What is an Initial Coin Offering (ICO)?
An ICO can be described as an investment which gives an investor a digital coin commonly known as a token in return for their investment. In the Initial coin offering, a project creates/develops some digital tokens and then sells them to the public in exchange for cash or other digital currencies such as Bitcoin. Therefore, an ICO can be described as a form of crowdfunding where the investors get tokens or coins in return. You can get free ICO tokens by joining Airdrops & ICO Bounties, these are explain lower in this article.
ICO’s became popular in 2013 and since then many crypto startups have used the method to raise funds. One of the most popular digital currency which was funded through an ICO is Ethereum (1 ETH was 0.31 USD at ICO). Since then, most of the ICO are launching using the Ethereum blockchain as it has simplify the process (using smart-contract and easy token creation).
Update 18 March 2019: For those who are interested in learning about a new type of ICO called Initial Exchange Offering, read this post explaining it in detail.
A typical ICO has the following structure:
If a startup wants to raise money through an ICO it first publishes a whitepaper which contains all its plans and details about the project. In the whitepaper, the startup explains the amount of money required to complete the project and how it plans to create the tokens. Information about the currencies accepted whether fiat or crypto, how long the ICO is planned to run and the ICO campaign are all included in the whitepaper.
After the ICO launch, investors and project backers buy the tokens using either fiat or crypto. The ICO is treated like shares sold to investors through an Initial Public Offering commonly now as an IPO.
After the completion of the ICO, it’s seen as successful if the raised funds meet the funding requirements. If the funding does not meet the requirements then the ICO is canceled and the money returned to the investors.
ICO’s have been successful in most of the projects. Some popular startups have raised billions from ICOs. A good example is EOS which raised $4.2 billion and Telegram which raised $1.7 billion.
What are the ICO stages?
Initial Coin Offering is the first step carried out by developers to raise funds to support a specific project. In order to carry out a successful ICO you should follow the following steps:
Pre-announcement is the first step in an ICO process. In this stage, the developers highlight the goals of the project. For an idea to receive massive support in this stage it should be unique and viable. The pre-announcement is done so that people can comment on it. This is the most important stage of an ICO because if the community finds it interesting they will support it but if they see some questionable processes then they can abandon it.
Gathering the team
After the idea of the project has been accepted the next step is to gather a team of professionals to work towards launching the ICO. The team should include programmers, designers, editors, and even PR-team. Before the start of the work ensure that you agree with the team how they are going to be compensated. You can decide to pay them with your money or ask them to wait until the completion of the ICO.
Preparation of the whitepaper
The third stage is the preparation of the whitepaper. The whitepaper should be based on a thorough market study. This paper should contain all the details about the project including the aspirations and goals, funds required, the team working on the project, the digital currency to be used in this project and the deadline of the project among other details. After the whitepaper is completed have it checked by experts which it’s the document that is used to attract investors apart from being the roadmap of the project. In this stage also ensure that you have complied with all the legal requirements to avoid legal battles during an important phase of the project.
Launching the ICO website
The launch of the website is very important. It is supposed to be hacker-proof because it is the platform that will be used to transact all funds. In addition, the website should have the ability to be accessed by many users since it can also determine the success of an ICO. When it’s working properly spread the news in all social media platforms about the upcoming ICO.
The actual launch of the ICO
This is the final stage. In this stage, you should have software specialists to monitor the funding process to ensure that hackers do not interfere with the system since that can lead to massive losses. You must know that this is the most vulnerable stage in the entire process. During the launch keep the campaign about the ICO very active on all platforms.
If you are interested to invest into an ICO, make sure to check out our ICO List. We offer the most complete ICO Filter tools for fast and accurate ICO Research.
Learn more about ICOs in this article.
What is a Security Token Offering (STO)?
STOs are similar to ICOs only that they are tied to real securities which can be used to represent token assets. In many cases the tokens represent real equity inform of digital shares belonging to a specific company. Therefore a Security Token Offering can be described as an Initial Coin Offering selling security. In addition for a security token to become an STO, it must pass the Know Your Customer and Anti-Money Laundering checks. Before the emergence of STOs, ICOs were very popular. However, most of the ICOs were not compliant with regulations. In additions because of the lack of securities, only 20% of ICOs became successful.
People invest through ICOs in order to receive cash flows, voting rights which are tied to the securities and even dividends in the future. The difference between ICO’s and STOs is that STOs are backed by assets, cash flows or profits, therefore, having an intrinsic value. In addition, STOs are fully compliant with all the regulatory requirements giving investors’ confidence to participate. Some of the best features about STOs is that cases of money laundering are minimized therefore reducing fraud. These security tokens are already replacing ICOs and they are becoming the phase of many startups.
Check out our list of STO Listing sites.
Benefits of STOs
- Increased liquidity since traders are not tied to the normal trading hours
- Reduced costs
- Automatic compliance
What is an Equity Token Offering (ETO)?
An ETO is a method of raising money for a company that issues Equity Tokens on Blockchain projects. The issuance of the tokens can be done in private and public placements and can only be done through a regulated entity in the company’s parent country. The process of issuing ETOs is similar to the issuance of shares by companies. The issuance of an ETO is completed through the following process:
- Registering the company to an Exchange
- Creating commercial terms for the company
- Pre – ETO
- The Equity Token Offering
- Investing in the community
This article explain how Equity Token and Security token are different in depth.
What is a Utility Token Offering (UTO)?
A Utility Token Offering is a digital token of crypto which is issues so as to fund a digital currency. The token can be used at a later stage to buy goods or services offered by the issuer of the digital currency. In short, a utility token is not a physical token and therefore you cannot touch or even hold it. The main purpose of creating this token is to raise funds. The buyer of the utility token uses fiat money or specified digital currencies and the raised money is used to develop a specific product.
What is a smart contract?
A smart contract is a computer program which controls the transfer of cryptocurrencies between different people after specific conditions have been met. Smart contracts are run and executed by blockchain technology. In addition, the contracts are also stored in the Blockchain technology which can be described as a decentralized ledger which also runs cryptocurrencies such as Bitcoin. The beauty of smart contracts is that they work on their own. They are designed in a way that they depend on one another meaning that when one smart contract is completed it triggers the start of another.
Smart contracts offer more than just the transfer of digital currencies. Through Blockchain technology, these contracts can be used in different areas such as supply chain departments in companies, controlling online games, running a voting system among others. The beauty is that they cannot be interfered with because changing one contract would need you to change the entire coding which is practically impossible.
Benefits of smart contracts
- Security – smart contracts work through Blockchain technology which is decentralized which makes them very secure and impossible to hack.
- Speed – Through smart contracts transaction time is reduced and your transaction can be approved within seconds.
- Cost-efficient – Smart contracts have eliminated costs of hiring staff to monitor the progress of a transaction.
- Anonymity – Smart contracts are automatically performed which eliminates third-party involvement.
What are Softcap and Hardcap in ICO?
An ICO hardcap means the highest amount of money that an ICO is planning to collect from the crowd sale. Most of crypto projects and startups set the hard cap so high making it hard to achieve. There are however some well-hyped projects which have reached the maximum capital needed. In most cases when the hard cap is reached the projects stop accepting more funding and the ICO is closed. We created a list of low hardcap ICO and STO. Check it out!
An ICO softcap is the least amount of capital expected to be raised through the ICO for the project to be termed as successful. If this amount is not reached the project is stopped and the amount raised returned to the investors. Most of the ICO projects, however, hit the Softcap. View our list of active ICO and STO that have reached softcap.
What is a Whitepaper in an ICO?
A white paper is a paper that is used to describe the theory behind specific technology. In short, it is the theoretical part of an invention. According to Hubspot, “A white paper is a persuasive, authoritative, in-depth report on a specific topic that presents a problem and provides a solution. Marketers create white papers to educate their audience about a particular issue or explain and promote a particular methodology. They are advanced problem-solving guides.”
A white paper is used to communicate about a product. I addition it acts as a guide during implementation since it shows the timelines, legal requirements and even the capital requirement. White papers have become very popular in the crypto world. A well-written whitepaper helps build credibility and trust.
What is an Airdrop in crypto? (free token!)
A crypto airdrop is a process of distributing new tokens to people either as a method of promoting the token or rewarding loyal customers. In general, it is the process of distributing digital currency tokens to specific users’ wallets free of charge. In most cases, airdrops are done by startups in an attempt to boost their projects. This is a good way to get Free cryptocurrency and start building your crypto portfolio.
Airdrops are done because of the following reasons:
- To reward loyal customers – This happens when trading platforms or exchanges decide to give back to their best customers.
- As a marketing tool – Airdrops are used by many startups as a marketing tool to attract many people to their projects.
- Creating awareness about an upcoming digital currency
Note that anyone can participate in airdrops. The only requirement is an active wallet and access to information about upcoming cryptocurrencies. Visit our ICO, Airdrop and Bounty Facebook group to stay up to date with new airdrops and Bounties. You can also visit Crypto Airdrop for an updated list of crypto airdrop.
What is a Bounty in crypto? (free token!)
A bounty is a reward which people get after completing specific tasks. In most cases, the tasks are simple enough for all everyone to participate. Bounties are mainly associated with ICOs and the participants of these bounties are spread across the different stages of the ICO. There are two types of bounty programs: Pre-ICO Bounty Program and Post-ICO Bounty Program. Bounty will usually give you more crypto than airdrop as the user need to do some tasks. Like airdrop, bounties are a good way to start building a portfolio and get free cryptocurrencies.
Pre-ICO Bounty Program
This bounty is launched before the start of an ICO. This program is mainly created to bring excitement about a cryptocurrency project. In the pre-ICO bounty, the activities include a social media campaign, Article writing, and signature bounties.
Post – ICO Bounty Programs
This bounty happens after the ICO has been completed and the required funds raised. The main aim of the post-ICO bounty is to make improvements on the projects based on suggestions from the community and bug examination. In this stages, the bounties include Bug reporting and translation campaign bounties.
Get into bounty easily with Bounty0X. The easiest way to get into bounties in my opinion.
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