ICOs have reached fever-pitch level. They are transforming the landscape of digital investment like never before. Billions of dollars are exchanging hands every month as new millionaires are digitally born, virtually every day. Investors are constantly sniffing out for new ICO opportunities to hedge their investment surplus in the hope of riding over the exponential growth that is characteristic of most ICOs’ trajectory.
According to Coindesk, $6.3 billion worth of ICO funding has been raised just in the first quarter of this year. This is already a 118% rise compared to the same period last year. A PwC Report corroborates Coindesk’s findings by reporting that ICO funding by the end of the first half of this year has doubled that of the entire of last year. This proves where the new billions are being minted.
In this article, we are going to provide general information, investor-specific information, and creator-specific information. This way, we can cater to each interest in a tailored manner.
What is the nature of an ICO?
There are two aspects to consider when looking at the nature of an ICO: financial and technical.
From a financial perspective, an ICO is simply a digital offer for a stake in a future asset, based on the creator’s prospectus.
Technically, an ICO is simply a new kind of crypto token. In this regard, a crypto token is a block of unique cryptographic code created through a hash algorithm.
Types of ICO tokens
However many ICO tokens there are in the world, they fall into two broad categories:
- Utility tokens
- Security tokens
Utility tokens are those tokens that are geared towards funding a utility product or service. As such, they are aimed at the delivery of utility to consumers. On the other hand, they are assets to the buyer (investor) as they provide the buyer with a right to an asset, or a liability, in the utility company to be formed. The issuer either promises the buyer a future stake of the project’s earnings or a stake of the future repayment. In essence, utility tokens are financial in nature and are more likely to be treated as shares (in terms of assets) or bonds (in terms of liability) whenever disputes arise or there is a need to enforce contractual or compliance obligation.
Security tokens are those tokens aimed at enabling the buyer to digitally access certain restricted resources. They are like gateway passports or visas to a given resource point.
Therefore, when you are planning to create or buy an ICO, you must ask yourself whether the ICO is a utility token or a security token. There are a few instances where an ICO can be both, but, one function will be more dominant than the other.
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How do ICOs come about?
The first step of an ICO begins in the mind. As a creator, you come up with an idea about a novel project that you think has great potential of being actualized. You then formulate this idea into a consumable concept.
With a clear consumable concept, you create a business plan to guide its implementation. Once you come up with a business plan, the next step is to woo prospective investors via a white paper.
After producing a white paper, you then move on to the technical aspects of creating your token to issue as an ICO. You can, however, still create the token (demo version) before writing the white paper.
What is an ICO white paper?
A white paper is simply a document clearly outlining your concept, how you are going to implement it, what kind of pain-points it is addressing, and what kind of solution it is offering. Ultimately, the white paper must have a specific target audience. In this case, the target audience is potential investors. Since you are targeting potential investors, you must clearly address the question, “What is in it for me?” You must demonstrate how potential investors are going to benefit from your ICO, should it succeed.
A white paper is more like a distilled version of your business plan that focuses primarily on stimulating a specific target audience into committing to the desired intent.
What is the relationship between an ICO and blockchain technology?
To achieve wide distribution, automated transaction, and sound transparency, the tokens are listed in a special public ledger called blockchain, bringing about the relationship between an ICO and blockchain technology.
While not all ICOs rely on blockchain technology, most of them do. Since most public ICOs are floated through a cryptocurrency exchange platform, it is inevitable that they will rely on blockchain technology, with only a few private ICOs that have dispensed without blockchain.
In this section, we are going to focus on providing information to those who want to buy/invest in ICOs.
Where are ICOs floated?
ICOs are floated on the cryptocurrency exchange platforms. It is just the same way IPOs are floated on the stock exchange markets like the NYSE, NASDAQ, and LSE. Mostly, each coin is floated on a particular cryptocurrency exchange platform, however, it is possible to cross-list among several compatible platforms.
Popular exchange platforms for ICOs are Coindesk and Binance.
How does one buy an ICO?
To buy an ICO, you simply need to visit the cryptocurrency exchange platform where that particular ICO is floated. Each ICO will indicate the platform on which it is available. There are very few platforms that support different kinds of ICOs and cryptocurrency. The Ethereum platform takes the giant share of ICOs as most of them are created using the ERC20 standard. Thus, any exchange platform that trades in ether (the Ethereum blockchain’s token) is likely going to trade in some of the well-known ERC20 ICOs.
How does one know that a particular ICO has been floated?
When it comes to the world of cryptocurrency, information is the king. You need to be up-to-date with cryptocurrency market information. Luckily, there are various online sites where you can get this up-to-date information collected and collated for you. One such reputable site is ICOWatchlist, where you get information about upcoming ICOs.
What are the current ICO trends?
Just like the securities exchange market, observing trends is crucial to making buy or sell decisions. Without knowledge of market trends, it will be hard to make an informed decision. Establishing a trend requires you to have up-to-date data, statistical skills, chart-making skills, and analysis skills. These are too technical for an average trader and also time-consuming and so the best way is to observe trends from already compiled charts. There are dedicated online sites that show this data, ICOWatchlist being one of them. This enables you to focus your energy and attention to interpreting the trends and making the buy-or-sell decision.
What is the latest in the world of ICOs?
Observing trends enables you to have a glimpse of the cryptocurrency market skeleton. However, to have a soft-touch with reality, you need the flesh, that being market sentiments. The best way to gauge market sentiments is to listen to experts and attend events where both experts and traders/investors come together to specifically discuss the cryptocurrency market in general, and ICOs in particular. Knowing when and where these events take place can be a challenge, however, there are dedicated sites to help you gather this information; one such popular site is ICOHolder. On this site, you not only get the usual information about what event, where, and when, but also information about the popularity of the conference, growth rate in attendance, and discount offers. This extra information helps you to wisely choose which event to attend.
How does one gain from buying an ICO?
The main reason why people buy ICOs is for speculative purposes; they hope to buy low and sell high. The main aim is to reap profits from a higher selling price compared to their initial buying price. For example, it is not so many years ago when 1 bitcoin was selling for less than $5. This climaxed several years later at around $14,000, thus rewarding the initial investors with over $10,000 in profits per coin!
However, investment is about assuming risks. The common financial principle of “higher risk, higher returns” still holds. Thus, just as there are chances of winning, there are also chances of losing.
In this section, we are going to focus on information that is useful to those who would like to venture into creating tokens and floating ICOs.
How does one launch an ICO?
With the information provided above, a curious mind would be interested in how to launch an ICO.
The following are key steps to a successful ICO launch:
- Generate a novel concept about how to solve a common pain-point
- Devise a project based on the concept
- Create a business plan to actualize the project
- Create a token prototype for potential investors to have a ‘look-and-feel’ of the final product and of your technical capability to deliver it. If you are not a developer, you will need to hire a team of developers for that purpose.
- Review what other successful ICOs are doing with a view to refining your token
- Hire reputable auditors to test your token for security and compliance
- Develop a white paper for your potential investors. You may need to hire business development strategists to help you create an inspiring white paper
- Build a team to help you oversee the launch
- Prepare your online infrastructure to deal with pre-launch and the launch issues
- Prepare your crowdfunding campaign
- Launch your ICO
- Manage the post-launch communication and issues
- Manage success
Factors to consider before launching an ICO
Launching an ICO requires adequate preparation, just as launching a rocket does. The preliminary preparation will determine whether the launch will take off or not and the particular trajectory the ICO will be propelled in. Thus, you need a solid launch platform based on the following foundation ingredients and questions:
- Goal-oriented. “What is the goal of my startup?”
- Purpose-driven. “Why do I need blockchain tokens for my startup?”
- Blockchain-driven. “Do my startup and products really need blockchain technology?” The biggest mistake is that most startups go for blockchain as a means of using an ICO to raise funds, yet their products do not really need blockchain technology. Eventually, the ICO collapses not-so-long after launch
- Investor-centric. “What is it in my ICO that will cause investors rushing in droves? What is that compelling benefit that my ICO has that is too good to forego?”
- Legal protection. “Is my project legally compliant? If not, how will blockchain enable me to circumvent the legal bottlenecks without attracting the wrath of the government?”
- Privacy. “Will sensitive data be sufficiently protected when using a public ledger (blockchain)?”
- Competitor awareness. “Do I have competitors? If yes, how are their ICOs performing?” This answer will help you in benchmarking and product differentiation.
What kind of team do you need for a successful launch?
It is quite obvious that the entire process, leading to the launch of an ICO and managing its success, cannot be handled by one person. No single person can have all the skills and attributes required for such an enterprise. As such, you will need to formulate a strong team to help you manage the entire process.
At the bare minimum, the following are the people you need in your team for a successful ICO launch:
- Blockchain developers
- App developers (for the website and related mobile apps)
- Business developers
- Graphic designers
- Content experts and specialists
- PR experts
- Digital marketing specialists
- Community managers
- Specialized cryptocurrency legal advisors
- Translators (for the international audience)
Why are marketing and public relations key to your success?
History is replete with many projects, and more so, ICOs, that were conceptually superior and technically sound but collapsed at the doors of marketing and publicity. On the other hand, there are those ICOs that were conceptually weak and technically mediocre that were a success, simply because they were catapulted by marketing and PR geniuses. They eventually toddled through and gained stamina to stand and walk along the way.
Marketing and PR are crucial to the launch of your ICO. Nonetheless, you must not overlook the quality of the product (in terms of conceptual strength and technical soundness), in the hope that strong marketing and convincing PR will cure the defects. There is nothing that poisons your marketing, PR, and ultimately your investment than the wrath of investors failing to find worth for their money.
You need a solid marketing plan to avoid bottlenecks at launch, with such a plan including the following:
- A professionally created white paper that is both technically and economically sound
- An appealing website that has positive, inspiring and enriching content
- A highly engaged Telegram community (Telegram is the most loved messaging app by the crypto community)
- A well managed social media network (comprising of diverse social media accounts)
- Robust PR engine (for articles, blog posts, media pitches, press releases, among others)
- ICO listings
- Prototype demonstration and review via video (YouTube)
- Engaging supporters and key public announcements via in-person and online events
- Excellent customer support
How does a creator make money from ICO?
A creator is firstly an investor and secondly an owner. As an investor, the creator gains from an increase in the market value of the coin he/she has created. As an owner, the creator is able to gain capital to invest in the desired project with the aim of making ‘normal’ profit and deriving income.
The world of blockchain and cryptocurrency continues to explode astronomically. There is still infinite space for creators and profitable opportunities for investors. Information provided in this article offers a glimpse in to this relatively new world that still requires more citizens to inhabit its terrain.