There has been a lot of confusion on what an initial coin offering is (ICO– likewise sometimes called a token generation event or token sale), what type of companies an ICO can be used for, and what enters into releasing an ICO– from a project’s viewpoint.
Disclaimer: This is not to be construed as investment or legal suggestions, but rather implied as a design template to show the process behind an ICO, and exactly what a job’s stakeholders (group, board, stakeholders) must think about when carrying out an ICO.
Given the blockchain market is relatively new, there isn’t a whole lot of information on the topic (from a task’s viewpoint), and with each new ICO, teams are learning finest practices on what to do and what not to do. Below is a guide of all of the info we collected about the ICO process, with input from individuals who experienced the procedure very first hand.
The biggest 2 questions you have to think of initially are:.
- Exactly what is the purpose of the token?
- Are you sure you wish to do an ICO?
- What is the purpose of the token?
- What function or utility does it carry out?
- Is the token absolutely needed?
- Why does your task need to be on the blockchain?
- Can you describe a viable economic model behind it?
If your application doesn’t have to be built on top of a blockchain procedure, you need to think hard prior to progressing. For example, the computational expenses of developing an application on top of Ethereum is a lot more expensive than something like AWS. You have to have a strong reason for why you are building a decentralized application vs. a centralized application.
If you are not sure whether your application should be built on the blockchain or not, you should do more research study and spend more time finding out about Bitcoin and Ethereum. Constructing a decentralized application is essentially various than an application utilizing client-server architecture, and you’ll have to completely comprehend the parts of a blockchain and exactly what can be built on top of this brand-new architecture.
An ICO is essentially different than raising money through VC’s or other conventional methods.
On one-hand, you are offering future usage of your platform (not giving up equity). On the other-hand, you are ending up being a public company on the first day. You’ll have a substantial community you’ll have to handle post-ICO, and you need to ensure you want to handle this concern in advance.
Here are a couple of things to keep in mind while thinking through whether your task needs to do an ICO in the first place:
- Whatever you do and all the actions you take will be reflected in the cost of the token.
- Your team will get bombarded non-stop, numerous times a day, with questions about the rate of your token.
- You’ll have to be a global business from the first day.
- All of your internal group conversations will likely be pressed publicly.
There will be fantastic tension in trying to develop things that are long-lasting important vs. short-term valuable.
- If your product isn’t open sourced already, there will be a big backlash to become completely open sourced. There is a strong expectation that many blockchain projects are open-sourced jobs.
- In general, cryptocurrency jobs are way more public/transparent than common start-ups, or even standard public business.
In general, excellent blockchain tasks look and function far more like open-sourced software application tasks vs. traditional tech companies. You and your team will need to choose both whether your application makes good sense to be built on a blockchain + you want to run as a transparent and open company.
Marketing is insufficient, people have to understand and trust your abilities.
Much of these early ICO’s were carried out by deep stack blockchain designers that became part of the core crypto community, with high credibility and track record. The ICOs that sold out quick and fast did not come out of thin air. Early token investors– who by the way were likewise part of the core crypto community– knew these designers well, and trusted them, as their respective product concept had actually been talked about and peer evaluated for many months over Reddit, Twitter, Slack, Bitcoin Talk, different crypto podcasts, and so on.
White papers are the business plans of the Web3 with which groups attempt to raise your funds, typically before having a prototype. Composing a good whitepaper is the main job for every group. Avoid outsourcing the writing to 3rd parties. If you desire people to take you seriously, you need to include the whole group: from core devs to your sales individuals. You need a semi-technical explanation of how your project works and an easy to understand walk through for non-techies. The whitepaper ought to be attracting financiers with no technical knowledge and designers alike. It needs to consist of:
- Reliable technical roadmap.
- Possible service roadmap.
- Clear tokendistribution model.
You can take your effort one action even more and release a technical paper like the Ethereum’s Yellow paper or Zcash’s technical whitepaper. These papers give an additional insight into the technical application and are only focused on individuals with deep understanding of blockchain innovation. They offer more trustworthiness to your tech understand how, and allow for online swarm review. Technical documents have so far primarily been utilized for blockchain token sales and not for dApps token sales.
You will be more trustworthy if you currently have an item model. Motivate individuals to visit your GitHub page and play with the code. Please note, projects without a single line of code raise many red flags in the eyes of investors. If your name is not Vitalk Buterin or Gavin Wood– simply using examples here– you might have problems raising money just with a white paper.