its website, but it’s required to have a wallet with bitcoins, ether or other kinds of cryptocurrency, and, of course, to be able to carry out transactions. Just start up an electronic wallet. Then everything works just like with any money transfer system or an Internet bank.
   Information resources on which the projects that conduct ICO can be found are a lot. For example, AngelList and Protocol Labs have launched a new website https://coinlist.co/ - a specialized platform for launching the ICO, for which they are working on a contractual basis (and, of course, the projects will be screened out immediately). Up to now, it is still unclear who will be able to invest through it. But for an inexperienced investor, this is exactly the optimal solution.
   How to conduct an ICO for your project
   It is not difficult to do this. For example, here https://www.walletbuilders.com/.
   It's harder to understand why you really need an ICO.
   If you still really need, then most of the time you will spend on the development and sale of your project, not preparing for the release of ICO. In addition, all the "fast" ways involve the creation of a currency, according to the mechanism of operation, which is similar to bitcoin, which has its disadvantages (in bitcoin, there are a number of inherent flaws in the mechanism that developers hope to correct with time).
   The loudest latest ICO
   In 2014, one of the most famous crypto-currencies to date - Ethers (ETH, ethers) was issued. Throughout the IСO, the broadcasts were sold at a price of $ 0.3-0.4 per unit, by July 2015 the price had risen to $ 20, and today the exchange rate of the ether exceeds $ 700 per unit of currency, and they are second only to bitcoins in terms of their total capitalization.
   The first ICO in history was the release of Mastercoin tokens in 2013. Mastercoin was developing financial services using bitcoin as the basis. In 2014, the MaidSafe project, embodying the idea of the decentralized, protected from hacker attacks and government prohibitions Internet, attracted about $ 6 million, collecting money in mastercoins and bitcoins.
   In May 2016, the DAO (Decentralized Autonomus Organization), a decentralized investment fund built on Ethereum, raised about $ 150 million during the ICO. Unfortunately, hackers could exploit the vulnerability in the DAO code and withdraw about a third of its funds from the accounts of the organization (about $ 40 million).
   However, the team of programmers who worked on the Ethereum project intervened in the network and returned most of the funds stolen by hackers. There was a group of users dissatisfied with such interference, undermining the principles of creating Ethereum, withdrew from the project and created its own currency based on Ethereum - Ethereum Classic.
   There are also a lot of projects that failed, as it often happens, already after the ICO. For example, Dogecoin still can not restore its reputation and return to its former heights ever since the founder of the Moolah exchange platform, Alex Green, stole money from customers and disappeared.
   Josh Garza, who launched PayCoin, promised in white paper to become a revelation for the market of cryptocurrency. In fact, he became another clone of bitcoin. Garza repeatedly gave promises about the development of PayCoin, which he could not fulfill, and also made statements that did not correspond to the truth - until the police started to pay an interest in him and he had to leave the US. On June 1, 2017, Garza confessed his guilt to the crimes committed and now he faces up to 20 years in prison on charges of fraud.