A token sale of digital assets based on blockchain is an option to raise capital. Take the case where you have a startup idea for a blockchain. Maybe your goal is to create the first blockchain-based decentralized computer.
This can be used to develop blockchain-native digital assets and decentralized software. With your blockchain and the decentralized applications you build on top, you can create tokens, which are digital assets. Using the network, users will conduct transactions utilizing tokens. It has a lot of potential. But as with every startup, it's crucial to raise money first.
Conventional businesses have three options:
- Pitch a venture fund (or more than 100).
- Try crowdfunding through a crowdfunding platform.
- Attract a seed round of private investors.
There is another choice with your blockchain startup. Selling tokens that the network will eventually use allows you to raise money. As the value of the tokens increases along with the expansion of the network, investors will profit. A way to raise money is through an ICO.
What Is An ICO?
The cryptocurrency industry's version of an IPO is called an initial coin offering (ICO). An ICO is a way for businesses to raise money to launch a new coin, application, or service. Initial coin offerings are available to investors who want to purchase cryptocurrency tokens. This token could buy stock in the organization, undertaking, or thing.
The first step project organizers take when a cryptocurrency project seeks to generate money through an ICO is choosing the coin's structure. An ICO can be organized in a variety of ways.
- Static Supply and Fixed Price: A business may specify a funding objective or cap. This implies that each token sold during an ICO will have a fixed price and a limited supply.
- Static Supply and Dynamic Pricing: An ICO may have a fixed supply or a financing target. As a result, the overall cost of each digital token will depend on the sum of the cash received.
- Fixed Price and Dynamic Supply: Some ICOs have a dynamic but static supply. This implies that the supply will depend on the quantity of financing obtained.
Presale: All you Need Before the Launch of ICO
First, you must determine whether using an ICO is the best way to raise money for your company. The graveyard of unsuccessful ICOs can be broad and deep. Overzealous entrepreneurs may be tempted to disregard the dangers of completing a significant investment round in weeks or days. Every project does not require an ICO. First of all, an ICO is about more than just generating money. Here are some things to think about before choosing an ICO:
- Using tokens (and blockchains) can improve a product, business, or service. It goes beyond injecting capital for a short time.
- How to guarantee that long-term returns for token holders are fair.
Like any business, a successful ICO is driven by a compelling use case and a product or service that customers demand. There are lots of tokens on hand. If they don't receive an effective response, investors hesitate to invest in poorly thought-out firms.
Create a Team
An ICO project may be intricate and multifaceted. You'll need an excellent team if you want to succeed. The team behind an ICO will get the attention of investors. In fact, it is one of the best predictors of success or failure.
Learn the Law to Choose the Right Place
Even though lawmakers and regulators are becoming more adept at comprehending blockchain and cryptocurrency, this relatively new sector of the economy is still subject to murky regulations. ICOs are a part of this. This does not imply that local rules and regulations will not apply to your ICO. This means that you will want legal counsel to ascertain the legitimacy of your token and any potential regulatory framework.
The laws that apply to your ICO depend on the nation where you conduct business. The Securities and Exchange Commission's (SEC) rules may apply to token sales to US citizens. Several nations, offer advantageous legal frameworks for ICOs or cryptocurrency initiatives.
Select the Best Technologies
It should come as no surprise that choosing the best technology for your ICO is essential to a successful fundraising campaign. The three key technologies you require are a token, a token, and a blockchain.
Blockchain: The bulk of ICOs are conducted on well-known platforms like Ethereum. At the same time, other projects may decide to build their blockchain to house their offering. Working with a blockchain can be difficult and time-consuming. It is only applied to tasks that demand a special blockchain. Some blockchains provide distinctive features and more flexibility but take longer and demand more knowledge.
Smart Contract: Your ICO's smart contract is its center. It controls incoming token purchases, connects to your token wallet, and enables token holders to sell and transfer tokens. To ensure your smart contract is safe and effective, you must ensure it is thoroughly audited. Hackers will try to find weaknesses in smart contracts to steal money from you and investors.
Tokens: As tokens are made of code, it is possible to encode many functionalities. Tokens can be categorized as asset-backed, utility, participation, or investment-related. It is crucial to understand the status of your token because different types of tokens may be subject to different legal restrictions. These are descriptions of the various token types.
Infrastructure: Servers are needed to manage website traffic, sign-up people, and the fundamental technologies needed for your ICO. Automated Know Your Customer (KYC) or manual verification can be used for this.
Security: Although blockchains are very safe, smart contracts and websites can be attacked by hackers. Hackers and con artists may find ICOs to be lucrative targets. You will be exposed to distributed denial of service (DDoS) assaults, smart contract hacks, social phishing, and personal information breaches due to your domain name. Having top-notch security will reassure and safeguard investors. A professionally audited smart agreement, dependable and high-quality hosting (with DNS protection), and domain monitoring for phishing will all work to safeguard your project and investors.
Your ICO Tokenomics Design
In your ICO Development, you want to balance the supply and price of your coin. A surplus of tokens will result in a low and diluted price per token. Investors can be put off by the token's high price or decide not to invest if the offer falls below the required level. This is referred to as your ICO's tokenomics. Your tokenomics should accurately represent the features and cost of your goods and services. Two crucial elements to consider are the allocation and distribution of tokens and the supply and distribution of tokens.
Allocation and Distribution
You will have to make many choices about dividing and distributing your token. The initial choice is whether to start a private or public ICO. Or either. A small, specialized group of investors can purchase pre-mined tokens through private ICOs. This is frequently carried out in a presale event before an open ICO. Token crowdfunding is another name for public ICOs. Thanks to them, anyone can use a crypto wallet to invest in a token.
Here is where a balance needs to be struck. Employees and early investors may own a sizable portion of tokens. If they sell, it can result in a huge token price decline. Lock-up agreements will be included in many ICOs to stabilize the price for the medium to long term. Retail investors should be cautious about getting dumped if whales hold too many tokens.
Supply of Tokens
Your token will have a maximum (the most tokens that can be created or mined), a total (the total amount of tokens that are currently in circulation), and a supply (the current number of tokens in circulation, i.e., not locked up or burnt). The value of your token will be influenced by supply and promise. You can choose to have an inflationary or deflationary supply of your coin depending on the nature and goals of your project. Deflationary tokens like Bitcoin (BTC) have a maximum supply, but inflationary tokens don't and can be issued anytime.
Inflationary models can cause token holders to lose their tokens over time. They do, however, also urge token owners to spend their tokens. As demand rises, a deflationary approach might aid in raising or maintaining the token's value. However, that might lead to token holders hoarding their tokens rather than using them. It would be best to decide which model is best for your project.
Choose Your Token Sale Model
It is time to select how to sell the tokens once you have chosen the tokenomics for your project. The token sale concept must be straightforward and offer as many possibilities as possible to attract and reward investors.
There are three kinds of caps: hidden, hard, and soft. The minimum amount your ICO needs to raise is called the soft cap. Either through token sales or money-raising efforts. The amount the ICO can raise before it ends is known as the "hard cap." Before an ICO starts, these caps need to be determined. Hard or soft hidden caps are both possible. The capitalization won't be known to investors until after they have been allotted.
Fixed Rates or Uncapped: You can establish a fixed price for them at the beginning of the ICO and raise it later. This motivates investors to make early investments.
Reverse Auction and Dutch Auction: Following the receipt of all bids, a smart contract determines the token's price. The highest offers are given priority. The reverse Dutch auctions start with a high token price cap that then drops with each block mined or each passing day of the sale. The sale is over when the cap is met.
Collect and Return (C&R): Although C&R provides some flexibility, the cap is fixed. Over the predetermined fixed limit, smart contracts gather contributions and change the token distributions to reflect the ratio. The owners receive a refund for any discrepancy.
Dynamic Ceiling: These ICOs raise money in stages instead of releasing the entire cap to investors simultaneously. Because it prohibits whales from acquiring the full allocation at once, which would make it challenging for lesser investors to participate, this kind of ICO is desirable.
ICO Product Roadmap
Your ICO serves as a means to an end. Investors will be curious about why you are raising money, what you plan to do with it, and where your business is going. A thorough product roadmap will be required to convince investors that your business is reputable and likely successful.
The following should be included in the roadmap:
- Hire a copywriter to help you create a well-written vision for your project.
- A set of SMART (specific, measurable, attainable, and time-bound) objectives (specifically measurable, attainable. realistic. time-bound).
White Paper In ICO
White papers serve as an ICO pitch. When investigating your idea, investors will utilize it as their main source of information. The white paper is crucial in persuading potential investors that your project is trustworthy. Before you develop your neighborhood or approach investors, it ought to be established.
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Your white paper should contain all the information provided, such as your staff, technology, tokenomics, and product roadmap. Spending money on graphic designers and copywriters is important since it will improve the appearance of your blockchain projects and your whitepaper.
How To Launch ICO?
Your Website and Brand can be Created
Based on the caliber of your website, investors will judge your proposal. Hire the top web designers and Blockchain developers you can afford without skimping on quality. If your project is multinational, you should hire experienced translators. This will assist you in luring foreign investment.
Before your ICO opens, your website must include a landing page for token sales. The landing page should have a synopsis of your project, a list of its key selling features, and a prominent link to your whitepaper. A well-designed landing page can have a significant impact on your ICO.
Your Community Is Your Best Asset
Crypto is all about community. A loyal, enthusiastic, dedicated community will benefit your project and ICO. Your public relations and marketing efforts will strengthen your community. Marketing and PR agencies specializing in ICOs or crypto will most well serve you. Cryptoverse is unique. Traditional and corporate practitioners will not have sufficient knowledge of the ecosystem, investors, media, or media.
PR: A great PR staff can establish contacts and has a strong eye for the crypto media and possibly national media. PRs can assist you in becoming featured in trending news stories and thought leadership articles. They may also portray you as an authority in creating press releases and approaching the media with your project. They can arrange for founders to be featured on podcasts and interviewed by well-known crypto personalities.
Community Groups: Maintaining community involvement is crucial before, during, and after your ICO. A community manager will oversee.
Social Media: It is crucial to be active to keep potential investors and investors informed. A social media manager can help you to be entertaining and engaging.
Pay-to-Play: At various token sale stages, you can experiment with various advertising and pricing methods (such as impressions vs. direct response).
Influencer Marketing: A well-known celebrity can aid in boosting public perception and trust in your enterprise. You must conduct a thorough investigation to identify the right influencers. This will associate their reputation with yours.
Bounty Programs: Offering rewards for tasks like reporting bugs, promoting your pre-ICO project, maintaining forums and other fan projects, and other duties is a terrific way to increase interest in it. They are a fantastic approach for those familiar with cryptocurrency to learn more about your project.
ICO Calendars: Make sure your initial coin offering (ICO) is mentioned in the most well-known ICO Calendars, including the ICO calendar.
Rating Agencies: These expert rating services will evaluate and audit your ICO. Although these organizations are not inexpensive, they can offer a reliable seal of quality and credibility.
Check Out the List of Crypto Exchanges
A wonderful product with a token everyone wants makes no sense if there is no way to sell it. It is essential to get the token published on an exchange before the start of your ICO. Your ICO will receive organic promotion by being listed on reputable, legitimate, secure crypto exchanges. Each exchange has certain criteria you must meet to list. This frequently depends on your business and token. Some needs, like the necessity for an audited smart contract, are ubiquitous.
Exchanges are driven to offer coins with strong demand since trading fees are how they generate revenue. Suppose your token has a sizable community and shows strong demand. It would be best if you didn't have trouble finding an exchange listing it in that case. A listing application takes one to two months to process. Make sure to include this in the overall timeline for your ICO.
Why Are ICOs A Popular Method To Raise Capital?
ICOs offer many advantages. ICOs are not simple to implement, but they have several advantages. Both the crypto community and regulators will be looking closely at your idea. An overview of what it takes to execute a successful ICO will be given in this post.
Investors and Startups are Easily Accessible
There are investors from every background. They can be aspiring entrepreneurs or independent contractors looking for opportunities at universities. When it comes time for an investor to grow their portfolio, they each have a distinct budget.
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Since stocks and venture capital are in short supply and difficult to get by, businesses that use cryptocurrencies to invest in tokens may have more access to investors from all socioeconomic backgrounds. This is a fantastic choice for ICO companies whose products lack the funding to get off the ground but may gain value over time.
Online Accessible
The main benefit of an ICO is that all transactions can be completed online. Everything can be simply tracked down and researched online. The resources listed below can be used for background checks and research: A whitepaper that includes important project information, such as the issue and potential remedies.
High Liquidity
Tokens can be sold on a worldwide market open 24/7. An asset with high liquidity can be acquired or sold on the market rapidly without losing value. Because of the lack of a physical exchange requirement, cryptocurrency coins are more liquid than traditional assets and can trade at considerably higher rates. Investors can also monitor their investments by following the company's performance on secondary markets and its current stock price.
There is Less Paperwork
Regulatory filings are essential for traditional assets, including initial public offerings, stocks, bonds, and other exchange forms. These files may require a lot of time and effort. Even when they are validated, it is possible that these investments won't receive the publicity they require to attract investment from the general public.
Because they employ blockchain technology to keep track of all transactions, ICOs are more enticing than traditional assets like IPOs or other traditional assets. This makes it possible for data to be continuously updated in seconds.
High Return on Investment
The best-performing ICOs began with a small market capitalization and steadily improved it. These ICOs stand out because they offer investors a novel and interesting experience.
Cons of ICO
Volatility
Several blockchain technologies may alter as a result of market rivalry. Due to the numerous variables that could impact them, investors should anticipate quick asset price adjustments. This could be an exhilarating challenge or an annoying experience.
A Potential Fraud
The main disadvantage of an ICO is that investors have to carefully examine team member biographies to evaluate whether they have the expertise and technology to back up their claims. Investors are not always knowledgeable enough to distinguish between a legitimate and fraudulent ICO.
Unlike IPOs or other traditional assets, many ICOs are not subject to the same regulatory requirements. This increases their availability and ease of acquisition. Still, it exposes them to fraud and other dishonest tactics that could help criminal businesses extort money.
Accountability may be Lacking
Startups and commercial institutions that lack the resources to support their potential initiatives give rise to many ICOs. High returns on investments are what investors can anticipate. Still, there is no assurance that they will produce the anticipated outcomes. Investors might not receive what was anticipated.
Before choosing which ICO they want to invest in, investors are urged to research all facets of the business. This includes their track record, important personnel, and the accomplishment of prior initiatives.
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Conclusion
Governments and financial institutions have tried to legalize and regulate initial coin offerings (ICOs). There is no one-cut answer as to whether ICO Experts are profitable, but it is evident that some have been successful. It would be best to exercise caution before making an ICO investment for your safety.
