ICO Guide – complete guide to initial coin offering
Initial Coin Offering used as a new way of raising capital and participating in investments is increasingly capturing the attention of many people and industries. This comprehensive ICO guide covers all aspects of the subject, step-by-step guidance through the ICO stages of the new cryptocurrency release. This practical ICO guide on setting up an initial coin offering is for beginners and for more experienced blockchain and cryptocurrency enthusiasts. But, before diving into details on setting up an ICO project, let’s make sure you completely understand the concept of an ICO.
ICO Guide – What is an Initial Coin Offering?
ICOs are shaking up the established order of building a business by their simplicity, accessibility, and popularity. But, what is the initial coin offering? An initial coin offering represents a concept between crowdsourced fundraising, and an initial public offering IPO. ICO is, therefore, a crypto version of IPO.
In other words, an initial coin offering stands for raising money to propel the startup business and to do it with its digital tokens or coins. Once the company creates the digital tokes using blockchain technology, it offers a limited number of newly created cryptocurrencies to interested parties and potential investors in exchange for well-established cryptos such as Ethereum and Bitcoin.
If in a classic IPO (Initial Public Offering), the investors buy a share of capital, then it goes differently with an ICO: investors acquire tokens in cryptocurrency exchange (usually Bitcoin and Ethereum) or fiat currencies (in EUR, for example). These crypto-assets do not correspond to shares of the company but to a right to use the future service or product.
In other words, an initial coin offering ICO is a fundraising method that works through the new cryptocurrency release during the startup phase of a project. It helps business ideas come true. Any business and project based on blockchain technology have a big interest in launching an ICO project.
A majority of ICOs rely on the Ethereum blockchain. In practice, a smart contract is created and stored on the blockchain to manage all of the ICO’s processes: receipt of tokens, payment when the funding amount is reached, or reimbursement when the amount is not reached. Setting up this kind of smart contract is pretty straightforward, and the code (open source) is available on the Ethereum website.
Successful ICO Projects’ Example
One of the first and most successful ICO projects was BCNext, launched in 2013 and created as a blockchain platform for the financial services industry. BCNext token sale started at $0.0000168 but reached $2.15 at some point.
Besides Bitcoin, another winner in ICO projects is Ethereum, and it is known for its smart contracts-based network. At the beginning of the new cryptocurrency release, the Ethereum token sale started at $0.31 to reach $2,400 in 2021.
ICO Stages – How to Set Up an Initial Coin Offering
Investing in an initial coin offering turned out to be a booster for many startup businesses, especially in cryptocurrency sectors, as we could see with the Ether and many other altcoins.
Still, not all the projects succeed in seeing the light of the day due to the lack of good planning, wrong marketing strategy, insufficient technical expertise, and like. Here is an ICO guide that provide the essential ICO stages for a successful new cryptocurrency release.
Essential Steps for a Successful New Cryptocurrency Release
Carrying out an ICO project from start to finish involves several specialized experts in their respective fields encompassing technical, legal, and marketing expertise. Here is an ICO guide on how to set up an initial coin offering.
1. A clearly defined project
It is necessary to define in detail the product that will be sold to future customers. Whether it is pre-existing or in development, it must be sufficiently explicit and straightforward to convince users and investors.
2. The team established of experts encompasses many fields
The team must be composed of at least five multilingual people. They need to be able to invest in the long term for the project. Among these experts, there is a distinction between those with more specific knowledge (technical audit, structuring tokens, etc.) and service providers (for legal, marketing, accounting aspect of the project.)
3. Building attractive tokenomics
Tokenomics correspond to structuring new cryptocurrency releases from financial to legal aspects. Tokenomics are the most speaking for investors as they define all features of the tokens and their behavior within various ecosystems. It’s about utilizing procedures to control the funds’ sources and collecting money while avoiding embezzlement.
4. Creating a website
The website dedicated to the ICO project is indispensable. These sites are often marketing gems. Although their top-notch quality is a must, it’s not decisive proof of the quality of the project itself.
5. Initial coin offering a white paper
The initial coin offering of the white paper is the ICO’s reference document. The ICO whitepaper presents the project, the team, the token, the chronology of events, and the growth projections. The initial coin offering white paper now has a prominent marketing dimension.
6. A marketing strategy and reaching out to influencers
As the public launch of the ICO approaches, the definition of marketing goals is required. At this ICO stage, the experts in charge of the project define the marketing channels, valuation of the marketing campaign, and speech adapted to various marketplaces.
7. Presenting the project to investors
Once the ICO founders have come up with a detailed white paper document, it’s time to search for private investors. These should find financial interest in the project and the product behind it. The target here is multi-contributors capable of investing large amounts in different projects.
In this private sale round, the investors are not individuals but large companies and already existing venture capital investors eager to diversify their investments. However, the investors might be the group of individual investors gathered by their own preferences.
Pitching for private investors goes along with the pre-sale round, which comprises smaller groups. These groups can include friends and family circles of the project creators.
Generally, in a pre-sale round, the founders offer bonuses and other benefits that are more modest than private investors’ compensation. Bonuses depend on the amount invested and, of course, the moment of investment.
8. Community management and implementation of the Bounty program
Beyond a social media presence, it is essential to create interactions and involve the community in the decisions making process. Bounty programs are a powerful tool. They strengthen the community through recognition or compensation in exchange for services such as bug reporting.
9. Listing of tokens on a cryptocurrency exchange
Listing “coins” or “tokens” on a cryptocurrency exchange is vital to the success of the ICO. Obtaining such registration guarantees a higher selling price and exposure to an extensive investor base. Most exchanges have published their own criteria to assess whether or not to accept tokens.
These ICO stages should be synchronized and complementary. They require coordination and expertise to ensure the success and leveraging of the initial coin offering project.
A Brief ICO Guide for the Retail Investors
Now that we have answered the questions about what an initial coin offering is and how to set up an initial coin offering, let’s how it looks this process from a retail investor’s perspective. As a retail investor, you will have to go through the following steps:
● Buy Ether or Bitcoin on an exchange
Most of the ICO operate with Bitcoin or Ether. There are several ways to get cryptocurrency, but the most common is through a cryptocurrency exchange.
● Choose the digital wallet
Each ICO uses its own set of rules. But most of the time, you will need to send the private keys of a given token (usually BTC or ETH) to the wallet created specifically for the ICO you invest in. You should never transfer your tokens directly to the ICO wallet from an exchange because you do not hold your private keys. Consequently, you will need to choose your own digital wallet.
And obviously, you will have to choose a wallet compatible with the ICO tokens you want to invest in. Today, most tokens are compatible with the Ethereum protocol. Thus, you will need to have a wallet that can receive this type of token. The most commonly used wallet is MyEtherWallet.
● Receive your tokens
All ICOs use a different process, so you need to go to their website and follow their instruction. Generally speaking, you will be asked to transfer your Ether or bitcoins to a given address and receive your tokens after the ICO is complete.
The Importance of Due Diligence
The three steps described come after due diligence to ensure the project is a worthy investment. But how can you be so sure? The first reference for you must be the initial coin offering of the white paper. Another way to accurately determine if the ICO is worth your attention is by visiting its Telegram groups. It’s the most prominent voicing channel for the cryptocurrency sector.
Now that you grasp an ICO concept, beware that ICOs are relatively new and therefore subject to very few regulations. As a retail investor, you must know who are the founders of the ICO project and the overall market trends. As a project creator, first and foremost, you need to make sure you can deliver the product in accordance with growth projection. Following the stages presented in this ICO guide will enable you to be a step ahead of your competitors.