These days, if you have money and you want it to make some more money, you've got a myriad of investment options to go for. If you don't have money but have a brilliant idea, you can make a fortune, too. Converting fresh mind and creativity into a cash flow has never been easier — that's what the ICO is all about.
In this webinar
, the technical side of the venture is comprehensively explained.
Below, you can get acquainted with the key points and gain useful information about how to not just launch the ICO, but to make it successful. For Starters
The launch of ICO is not that easy. You need a whitepaper, you need a website, you need a marketing campaign, you need a token, you need a platform, you need audit — there is quite a lot of what can prevent your startup from… starting.
Although the technicalities may be quite hard to grasp, the idea behind the initial coin offering is fairly simple — you create tokens and provide them with a certain value underpinned by a promise. Those who believe your promise buy these tokens expecting their value to grow. The model is old as time. The main novelty here is the cryptocurrency use and the token itself.
The entire concept of the ICO is based on the fact that your actions are tied by the digital means. Once launched, your ICO cannot be modified in any way except for that you've predicted and announced prior to the launch. For that reason, it's crucial to do everything just right. The smallest bug in the code can ultimately result in the failure of the entire enterprise, which is why such steps as testing or security audit are of the greatest importance. Tokenism
Token is the code that you either write yourself or hire somebody to do it for you. It's stored in a distributed ledger (smart contract, database, etc.). Normally, you hire a company creating a token and providing the rest of the services because it saves time and gives you some sort of promises about quality and terms.
For now, there are two commonly used types of tokens — utility token and security token. Utility token (also referred to as a voucher) is a bond for a redeemable transaction of a certain monetary value on specific services or goods.
Put it simply, the utility token is a promise to provide something to the one who purchased it. A gift certificate and a season ticket are the examples of such a thing. With a utility token, you can raise funds prior to actually issuing the coin. It can be useful if you don't have about 200,000$ that an average ICO campaign takes. Security token is what your coin in fact is. Security token is the access to something that you give to the one who paid you.
Unlike the utility token, which is just a promise, the security token can be considered a product that is bought and possessed. This sort of a token is a necessary part of the initial coin offering. You only choose whether you issue them at the beginning (if you have enough money and expertise for that) or use utility tokens to do it some time later. Coin Coining
The next step is the issuing of coins. The majority of tokens are based on the ERC20 standard implemented by Ethereum back in 2015 and it would be sensible to develop your coin taking it into account.
The ICO is based on smart contracts — protocols whose function is to facilitate, verify, and enforce transactions in the digital space. You need to create them in order to sell your tokens and build a reliable foundation that investors would trust.
You have to make decisions concerning the overall number of coins (it can be infinite) and the sequence of the sale. These are the three options you have:
1. The initial sale of all of your coins (finite);
2. The sequential sale of your coins (finite);
3. The continual implementation of new coins (infinite).
Each of the approaches has its own pros and cons. With all of your coins sold, you won't be able to raise some more funds in future, but you have a very strong financial support at the beginning.
In case of the unlimited number of coins (a bitcoin with its "mining" is the example), you have problems with the devaluation but can sustain interest to your activity over an extended period of time. Something Known as Multisig
Multisig is short for multisignature — a means of dividing responsibility for possessing something in a virtual space. That's a security measure that you should apply in order to keep your coins safe.
The coins, which are effectively the stocks of your company, worth millions even at the stage of their introduction. They are a lucrative target for hacks and you should keep them protected.
The multisignature makes sure that the transactions are performed only in the allowance of a certain number of the authorities — for instance, you and two of your co-founders. It works like the blockchain itself by decentralizing the control and hence making it harder to intercept.
The alternative to the multisig is the cold wallet. The cold wallet is called so not because you hide it in the fridge, but because it's inaccessible from the internet. It is a physical storage that cannot be hacked as such. A flash drive, a CD (if you live in the 2000s) and a floppy disc (if you're a really hardcore one) can be used as cold wallets. Crowdsale Rationalism
Before creating your own cryptocurrency (in some way, that's what the ICO actually is), you have to link its value to something whose value is already known — you want a bitcoin only because it costs a pack of bucks, which you can use buying anything anywhere in the world.
For that reason, you base the value of your coins on that of a bitcoin or an ether as recognized and proven cryptocurrencies. Or, you can tie the rate to the U.S. dollar directly hence mitigating the risks.
The amount of bucks that you eventually get in the first case depends on the exchange rate of the cryptocurrency you've chosen, which, as you probably know, changes rapidly and unpredictably. In such a way, theoretically, you can raise more funds, but you also likely scare off a good portion of potential investors because of high risks.
In the second scenario, you won't have an unexpectedly high cash flow, but you get more trust because you base your actions on what won't devaluate significantly in the nearest future. Caps and The Refund
Trust is the most valuable and the most important thing in any crowdfunding activity. To earn it, you need to introduce as many details about your campaign and make as many risk-reducing promises as possible. Sure enough, you must be able to fulfill every single one of them.
Launching the enterprise, you choose between the hard cap and the soft cap. Hard cap is the fixed upper limit for your money-collecting crusade.
For example, you set moderate goals and you don't need a billion on their accomplishment (and you don't want to share a major part of the profit with those who gave you this much money). Then, you set the hard cap saying that you won't take more than this or that sum. Such a decision will also heighten the interest and plausibly increase the value of your coins. Soft cap is when you basically take as much money as you can.
For that, you need a flexible plan and an ambition to go as high as the crowd believes you can. Refund. You should also set the lower limit and promise the refund in case it's not reached.
If your ICO fails because of the lack of interest, you should return the money (maybe even provide some compensation). It would be fair and it would boost the interest in the first place. KYC But Do Not DIY
Although the cryptocurrency crowdfunding isn't strictly regulated (so far), you're responsible for those who you help to make money. In other words, if, let's say, ISIS buy guns using the income from your venture, you will be punished regardless of whether you knew about it or not.
For that reason, you need to know who you're dealing with, but that can be tricky. The majority of those who're willing to give you serious money prefer being incognito and the demand to reveal who they are and what are their intentions may have an adverse effect on your campaign. And then, they may just lie to you.
Hence, it's reasonable to gather support of a consulting company or any other third party that would not spoil your business while keeping you safe. Just in case your investors have beards and lots of photos with AK-47s. The Cabinet
Thinking about future token sales, you inevitably come across the obstacle that looks like a white spot in the understanding of how you can manage all the stuff and how your investors can interact with your currency from their devices. Even a straightforward internet banking requires a sort of a secure and user-friendly interface, much less the ICO campaign.
Development of an ICO cabinet, like this one
, is, in fact, the second most expensive and time-consuming step on the ICO road. It's a platform that, ideally, gives you a full range of tools that you need in order to carefully navigate your USS Crowdfunding and ensure its performance and security. At the same time, it must be attractive and easy-to-understand for those who you want to cooperate with.
At this step, you can either choose one of the existing platforms or go all the way inventing your own engine. As always, both solutions have their own pros and cons.
With your own custom-made cabinet, you need to spend about half a year and quite a lot of bucks ($50,000, on average) on the development team. But it can give plainly everything that you would like it to.
With the majority of existing platforms, you have a limited functionality and lack of marketing tools (more on this below). Instead, you get the solution right here right now spending less money and ensuring a relatively high security level. DAICO
The DAICO stands for the Decentralized Autonomous Initial Coin Offering. Introduced just recently, the concept joins the idea of DAO (Decentralized Autonomous Organization) and that of the ICO.
Appearing as a result of multiple frauds in the ICO field, the DAICO makes investments more secure involving the investors in the initial project development process. Subsequently, the concept allows token holders to vote for the refund if the progress is unsatisfactory.
This is one of the viable approaches allowing to appeal to the investors through, yet again, the mitigation of risks. M for Marketing
"My ICO raised five millions and I've spent nothing on the ad!" — the phrase that nobody has ever said. Launching the crowdfunding campaign, you kinda need the crowd. Advertising is what you use to create it.
Even if your company is the established one and you're as renowned as this guy
, you have to deliver the right message to the right people, which is impossible without proper marketing. As a matter of fact, you will spend a bulk of your budget (around $100,000) at this stage.
The general rule here sounds like: "The more, the better". The more people know about your venture, the more funds you can raise. Sure enough, banners on a street isn't what can help you with this — your audience is pretty specific and you need a bit more sophisticated approach to reach them and deliver your message.
A website with some decent content on it, a bit of a search engine optimization, mailout and social media marketing are fine to begin with. To track your progress, the tools such as Google Analytics are needed. And if you don't have experience in the area or you just want the process to be optimized and time-friendly, then these tools should be integrated with your ICO cabinet. Summarization
In the ICO, the best thing is that plainly everyone can do it. Even if you don't have a ton of cash, you can launch the pre-ICO, take the advantage of utility tokens, etc. And it all gonna work if your view is the advanced one and what you're planning is worthwhile.
For centuries, bright minds with incredible ideas that could improve our lives were being left unnoticed because of the lack of power and money. With the opportunities of ICO, it no longer happens.
Ain't it awesome?