Are you planning to become a part of the cryptomarket and create your own cryptocurrency? Great idea! Nowadays, the digital currencies are a global phenomenon that arouse huge interest among the investors. According to CoinMarket group, the total capitalization of Cryptomarket exceeded 600 billion dollars in December 2017.
The most famous and valuable cryptocurrency is Bitcoin. However, as Coinmarket states, it is not the only one that attracts investor attention. In the following chart, you can see that in 2017 more than 3.5 billions dollars were invested in the cryptocurrency market, not including Bitcoin.
What is common in all these projects? Each one of them has run a successful ICO before actually presenting a new cryptocurrency.
What is an ICO?
ICO is an abbreviation for Initial Coin Offering – a crowdsale of a new cryptocurrency that becomes a part of blockchain network. The aim of ICOs is to attract investors to invest their money towards the project by selling to them a limited number of tokens – unique digital assets confirming the buyer’s ownership of a coin or their right to purchase the company’s services. In the case that the campaign is successful, the price of tokens increases giving profit to their owners.
What are the advantages an ICO?
According to Coinschedule, last year more than 200 crowdsales were run, and almost 4 billion dollars were gathered. Fascinating numbers, aren’t these? And this is only the beginning. 2018 is predicted to be even more impressive. If you are interested in official figures, feel free to check the stats of this year.
The advantages of ICOs explaining include:
- quickness, easiness, efficiency – the process of handling an initial coin offer is easier, cheaper and faster in comparison to other fundraising mechanisms
- easy marketing – it can be easily advertised through online marketing
- engagement of the target audience – you can easily communicate with your target audience via social networks, blogs, Slack and Telegram channels.
What are the examples of successful ICOs?
Although the popularity of initial coin offers increased dramatically during the past year, it is not a new method of fundraising. The first famous crowdsale was held by Mastercoin in 2013 – they managed to raise $500.000 during the campaign. A year later, Ethereum attracted $17.3 million in investments. In 2016, their record was beaten by DAO or Decentralized Autonomous Organization, who collected about $150 million.
In 2017, DAO was surpassed five times over! Here are the most successful ICOs of the last year:
What are the main ICO prerequisites?
We have come to the most important question for you – how to launch an initial coin offering? Despite the ease and popularity of crowdsale, its preparation requires сoncerted efforts of numerous people, from developers to marketing, and PR-specialists. In this article, we will give you a brief ICO tutorial which will help you to plan the stages for your crowdsale.
Before launching an ICO project, you should get familiar with your target audience. Usually, they are:
- people who buy tokens in order to use the product associated with them. These are your most valued investors who see value in your project and decide to become a part of your blockchain. Usually, they are already quite familiar with the cryptomarket, and they are going to be your loyal clients
- speculators. They buy tokens with the purpose of selling them after their price increases
- gamblers. Usually, they are not really into crypto-community and are investing in many ICOs hoping to gain benefit from the most successful ones.
First of all, you cannot do everything alone, and you need a team of people that will be working on your project. During your crowdsale, you will require the help of the following specialists:
- Project Manager – the person who will coordinate the entire work of the group
- Community Managers – the people who will be in touch with the target audience
- PR expert – a mass media specialist
- Content Creator – the person to create ongoing interesting content for your blog and social networks
- Software Developers and System Administrator – the people who will provide technical support for your project
- Cyber Security Expert – the person who will prevent the leaks of data and prevent external attacks
- Graphic Designer – the the person who will create and protect the company’s brand: logotype, website, graphic materials for advertising
- User Interface Designer, Webmaster – the people who will develop a website, and interface of a web/mobile MVP, if any
- Legal advisor – the person who will help settle the legal issues.
Stages of preparing an ICO campaign
1. Developing the business model
In any business, you will need to prepare a detailed business plan and create a strategy of its development. You must understand the very essence of your project and you must be able to explain it to your potential investors. At a minimum, the business model should answer the following questions:
- What are the goals of your project? How are you going to achieve them? Why does your project need its own blockchain and cryptocurrency?
- Who is your target audience? How do you engage them?
- What technologies will be used? How will they contribute to the cryptocurrency community?
What is the most important thing needed for an ICO? Without what it is impossible to succeed? The answer to this question is very simple – the investors, their attention and their money. This is why it is essential to plan how will you attract the investors’ attention. How you will tell them about your product? You need them to trust you, to understand that they will benefit from investing in your product.
One of the means to educate your investors about your product is by creating an MVP (minimum viable product) that will allow users to estimate its relevance, possible benefits, and give them the opportunity to offer feedback. It is one of the key points in handling the ICO, since it is meant to clearly present your project to the investors.
Once the MVP is released, you may launch a presale. It is in the pre-ICO stage where you will begin to sell a limited number of tokens. After finishing the presale (in a couple of weeks to a couple of months), the ICO itself is managed. However, if the project becomes popular, all the tokens may be sold out during this stage. Thus, the pre-sale may be the only stage of your campaign.
3. Legal work
While preparing to launch your crowdsale, be ready to face some legal challenges. Blockchain and cryptomarket are an unexplored area for modern lawyers, and therefore, it lacks proper regulation, and may have unforeseen challenges. Modern law does not have a clear definition of blockchain, cryptocurrency, ICO, tokens etc. Some lawyers do specialize in the blockchain industry; in fact, there are only a few of them, consequently, it will be extremely difficult and expensive to hire such a specialist.
In order to settle legal issues, we recommend you to find an experienced and curious lawyer that is skilled in the following areas:
- corporate formation – he will help you with establishing a company as a legal entity
- know your customer (KYC) – in banking law, there is a process for business identification, and verification for the client ensuring the legitimacy of their business and transactions
- anti-money laundering (AML) – a set of legal procedures aiming to stop the practice of legalizing the criminally earned revenue
- securities law – procedures regulating the process of business investments.
This will be sufficient for your campaign to be compliant with legal requirements.
4. Pre-ICO teaser (documents to be shared with potential investor)
Another important step of ICO preparation is creating a pre-ICO teaser. It is a brief (about three to six pages) description of your project highlighting the most important points that will be publicly available to your potential investors. The information should be presented in a clear way not only for experts in blockchain technology but also understandable for the general public.
Non-exhaustive list of issues that must be highlighted:
- project description
- ICO structure
- amount to be raised
- information about tokens
- closing date
- and whitepaper
The most important document of an ICO is the white paper prepared by the party launching the cryptocurrency. It contains detailed explanation of everything the investors need to know before deciding whether they are going to invest or not. The whitepaper should include the commercial, technological, and the financial details for a clear and understandable read:
- proof of concept (What will your coin add to blockchain industry? How it will be used?)
- technical description of your coin (information about the realization of the coin, its security and other technical characteristics)
- presenting of your team – give the investors the opportunity to see that highly skilled specialists are working on this project
- highlighting economic issues, validating by math (proving the economic efficiency of the coin by math calculations)
- legal basis – your investors want to be sure that they are investing their money in potentially profitable product, but are not just giving it to fraudsters
- token description (the number of tokens, token supply mechanisms, how token scarcity is balanced, how are tokens allocated between all participants of an ICO including developers and big investors)
- publicly available roadmap
– project goals and objectives
– a timeline indicating the timetable
– important milestones and deliverables
- glossary – provide the explanation of specific terms mentioned in the document.
5. Advertising, PR-campaign
Having worked on all the above-mentioned stages, it’s time to think about the advertising campaign. To run a successful ICO, you will need to pay attention to the following:
- creating a landing page
- creating a website and a logo
- writing to an official blog
- running advertising campaigns in thematic forums (e.g. Bitcointalk), post the news of your project. (This will help you to be in contact with the target audience and find your first loyal customers and the future users of your product).
- advertising on ICO listing websites–these platforms deeply research the ICO campaigns (their websites, whitepapers, social platforms, blogs etc.) and provide detailed information about active, upcoming and past crowdsales. The most famous and reputable platforms are:
– ICO Map
- creating a promotional video
- attending the roadshows which are live presentations by an issuer to potential buyers. (Be sure that you have a good speaker at such events.)
In order to best engage the investors, you may arrange a bounty program, which implies token distribution via different channels. Free tokens are offered to those users who do some work for the project – e.g, sharing the information via social networks, reporting bugs, or translating the whitepaper into different languages. Usually, bounty programs are advertised on thematic forums like Bitcointalk.
Everyone wants to have their funds safe and sound. In order to ensure the security of your campaign for your potential investors, and for yourself, you will need to pay attention to the following:
Can your ICO be classified as fraud?
If your target audience considers your campaign as a scam, they will not invest. In order to avoid misunderstandings, provide as much information about your project as possible, pay serious attention to developing a professional whitepaper. If your project implies an open-source code, upload it to GitHub. For those who are experts in Blockchain, it will help them to understand and be interested in the nature of your coin and to ensure its reliability.
Monitoring the phishing sites
When you announce your crowdsale, be prepared that there will be people trying to obtain the money from your investors. They will copy the design of your website and give your clients the numbers of their wallets. In order to prevent phishing attacks, you may want to use the services of companies specializing in cybersecurity, e.g. – Netcraft fraud detection.
Protecting your servers from DDoS-attacks
The DDoS-attack aims temporary takedown of your website. If your site is down for some time, your investors will not be able or willing to buy your product. In order to ensure the safety of your servers, consider using DDoS-protection services, e.g. – Cloudflare.
Audit of the project’s security
Before launching the crowdsale, perform a security audit of your project – this will help you ensure that your ICO meets the above-mentioned requirements and that the funds invested are safe and sound.
Now that you know how to launch a successful ICO, and what to do to organize the development of your own cryptocurrency, you are ready to begin! Since you are determined to be a part of the cryptomarket, our team of experienced developers at Sloboda Studio is always at your disposal.
We can offer our help in:
- developing Smart Contracts based on Ethereum ERC20 using Solidity
- developing custom blockchain using Python
Any questions? We are always here to help.