How to create an ICO
With the increasing adoption of cryptocurrencies by startups and established businesses, more and more companies are positioning themselves for Initial Coin Offerings or ICOs. The concept of the ICO is similar to the Initial Public Offering or IPO of the traditional stock markets, the key difference here is that the funds in the ICO are raised through the crowd sale of the cryptocurrency tokens of the startup. The early supporters of the project receive a share of the company’s cryptocurrency. Bitcoin is often used to facilitate an ICO.
Decide if you need an ICO and is it better than IPO?
An ICO is not the only way to raise money quickly by bypassing the long and tedious process of registering a public offering with the regulators. ICOs are not for every company, and not every industry is embracing the concept of digital coins.
The digital coin you wish to create should be effectively integrated into your business model for the Token Generation Event to be successful. If the only purpose of creating a coin is to facilitate trading on the exchanges, the event could be a non-starter and the price of the digital coin may fall drastically soon after the ICO launch. There should therefore be a strong demand for the decentralized token created produced by its utility value to increase the value of your product or service. If this is not the case with your project, the traditional Initial Public Offering (IPO) route would be a better option. The ICO countdown has already begun for many tokens.
It is not sufficient to have the product; you must use your token. Building a robust, secure, and scalable product on blockchain is crucial for an ICO launch and its success. Your White Paper should describe how it solves the existing problems of the industry and how it proposes to overcome them for good.
Create your token and plan to launch it
The creation of the token is essential and integral to an ICO event. It’s the asset that your business needs to survive and thrive in the markets. It is similar to the shares sold in an IPO transaction. ICO Tokens such as BunnyToken, Global Spy, Phoneum represent tradable goods that could take many forms, such as digital coins, gold certificates, loyalty points etc. You also need to decide about the following aspects:
- How much money you need to raise through crowdfunding.
- The soft and hard caps.
- How many Ethereum or blockchain tokens will be created in total?
- What you will do with the unused tokens.
- How many of the tokens will be retained by the staff.
- Under what conditions additional tokens could be issued.
Develop an informative White Paper
You need to write a White Paper for your prospective investors that not only provides all the details of the project succinctly, but that also clearly outlines the technical aspects of the product. A White Paper should be at least 2500 words long, while a highly descriptive one could stretch to 80-something pages. The White Paper should provide a clear description of the following:
- Executive summary.
- Token generation and distribution strategy.
- Details of the token.
- Pre-ICO launch and end date.
- ICO start and end date.
- How the funds will be allocated.
- Problems that the product solves.
- Marketing plan.
- Crowd sale summary.
- Description of the team behind the project.
- Development roadmap.
The white paper
The white paper is the technical oriented document that contains the business plan of the startup and company with which teams try to raise their funds, often before having a prototype. It is the main task for the team to write a good white paper.
White Papers can also be are seriously complex documents, and as the founder of the project, you need to be rigorous and thorough in publishing a White Paper on your website for the interested investors. Your White Paper is your marketing plan and technical manual, and ideally should be devoid of incoherency and fluffy substance.
In order to create the ICO campaign, it is recommended that startups avoid outsourcing the writing of white paper to third parties.
Companies need to involve the whole development team from the core developers to their sales people if they want investors to take them seriously.
Startups and businesses need a semi-technical explanation of how the ICO works and an easy-to-understand walk-through for non-technical investors.
The white paper should contain a credible technical roadmap, plausible business roadmap, and clear token distribution model, in order to appeal to potential investors with no technical knowledge. Small businesses and startups need to take their effort one step further and release a technical paper.
The technical paper will be only aimed at people with a deep understanding of cryptocurrency and blockchain technology. The technical information presented in the paper will give more credibility to the tech know-how of the company. These papers have so far been used mainly for sales of cryptocurrency tokens and not for dApps token sales.
Get your token listed on an exchange
Once you have created your digital coin, developed the White Paper and the marketing strategy, you need to approach the crypto exchanges to list your coin. It is the exchange through which investors buy and sell your token in the open market, and also trade your coin with other digital coins such as Bitcoin, Ethereum, Monero etc. So, getting your coin accepted by reputed exchanges such as Bittrex, Poloniex, Binance, Coinbase, Coinexchange etc. is critical to the success of your ICO token sale like Seal, Streamity, TokenLend. The actual process of listing a coin can vary significantly according to the exchange.
To list your coin, you need to provide the following information to the exchange:
- Coin name.
- Trading symbol of the coin.
- Logo of the coin.
- Description of the coin and project.
- Source code reviewed by a trusted third party.
- Launch date.
Another platform worth targeting is Coinlist that not only connects investors to your ICO, but also handles a lot of regulatory compliance issues. Getting listed on Coinlist will significantly increase the chance of the success of your ICO. Take note that some exchanges such as Poloniex and Bittrex forbid the listing of tokens that could be considered as security by the Securities and Exchange Commission. Similarly, the rating also plays a crucial role. Through ICO rating, investors will get an overview and will be able to know about the best ICOs to invest.
How to Create an ICO?
Initial coin offerings (ICOs) are storming the world of blockchain-based projects and cryptocurrency. The total initial coin offering funding for 2017 had surpassed more than USD3 billion by October. Every week there is a new cryptocurrency project and ICO that will provide investors with the opportunity to become involved in the cryptocurrency world.
Businesses and sstart-ups around the world are looking into raising money by carrying out crowdfunding campaigns on the blockchain technology. The community is facing high competition with the number of ICO campaigns on the rise.
To create a successful ICO campaign, start-ups and businesses will need to spend money and time on the white paper, the website of the company, the token smart contract, the crowd sale ICO smart contract, smart contract audits, marketing, and legal issues.
With a good reputation and track record, many of the ICOs were initially carried out by deep stack blockchain technology developers that were part of the core cryptocurrency community. Early investors knew the blockchain technology developers well and trusted them as their respective product or service idea had been discussed and peer reviewed for many months over social media platforms.
Theory behind your ICO token
As a business owner, you need to know if ICO funding is applicable to your newly-formed business once you know what an ICO funding campaign involves. Some business owners seem to think that launching an initial coin offering is a tool for any project, which will allow them to raise money/funds by bypassing the costly process of registering for an IPO. It is no longer the case as informal requirements or standards are now imposed in order to have a successful campaign.
Businesses need to have a cryptocurrency token fully and systematically integrated into the core structure of the startup to make their token popular during their ICO campaign.
Potential investors should be able to clearly see how the cryptocurrency token will gain value as their business starts to flourish.
It is important for start-ups to answer the following questions that any investor could ask them about their cryptocurrency token:
- Why do you need blockchain tokens in your startup?
- What is the goal and vision of your startup?
- What benefits does blockchain technology give your ICO project?
- What is the link between blockchain technology and your ICO product?
- Why is your token of interest to potential investors?
- What laws does it bend/break?
- What benefits and limitations of the tokens are there on a crypto-exchange?
- Does your product have competitors?
- Are there any other ICOs with same agenda?
Companies need transparency and authenticity in order to make their ICO sale successful and raise money by convincing potential investors to invest in their tokens and project. You can show your potential investors that your company and blockchain-related project are legitimate. In addition, you can show them that you are not creating the ICO campaign just to become wealthy at the expense of the investors. It is essential that your tokens solve an issue and have pre-defined goals that will benefit everyone involved.
If the company or startup has a product prototype during the launch of their crowd sale, then they will be more credible. Companies should encourage potential investors to visit their GitHub page and play with the development code. It is essential to understand that projects without a single line of code raise many red flags in the eyes of potential investors.
The token smart contract
You will need an ERC20 compliant cryptocurrency token if you want to raise funds through an ICO. The cryptocurrency ERC20 tokens are easily tradable on cryptocurrency exchanges because they implement common functionality, which can be used to move the token from an address to another.
You will need to hire professional smart contract developers if you cannot develop and deliver a secure ERC20 token. Smart contract developers are not easy to find because the best developers are running their own initial coin offerings.
Good blockchain developers are rare.
The majority of the investors are extremely sensitive regarding cryptocurrency token distribution and token pricing. Companies and startups will need to be extremely clear on how much of the funds their developers and other team members will get. It is also essential for company to decide how much of the funds will be dedicated to potential investors. Companies should make sure that they have the right monetary policy. They might lose potential investors if they set a high inflation rate.
The majority of decentralized applications have no inflation as all the cryptocurrency tokens in the ICO sale are pre-mined by the development team. Companies would need to develop or design an inflation mechanism if they want to develop a full blockchain for the crowd sale. Moreover, they need to decide what type of crowd sale they are executing – uncapped or capped. Typical ICO has soft and hardcaps.
In a zest to regulate crowd sales for blockchain-based projects or ICO, regulators worldwide are starting to look deeper into ICO projects. Regarding the role of a cryptocurrency token, there are many unresolved questions among investors as well as regulators. In addition, there are a lot of questions about what taxes apply to the crowd sale and what liability laws apply for token sales.
Many businesses and start-up ventures have established and launched ICOs in blockchain-friendly countries with regulatory uncertainties. Businesses need to determine whether or not the product they are building is part of a highly regulated market. If yes, then they need to understand how those regulatory laws will affect their cryptocurrency token. For example, blockchain-related projects and cryptocurrency projects are banned in many countries since September 2017.
Moreover, the majority of people in the US have been looking into the matter of cryptocurrency and blockchain-based project in recent years. Regulators have started to persecute the first token sales of many companies. It is important to make sure the company gets good legal advice from a law firm specialized in ICOs before they even think of conducting an initial coin offering.
Small businesses and startups need to ask one important question to their laweyrs, which is: “is this token classified as security?” The answer to this question will depend on and possibly affect the design of the token.
The website of the company or startup
Any small business venture or startup will have a professional-looking website to show off their goal, their vision, and their plans. You want to create the best possible impression to future investors when you run an ICO. You will have to spend money for the development of a high-quality website.
The website should follow the guidelines listed below.
1 – Site menu
The website of the company will need translations. It is essential to understand that only having English on the website will limit the amount of the people the company can reach as initial coin offerings are a global phenomenon.
Experts suggest companies or startups include Chinese as well as Russian translations on their website. If you want people to follow and get in contact with you, you need to have a website with different social media channels. You can also have links to certain parts of your website such as “white paper”, “ICO sale”, “team”, or “documents”.
2 – The homepage
The website of a company launching an ICO has a long landing page or a format with all the essential information available on the website. The users can access the vital information about the token sale, team, distribution of tokens, and other details by scrolling down.
To make the website more attractive and engaging, you can separate these into other pages. It is interesting to note that the majority of ICOs around the world prefer to have all the information on a long landing page. The homepage of the website usually contains a timer that counts down to the launch of the ICO.
The timer on the homepage is replaced with the “join ICO” button after the token sale has launched. In addition, the homepage will also include a bar with how much funds the company has raised currently. It is important to show how much the company has raised during the ICO campaign as it shows potential investors that others are also investing in the crowd sale campaign.
3 – The project section
All detailed information about the project is shown in the project section of the website. In addition, this section includes the roadmap/development plans, technology features, and current status of the development of the project.
The project section of the website shows the potential investors what they are actually investing in. In addition, this section of the website will help investors to understand the benefits of this ICO campaign.
Potential investors will also get a clear idea about the company’s plan for the funds collected during the crowd sale. Experts have suggested that companies should use an array of pictures or infographics rather than large amount of text.
4 – The ICO and the cryptocurrency token
The fourth segment of the website should systematically describe the ICO and the cryptocurrency token in detail. It is vital that this information be described in the ICO and the token section of the website can be seen below.
- The name of the cryptocurrency token
- What the token represents
- The price of the cryptocurrency tokens
- The amount of cryptocurrency tokens to be released by the company
- Start and end dates of the ICO campaign
- Hard cap and soft cap
- Success threshold of the ICO campaign
5 – Documents/legal/social media channels
The last section of the website should contain links for smart contract information and the white paper. It is better to have links rather than the documents on the main page of your website because the white paper, technical paper, and smart contract information are larger, full of text, and more in-depth.
In addition, there should be a link of the last section of the website that takes investors to the terms and agreements in regard to people investing. The terms and agreements are needed from legal stand point and should be carefully drafted by the company. All the social media links should be included at the last section of the website of a company that is planning to launch an ICO and raise money for future development of their project.
Social media links will be helpful for potential investors of the token sale to browse through them and follow the crowd sale project of the company. In addition, they can also get in touch and contract with the start-ups through their favorite social media channel.
6 – The team section
The team section of the website should contain the list of all the members of the team associated with the token sale campaign with recent photos and links to their LinkedIn profiles if possible. One of the most important factors that a potential investor look for in an ICO campaign is the team associated with the project in regards to the validity of the project.
7 – Additional items to be considered in a website
- Web-based chat application
- Website that is adapted to mobile devices
- Email/sign-up page