What is Initial Coin Offering (ICO)?
ICO (initial coin placement) is a crypto-analogue of an IPO (initial public offering), in fact, a new model of crowdfunding. At the ICO, young projects attract investment in the form of a crypto currency for the successful launch or further development. Instead of shares, the company produces tokens in limited quantities. Investors cannot influence the development of the company in any way; however, tokens can be used for purchasing different products, for paying company services or trading on crypto-exchanges.
How legal and risky is ICO?
All ICO events are not regulated by law and are considered legal. However, unlike the IPO, investors are at great risk of losing all investments at different stages of crowd sale and the company’s further development. This is due to the ordinary human factor, when the founders deliberately organize the ICO, presenting the fake concept even with a competently drawn up “White Paper” for the purpose of enrichment.
That is why it is very important to take into account the smallest details in the advertising campaign of a particular project, carefully study WhitePaper, RoadMap, read information on the forums for the project, pay attention to the advisors, and verify the legal force of all submitted documents.
How to organize your own ICO?
- The most important stage in which most startups end. The final product should be relevant and valuable to the target audience. It is desirable that the basis of the idea is a problem that you can solve.
- We need managers (for content, PR, SMM, community), programmers, designers, editors and targetologists. If you have limited in budget, try to find interested people in the forums of cryptomatics. Offer your tokens as payment method.
- Find out everything about competitors who have recently had a successful ICO. If you have the skills of Internet marketing – it is not a complicated process to study competitors. Use the services to analyze traffic, watch social channels and celebrate interesting moments.
- Company registration. It would be necessary to register your company in foreign jurisdictions: Waves, Starta, ZrCoin, BitCAD, Golos, etc. We advise you to contact a lawyer regarding this issue. However, many startups, that use HYIP, work without legally registered companies.
- Select the platform on which tokens exist: Ethereum, Waves, or own tokens. There are two options. The first: the creation of smart contracts and tokens based on Ethereum. A simple process with the availability of funds and a programmer. Pay and then forget about everything. The second option is budgetary. Based on Waves, you can design your own tokens without programming skills. Very convenient and gaining momentum.
- Determine the minimum and maximum amount of investment and set the duration of the ICO. Soft cap and Hard cap is useful for those considerations so that you can collect enough money for the advertising campaign of your main round of token-ICO on Pre ICO (if you are a young startup and did not enlist the support of an investor). In addition, for the ICO you still need to sweat and do not write mythical figures. The saying “more is more awesome,” does not work here. You should take into account many factors, such as organizing a workflow in the case of soft cap or hard cap. Moreover, work on improving the product, the subsequent marketing and so on.
- Development of WhitePaper. A complex document that is an analogue of a business plan. It should carefully describe the whole strategy of creating and promoting the product, describe its unique advantages, but the main thing is to do it convincingly and without errors. The main and the most common mistake of any fawner: I compile TK and give copywriters to work. Stop! It is a delusion. No one knows your project better than you do! A copywriter will write exactly as much as you give him information. Of course, this method suits start-ups, designed for fast, “easy money.” Still, do we expect to make a quality product?
- Launch of the official website, Email-list service and creation of pages in social networks. The main thing in the creation of the site is the presence of white paper and contacts in the header of the site. Then, mandatory progress bar is required (table) where each user can see the amount of people you are attracting and the achievement of Soft and Hard Cup in real time. The presence of a roadmap will clearly show the investor about your plans for the near (and distant) future. Plan bonus offers for each day for a token and place it in a beautiful table. Check the presence of the block Team on your landing (photos of real people, with a brief biography and links to their profiles on social networks). Think about how your form of buying token will look (what kind of crypto currency will replenish and calculate). The presence of an email subscription is an important point only at the stage of testing the idea (used to collect contacts). As for social networks, there is no big difference (classical posting of news with application of social engineering and cool pictures).
- Preparing and running Pre-ICO and Pre-Sale. You need to understand why you need them. Usually Pre-ICO is carried out by young start-ups who do not have sponsors or the initial capital. The collected funds from Pre-ICO, as a rule, are spent for the main round of ICO after its completion.
- Development and launch of the Bounty campaign. The campaign is developed in accordance with the number of tokens that you issued. The number of tokens is usually displayed as a percentage of the number of coins that you have. But not more than 5%. If you still increase the figure, then appears the question of the profitability of investment from the investor.
- Put the project into ICO-trackers: iconomical, icoalert, icotracker, ico-list, coingecko, the-blockchain, etc. One of the main sources of traffic and attracting investors are terriers. It is worth remembering that there are two types of it. The first: these are free trackers. Fill out the above forms and here is your project on the site. It is necessary to know, that such kind of placement would guarantee your project the lowest positions on the list. Now, the mechanism of payment for all sorts of paid services comes into operation (project picking up the list, highlighting with color, and so on). Therefore, we would call these sources of traffic conditionally free. Second: paid listings. You have to pay for not only placement, color allocation, lifting to the top positions, banners, etc., but also for tweets, mailing on the base of potential investors and other useful, at first glance, trivia. Undoubtedly, paid listings are much more effective, but placement and payment of a full package of services can reach up to 9 BTC. The cost of tweets is up to 0.1 BTC.
- Development and launch of an advertising campaign. The expression “who is on that much” is great for the phenomenon of an advertising campaign. In the course are all the methods, from spamming to groups in social networks, mails and instant messengers, buying advertising positions on crypto-sites, news, targeting in Facebook and Instagram. For these purposes, some startups attract a “guru” of paid traffic-arbitrage.
- The development of a private investor’s cabinet is not always relevant. It serves more as an imaginary investor’s guarantee against loss of funds. Now, the most profitable model for buying coins is “I give you money, and you give me tokens.” It is carried out quite easily, by creating a smart contract based on Ethereum.
- Translate all text materials into popular languages: English, Chinese, German, French. You can find a good English interpreter in Telegram channels. Later, when you have a clear vision of the situation, and you publish a bounty campaign on all sorts of venues, you can include translations into many different languages in the promotion program. Most users will gladly translate texts for a symbolic award.
- Launching the ICO. Carefully study all processes for the prompt elimination of unforeseen situations and force majeure. If there are several “think-tanks», it is easy to cope with the task. The fact is that only a few directions should be monitored (bounty, contextual and media advertising, content generation).
How to promote your own ICO?
ICO Market should fulfill at once 2 key tasks: the project should be recognizable and attractive for the maximum number of investors. There are several directions at once:
Development of an informative site on which there should be a product description and an ICO (roadmap) schedule. In addition, an advertising video, WhitePaper, the “our team” block, a subscription for mailing and retargeting. Do not forget about the block, informing about the quick start, and then we remind you about the form of buying the tokens and the progress scale of the token with bonuses and dates. It is worth noting and it is desirable to have real investment figures on the site.
Promotion in social networks and forums, especially on Bitcointalk, as well as writing information articles and press releases. The Bitcointalk forum is a separate story in all the variety of attracting investors, with its rules and features. As for social networks, the only advice is to publish a useful content. Not just about your project. Do useful things for users and you will win the loyalty of the audience and grow your own community.
Other marketing tools: bounty campaign, contextual advertising, paid ads and posts in popular Facebook, Instagram, Telegram, VK communities. Create chats, groups, target in FB and Instagram … Bounty campaign is a great idea, it accumulates a huge flow of users into your social channels.
When did ICO first appear and why did this phenomenon become popular?
Officially, the first ICO is considered to be the project “Mastercoin” (renamed into Omni in 2015), which began to attract funds on July 31, 2013. Only a year later the Crowdshead Ethereum appeared. The fundraising was held at the Bitcointalk forum and as a result, the project have attracted about 500 investors, which in total have invested 5,000 BTC ($ 500,000).
The main goal of Mastercoin is to give a hand in creation-encrypted currencies and trade them without tangible difficulties.
ICO has become popular for 3 reasons:
- The ability to collect quickly the necessary amount of investment in the crypto currency. There are several examples: Gnosis collected $ 12,000,000 for 10 minutes; and Brave in just 30 seconds collected $ 35,000,000.
- Absence of bureaucracy. Project managers save months in search of venture funds and do not burden themselves with paperwork to get the legal status they need – it is not needed a priori in the ICO.
- Everyone can invest with a profit of 100% in 1-2 years. The entrance barrier is minimal.
ICO is a simple and quick way to attract money without legal consequences in case of failure.
What is the difference between ICO and IPO?
There are 6 main differences:
- Time of return of investment: 1-5 years against 7-10 years of IPO. There are exceptions. In our memory approximately 10 projects for 2016-2017 brought return of investments from x10 to x100 for several months. Investors play a big role in the soon growing value of the token. After the release on the market of the ticker of a startup, all users who purchased it on the initial offer began actively selling these tokens in the hope of making a profit. Therefore, the term of investment return can take several years, less often months. It is necessary to remember this when investing in a new project with the hope for a month to receive a hundredfold return.
- Instead of shares and rights to a part of the company in an IPO, the investor receives tokens, which are only a functional unit, and are intended solely for use within the platform and trade. In addition, tokens are not regulated by law and are produced in the blockhouse.
- Differences in investment rounds: in the IPO, this is the seeding and investment rounds of A-F. In Initial Coin Offering – pre-account, pre-ICO, ICO, listing on stock exchanges and the final implementation of the model.
- Startups on IPO invest primarily in the development of the economy of a particular state, while the blockchain startups are developing a decentralized digital money market.
- The legal status of a company on an IPO is regulated by legislative norms in a certain jurisdiction. ICO does not have an organizational legal structure and operates solely on the trust of depositors.
- Unlike an IPO, any person can be invested in a start-up business without venture or family funds, avoiding any restrictions.
Is ICO profitable for investors at least 1000%?
Yes, this is true. However, if you want to get a solid profit, you should have to face huge risks of losing your investments already in the first rounds of crowdsale or in the process of developing a start-up. There is only 1 percent of 100 that your project will be successful and bring a profit of 100% (statistics).
What are the risks for investors who invested in ICO?
- It is the main and most popular risk, from which no one has immune.
- Human factor. Even if the idea of a startup can be called innovative and ingenious, any of the team members, incl. leader, can leave the project. The consequences are unpredictable. This outcome is also considered to be a scum.
- Because of the hacker attack, a startup may lose all the crypto-investment, as it happened with Matchpool (an application for online dating). Attracted at ICO $ 5.8 million were stolen.
- Infringement of the patent. The technologies described in WhitePaper, which will be used to create the product, may be in the intellectual property of another company, which will entail litigation and heavy fines.
All issued tokens must be registered in the state and be equated to shares on an IPO – the SEC made this statement; however, not all startups adhere to this recommendation. Any loss of investment can not be disputed.
How to become an investor and get on the ICO (Pre-ICO)?
To become an investor in ICO you need:
- a purse with a positive balance BTC, ETH, LTC, NEM (XEM);
- minimal knowledge of terminology and Blockchain technology;
- attentiveness in studying the ICO, in which you are going to invest;
- awareness of risks and patience.
If you want to get to the ICO, you need constantly monitor special resources (trackers and forums), which publish various blockchain startups with a schedule of pre-ICO and ICO, a brief description and a link to the official page. On the site, you can study in detail the WhitePaper and fill out the form for investment.
What is Pre-ICO?
This is a useful tool for efficient preparation of the basic ICO, which allows you to detect and eliminate any technical malfunctions and errors. At this stage, a limited number of tokens are put up for sale at the lowest price, which allows investors to save money and get bonuses for their activity. In theory, this sounds like this. In the enterprising minds of the funders and marketers, this process, as a rule, occurs in a different way. A startup does not have to have hundreds of thousands of dollars to initiate an ICO phenomenon. It is enough to have an idea, a minimum set of marketing knowledge and a little writing talent. For the most part, as mentioned above, the projects use Pre ICO to collect a pool of cash to begin promoting their idea and their project to the fullest.
How to choose ICO for investment?
You need experience in studying the project, in particular, its WhitePaper and RoadMap if you want to turn the next ICO into a source of large income in the future -. The right knowledge and the right vision of the potential will help you not to lose your choice and effectively invest your money. They are not responsible for your investments and it would be foolish to be guided by other people’s knowledge in such a risky branch. Recommendation: read the White Paper, regularly visit bitcointalk (the startup activity on this site speaks about its desire to develop and cost a transparent investment system along with the loyal community). Be familiarize with the advisers (most projects publish links to the profiles of their own advisers in the social channels). Take advantage of this. Talk, chat with people, and find out the details. The famous person in the Advisers block still does not say anything. There are cases when the scum projects published the founders of popular projects in order to attract money and deceive investors. Trust them, but do not forget to check everything. It would be superfluous to look into the most popular trackers. Even without money, the project can get there (because the administrator of any resource wants to show authoritativeness of his site and present several cool projects on it.) Therefore, administrators publish startup surveys on a voluntary basis to raise the prestige of the resource. Subscribe to social ICO channels, which you like and follow the publications. From our personal experience, we can say the following: using the above methods, you can significantly protect yourself from reckless investments and get a refund even if there are bad strategies on buybacks.
How to find an advisor for your own ICO?
Adviser is an auditor of the ICO project, acting as guarantor of conscientiousness and serious intentions of the founders of the startup. Public people who have become famous in a certain sphere usually choose this position: banking, game industry, IT technology or even in the blockchain.
You need to pay attention to the following factors, if you want to choose a good adviser:
- a person, who knows everything about the product that is being developed;
- he does not have a lot of projects that he leads simultaneously;
- he is interested in the quality of the product, not in the amount of the collected investments;
- this person studied the project in detail before he vouched for it;
- he has a positive activity in discussing or conducting similar projects – you can check on forums, social networks, blogs, YouTube.
How to find the source of the competitor’s ICO traffic?
Recommendation is to examine the entire advertising campaign of the competitor’s ICO and check each used instrument separately. This task can be entrusted to the Internet marketer or you can perform it by yourself, with the help of special analytics services and obvious factors: links to social pages and YouTube channel, contextual advertising, retargeting, SEO, back links.
What is Token and where does it come from?
Token (coin) is the digital currency of each specific ICO project, which is issued to investors in exchange for a crypto currency (in the form of a digital code). This “coin” is an asset that you can trade on exchanges. The cost per unit can increase against the backdrop of success in the development of the project.
Digital tokens are based on Ethereum block or other platforms to divide the company’s assets among depositors.
What determines the cost and volumes of tokens?
The cost and number of tokens is determined by the initial estimate of the amount of investment that wants to attract a start-up to the ICO. For example, developers need $ 10 million for a start and development through Ethereum. They issue 1 billion tokens at a price of 0.01 ETH per token. During all rounds, there is a perspective to attract Ethereum to satisfy the request for the maximum amount of investment. All remaining tokens will be destroyed, that will increase the price of the rest one.
What are the standards of tokens?
The standardization of tokens can be compared with the license that gets each script, which is issued over the blockchain on a certain platform. This status gives the token a value and the right to use it in trading on various exchanges. One of the most important standards, ERC-20, has been further developed by the Ethereum network and ensures that all tokens produced correspond to the complete list of requirements and work correctly throughout the ecosystem.
In the future, new standards will begin to appear, they are called upon to correct all the main shortcomings of the existing ones. For example, ERC223, which will block random transactions on random contracts.
How to add a purchased token to your Ethereum wallet?
After you purchased the tokens on the ICO and logged in to MyEtherWallet, you need to click on “Tokens” in the “transaction history”, and then you will be redirected to the resource “Ethplorer.io”. Then in the “history” you should select the initials of the corresponding token, opposite to which the balance will be highlighted. Further, everything is simple:
- In the office of MyEtherWallet we click on the button “Add your own token”.
- In the address field, add a smart contract.
- In the field with the symbol of the token, copy its short name.
- In the field with the crushing, you need to copy the number of Decimals.
- Click “Save” and check the balance.
What if all the tokens were sold?
If you do not have time to purchase tokens at the time of the ICO, they can be redeemed on exchanges.
What is the economy of tokens and why is it important to know about it?
The economy of the token is a system and principles for creating, issuing and distributing tokens within the company and among investors. This is a new economy based on cryptography. The necessary knowledge helps to allocate suspicious ICO-projects at the study stage, as well as:
- predict inflation;
- to note speculative actions;
- control the emission of tokens;
- to get out of the game in time without losing money.
What is Crowdsale?
Crowdsale is the same thing as crowdfunding, but with a different nature of assets. Investors, according to the old scheme, fold their money through crypto-currencies to develop an ICO start-up. Instead of shares and actual pre-order for the product produced by the company, depositors receive tokens in exchange for their own crypto-investment.
What is a Smart Contract?
A smart contract is an independent, safe, reliable and accurate algorithm that is being built into the blockchain and executed by its nodes. Smart contract automates the transaction process between the seller and the buyer, without resorting to the services of intermediaries. The work uses the domino principle – when the first action is followed by the second, according to the written code.
Smart contracts can be written on any block, but Ethereum provides unlimited possibilities for writing the algorithm and further work with it.
Smart contracts can be used in any business area.
What is the contract of crowdsale?
The contract of the crowdsale is designed to distribute tokens among investors, team members and members of the bounty program. The contract works very simply. You enter the desired amount of investment in the form of buying tokens on the site of the selected ICO. In the same form, you immediately see the count and the equivalent in the tokens, which you get by spending the selected amount. Then, you copy the system-generated address and paste it into the field for the items in your Ethereum purse. Always check the amount of GAS limit; otherwise, the transaction can be stuck indefinitely. After sending the payment, you receive your tokens directly to the address of the Ether.
How a smart contract does differ from a crowdsale contract?
If a smart contract specifies the conditions for obtaining a certain number of tokens in exchange for crypto-investment, the crowdsale contract should be preliminary analyzed by the specific ICO. This will help a potential investor to understand the percentage of tokens distributed during the ICO.
What is White Paper?
WhitePaper is an analogue of the business plan and the most important component of any ICO project. The document helps the investor to study the startup in detail and take a decision. Following points should be stated in the “White Paper”:
- How did the idea appeared.
- How blockchain will be adapted to the market.
- Analysis of the market, competitors and growth potential.
- A detailed presentation of the product that is being developed.
- Description of all technical characteristics and technologies used in development.
- Practice of commercial application of the product.
- Conditions for investors at the stages of the Pre-ICO and ICO.
- What is already done and how much time you need for full implementation.
- How exactly you use your investments.
- Description of the team with people and their experience.
- Bounty campaign.
What is a Roadmap?
RoadMap is a systematic scenario for implementing a project on an ICO with fixed deadlines. This allows investors to see a detailed schedule of all stages, key periods of development and financial component.
What is the difference between “White Paper” and “Roadmap”?
WhitePaper is key document (an analogue of the business plan), describing the company’s activities and the development strategy of its product. RoadMap is an important addition to White Paper with a systematic instruction for the company and an established deadline.
What is Blockchain?
Blockchain is a technology that appeared along with bitcoin. Its main feature is the continuous operation of the chain of blocks. All transactions between the parties are recorded from the very beginning and stored in an updated registry, which can be viewed by each member of the system.
In addition to cash transactions, you can store information about loans issued in Blockchain, committed offenses, marriage, etc. Money is not a key component of this technology; blockchain establishes complete independence and security between users.
The secret to the success and popularity of Blockchain is the way information is stored in a constantly updated registry. All records are combined by blocks, which are eventually connected in a chronological chain by means of mathematical algorithms. Each block is connected with the previous one – it resembles a train in which one car drags the next one.
The computers with the same network perform the process of hashing. When all calculations are the same, the block gets its unique number and is added to the end of the chain. Previous records can not be faked.
What is SCAM?
SCAM is a fraud. This phenomenon in ICO occurs very often and, according to statistics, exceeds 95% of all existing investment campaigns.
Scam is classified by:
- time – short-term and long-term;
- complexities – simple, medium and complex;
- subjective side – deception is planned initially or the project has completed its responsibilities in the development process.
The logical outcome of the victims of the scam is the irrevocable loss of money.
What is GAS?
Gas is a conditional “fuel” that allows financial transactions between the Ethereum crypto-currency wallets. When you enter the purse number and transfer amount in your office at MyEtherWallet, the minimum and recommended amount of “Gas” will be set in the lower field of “GasLimit”, which is received by the transfer miners. It is more likely that the transaction will not be processed at all If you set the figure lower.
“Gwei” can speed up the transaction process will help – this is the cost of one unit of Gas. The higher it is, the faster the translation will be made. You can find the average cost of 1 gas on ethstats.net. In sum, you will find out how much commission you will pay for your transfer in dollars.
How to calculate?
Let’s show an example. You are going to transfer 0.123 ETH and the recommended amount of “Gas” is 100,000 in the GasLimit field. You take this amount and multiply by 25 Gwei (for example, this is the average cost of 1 Gas). Further, we use the simple formula:
100,000 * 25 * 0.000000001 = 0.0025 ETH
0.0025 ETH multiply by the current rate ($ 300) and get $ 0.75. As a result, the transfer fee is 75 cents.
What is Premain?
Premain is the process of extracting new crypto currency in large volumes, until it reaches its popularity. The miners do this in order to profit sell the crypt on the exchanges in the future.
What is Hype?
Hype is the increased popularity of some phenomenon, a person or product, around which a huge number of stakeholders with a specific target action gathers.
What is Fiat?
Fiat is a monetary currency that received the legislative right to use as payment. The state exclusively trust fiat. These are dollars, euros, rubles, yuan, francs, pounds and so on
What is Bounty?
Bounty is a marketing tool for promoting ICO. Organizers create an information platform, in which they set tasks for a massive advertising event. Rewards are to be paid in the form of tokens in exchange for active action and effectiveness,. Very often Bounty campaigns are published in large crypto-communities like Bitcointalk, Golos and so on.
How to participate in the bounty program?
First of all you need to have an account on the Bitcointalk forum, as well as in Telegram, Facebook, Twitter, YouTube, Medium and Slack. It is necessary to have a crypto-purse Bitcoin, Ethereum and Waves.It is simple to be a participant in bounty. The startup publishes certain rules and the user must execute them. In return, the participant gets a share of the allocated tokens. Everything is under control with the help of Google tables and Google forms. You can get much more tokens than direct bounty participation through forms. In our memory, only one of the colleagues was able to earn about $ 70000 on one bounty only, suggesting to make video presentations.
What is the percentage of bounty?
Bounty shares are part of the funds raised at ICO, measured in percentages. For example, the organizers plan to allocate 5% of the attracted crypt to the bounty members compensation in accordance with the categories for which the limits were set. You can calculate shares for participating in bounty campaigns using formula:
(The amount of tokens allocated for a specific campaign / the sum of all shares of the campaign participants) * The specified share
(100,000 / 1,000) * 10 = 1,000 tokens). It is not necessary to exclude certain moments in calculating the emitted tokens allocated for the bounty. Otherwise, due to a poorly calculated number of tokens, you can pay out an impressive amount of money to the participants, which will lead to investor’s displeasure.
How to get Escrow?
It is necessary to look for an uninteresteds people in thematic forums or to resort to specialized Escrow services (the guarantor of the storage of funds), they will accept investments at the time of the ICO. The main thing is that the involved person confirmed his reputation with his activity in the forums or with a positive history in previous cases.
What is a ticker?
Ticker is symbol of a token within one information environment or marketplace. It is abbreviated designation, just like Bitcoin (BTC), Ethereum (ETH), Monero (XMR).
The startup tokens are redeemed on these conditions. The company offers an initial offer where you buy its tokens at your own expense. Then, after some time, the company redeem its tokens back, thereby maintaining the liquidity of the tokens on the exchanges. As a rule, the conditions of the buyback in WP (White Paper) are prescribed.
What does “buy back” mean?
Buy back involves some terms on which startup tokens can be redeemed. In other words, a company launches an initial offering where you can buy its tokens for your money. Then, after a certain amount of time, the company is obliged to redeem its tokens, thus facilitating their liquidity on exchanges. As a rule, the terms of buy back are indicated in a white paper.