ICO Pool Reviewed
Recently the term ICO Pool started surfacing, and here is why you should care. If nothing else, for fear that you don’t end up being “Dumb Money”. In case you’re a millionaire or an accredited investor then you have no need to trouble yourself with the term. Yet, in an article by Forbes magazine Mr. Bernard Moon describes a twisted reality associated with ICO investments.
Mr. Moon stated “Many ICOs are driven by whales that pump and dump. Even if the price of a token drops 20%, these investors still do very well since they probably bought at a 40% discount.” Certainly, you won’t be in the same position if you’ve contributed to a project in its public token sale stage.
Are You Starting to Get the Idea?
Mr. Moon goes on saying “Do not become the retail person at the end of these ICOs sitting with a bunch of phantom tokens”
Also, Mrs. Olga Kharif posted on Bloomberg “Instead of speculating on bitcoin, the smart money has figured out that one of the surest ways to get rich quickly with cryptocurrencies is to be in early on initial coin offerings.” But, unless you’re an accredited investor the probability of the pre-sale door opening for you is slim to none.
Big Fish Eat the Little Fish
Although this may be true, where does that leave the majority of the population who has no sufficient capital to pass as accredited investors? it leaves them at the bottom of the food chain.
Taking into consideration all the above, why would anyone contribute during a public token sale? For one thing, most public token sale buyers aren’t aware of the pre-sale deals behind the scenes.
Another key point is that they can’t! because they’re not “Whales”. That means that if a “pump and dump” takes place the profit potential for those who have bought their tokens at 40% higher than pre-sale buyers is very faint.
ICOs aren’t Going Anywhere
ICOs as means to fund future blockchain projects isn’t going to disappear. It is fair to assume, that even after regulations are set, ICO will remain a mechanism to fund future projects. That in mind, if you’re a non-accredited investor wishing to contribute to a project during the pre-sale stage you can pretty much forget about it. That puts you back at the bottom of the token sale food chain.
Enter the world of ICO Pool
An ICO Pool is a new approach for a group of non accredited investors to get together and to contribute to any given project during an ICO pre-sale. Only this time around, the investors in the pool are contributing a much larger sum than their individual share. Let us assume that the pool’s members have done their homework and due diligence, and now they wish to contribute to the project.
How does an ICO Pool Work
For example, let us say that there are 100 members in the pool. Given that every member of the pool has sent 1ETH to the pool (for the purpose of the example we’ll consider 1 ETH is worth $1000), the total sum in the pool is 100 ETH or $100K (please note that gas, administration, and smart contract fees aren’t calculated in this example and vary from pool to pool). In this case, the pool can now contribute a total sum of $100K on Pre-sale terms.
So, What’s the Big Deal?
Actually its a very big deal. This sum of contribution provides the pool a great negotiation leverage with the ICO team. For instance, this could mean bonuses as high as 80%. Additionally, in today’s environment, this could mean shorter token lockup periods or even no lock period at all.
Under these circumstances, each member of the pool is relishing a much better deal term. Actually, much better terms than they would ever get if they have contributed to the public token sale.
Why is a Pre-Sale So Important to an ICO Anyhow?
Let’s review why private and pre-sales are essential to projects launching an ICO. For one thing, the pre-sale funds are the initial oxygen to support the marketing, operation, development, token production, and legal efforts leading to the ICO public token sale. There are costs involved that are critical to the success of the ICO. To put it differently, the project’s team will need to fund the primary milestones leading to the public token sale.
Who’s the Perfect Partner?
Angel investors and VCs are the first outlets a project’s team will reach out to fund the first stages. There are numerous reports of ICOs reaching huge funding figures during the pre-sales stages. As a matter of fact, some projects never reach the public token sale. They end up canceling the token public sale altogether if it reached the hard cap at pre-sale. As an example, it has been reported by the verge that “Telegram has raised a total of $1.7 billion from its two pre-ICO sales”.
To put it in other words, to attract pre-sale investors the project will negotiate better deal terms. In return, the project’s team will get the funds necessary to launch its ICO campaign.
Why don’t All Non-Accredited Investors Invest by a Token Pool?
The first thing to remember is that KYC is a must to avoid breaching AML. In such case, an ICO’s legal team will have to go through the process of KYC with each contributor in the pool. This process might seem like more work than the ICO team will be willing to invest to get the pre-sale funds. Consider the telegram pre-sale example we’ve discussed earlier. By dealing with the big whales the ICO team only deals with accredited investors without the need to find a workaround to get early funding. In return, they present attractive deals and bonuses to such investors.
Never the less, an ICO Pool might be an attractive outlet for legit projects looking to jump-start their ICO. By allowing pools to participate in their pre-sale they can present interest in the project attracting additional investors.
The ICO Pool Trust Issue
Pools usually have a single or many administrators that are managing it. For instance, pool administrators will verify that all of the pool’s contributors have passed KYC with the ICO. That is before releasing the funds to the ICO. Or, they will be the ones negotiating the terms with the ICO’s management team.
Yet, a pool is a collection of funds pooled to a single e-wallet. That e-wallet is managed by the pool’s administrators. The pool administrators will be the ones that release the funds to the ICO. There’s nothing stopping them from disappearing with the funds.
Progress in ICO Pools
Certainly, horror stories of scams in the digital coin and initial coin offering world are a handful. Regulators are working on making some sense of the process. Although, currently it is still not there yet. In addition, poll smart contracts developers are working on improving the autonomy of these contracts. In turn, minimizing or eliminating administrators ability to manipulate the send wallet address. To conclude, make sure you trust the pool administrators.
Check Your Options
Given these points, bonus deal tactics provided to big investors on pre-sale stages are a fact. It is also pretty clear why the game isn’t being fairly played. In fact, ICO Pools seem like a great channel for non accredited investors to consider. However, caution is advised when considering contributing to an ICO Pool. Make sure you’ve reviewed the pool’s track record. As well, make sure you understand the deal between the ICO and the Pool. Review the fees associated with the specifics of the pool. Likewise, be prepared to go through the process of KYC with the ICO. Lastly, don’t neglect your responsibility for due diligence of the project itself.
Read the following posts below, as a resource, to better understand some basic concepts before signing up with any ICO Pools:
- What and Why ICO Investment
- How to Analyze ICO Explained
- Investing In ICO During a Bubble
- Cryptocurrency Exchange for Your New Tokens
- Best ERC-20 Compatible Wallet 2018
- A Whale of a Time for ICO Contributors
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