WHAT IS INITIAL COIN OFFERING (ICO) AND HOW DOES IT WORK?

Cryptocurrency like always has been popular this year as well. In fact, everyone loves talking about it. So many cryptocurrencies are already out there in the market like Bitcoin and Ethereum, and new coins like FantasyGold are presently making their entry into the market. Currently, around 1586 cryptocurrencies are listed online.

Blockchain technology is the main reason behind the existence of so many cryptocurrencies. Developers leverage the technology of blockchain to bring into existence different cryptocurrencies that features varying functionalities.

As blockchain technology is decentralized and not controlled, almost anyone with the knowledge of blockchain technology can come and create their own cryptocurrency. What’s more, they can also invest in an initial coin offering.

But, what’s ICO?

Do you have a superb idea for a new cryptocurrency project?

If yes, the most important thing you are struggling for right now would be the initial capital/ money to start your cryptocurrency project. To acquire the capital, you have two options – either you get a loan from the bank, or you try to bag some investments from a venture capitalist. Nevertheless, if you would like to gather money without giving away the ownership of your future company, then your best option is ICO.

ICO is the abbreviated form of Initial Coin Offering. To put it short, ICO is simply a fundraising mechanism. It means that if you wish to raise capital for your project, you sell your underlying crypto tokens in exchange for bitcoin or ether. ICO is more or less similar to IPO where a company’s share is put up for sale and investors purchase it.

Leveraging ICO, startups can cut down on the cost for regulatory compliance and intermediaries like banks, venture capitalists, and stocks.

Wish to have your own ICO?

Write Your Whitepaper: -
In a white paper is where you will jot down the existing problems with cryptocurrencies and how your new concept can help solve these problems. A whitepaper should clearly explain the technical features of the product, the problems it can solve, a brief description of the team, and distribution strategy, and then token distribution as well. To put it short, a whitepaper is a piece of document that contains detailed information about a product, its business and marketing plan, and technical manuals so that anyone who reads it can get an idea about the concept.
The Type And Purpose Of Your Token -
Under this step, you will make some serious decisions about the kind of token you wish to use and the purpose it will serve. As a rule of thumb, always go for a token symbol that’s easily recallable and steer clear from anything too fancy. Also, be sure about how you would want to offer incentives to your supporters and contributors.
Legal Planning -
This step includes exploring the legalities of ICO landscape. You have to make decisions about who should be involved in the ICO, set clear conditions regarding how many tokens should be distributed, should all coins be made available at once, and more.
Choose A Platform For ICO -
Now, it’s time you leverage the blockchain technology to fuel your ICO. So far, Ethereum happens to be the most popular platform for propelling ICOs. In fact, developing Ethereum ERC-20 tokens is almost a seamless process.
Execution Plan and The Rollout Calendar -
Determine when and how the tokens will be issues out. For instance, you can hold a presale, a coin offering, a private deal, or a general deal. Nevertheless, you should also take into consideration the ICO requirements and structure when deciding on a date and time. If you wish to see just a few individuals participate in your ICO, use a whitelist where the most frequent supporters’ list can be found. On the other hand, you can announce your ICO to the world using BitcoinTalk or Telegram.
Crowd Sale and Smart Contracts -
Once you launch your ICO, you will have to advertise your coins and create token deals. Those who are willing to buy the token will send BTC or ETH to your specific wallets while the smart contracts will self-execute, and tokens will be sent to the contributors. As there is always risks of hacking associated with the transaction, a lot of testing goes into this process in order to make sure it is secure.
The Hardware -
Now that your ICO arrangement is going smooth, you will have to set up important equipment – wallets where all your ICO reserves will be stored. Also, you will have to adjust the node to actively perform testing in the initial stages of ICO. This will help enhance the testing process and also speed up the dispatching process.
Your Website -
A website plays an integral role in connecting you with your supporters and helping them collaborate with the ICO. Make sure that your website appears professional and includes clear route catches and guidelines. Additionally, link the website to the hub where the token deal advance can be viewed. Allowing new clients to log into the whitepaper will immensely help in gaining more leads.
Marketing Your ICO -
Finally comes the trickiest part of your ICO journey. If you don’t have a marketing strategy planned prior, the chances are you wouldn’t do it well, and might even end up being undersubscribed. Rather than heading over to complete strangers, reach out to people who are already supporting your project. Leverage platforms such as Twitter, Telegram, and LinkedIn. Also, attend meetups, and networking events so that your ICO project gets a face.

What are the benefits?

For Founders:

A much faster process of gathering capital that features minimal restrictions when compared to venture capitals.

A completely new business model.
Ability to maintain equity during the project.
Flexible limits about the amount that can be collected.
Bootstrap eco-system.

For Investors:

Ability to become part of a completely new concept.
Potential profits in case the token’s price increases.

And the drawbacks?

For Founders:

Unreliable investments, and unreliable regulations.

Less transparency about who the token holders are.

For Investors:

No assurance about project development.
As there is no regulatory protection, the investment can be at risk.
Minimal knowledge about details of the project.

Less transparency when it comes to the token holding structure.

The success of your ICO project mainly depends on two factors – how unique is your product and what problems does it solve? Getting these points to the audience through effective ICO marketing will remarkably promote your project. So, if these points are taken care of efficiently, there will be nothing can stop your project from achieving success.