There has actually been a great deal of confusion on what an initial coin offering is (ICO– likewise often called a token generation event or token sale), what type of companies an ICO can be utilized for, and exactly what enters into introducing an ICO– from a project’s viewpoint.
Disclaimer: This is not to be interpreted as investment or legal advice, however rather suggested as a template to show the process behind an ICO, and what a project’s stakeholders (group, board, stakeholders) need to think of when performing an ICO.
Offered the blockchain industry is relatively new, there isn’t a whole lot of information on the topic (from a task’s viewpoint), and with each new ICO, groups are learning best practices on what to do and what not to do. Below is a guide of all of the details we gathered about the ICO process, with input from individuals who experienced the procedure very first hand.
If you wish to contribute to this guide, or have any tips, do not hesitate to make ideas here:.
The most significant two concerns you have to consider initially are:.
- Exactly what is the function of the token?
- Are you sure you wish to do an ICO?
Token: Considerations for
- What is the purpose of the token?
- What function or energy does it perform?
- Is the token absolutely necessary?
- Why does your job have to be on the blockchain?
- Can you explain a practical financial model behind it?
If your application does not have to be built on top of a blockchain procedure, you should think hard before moving on. For example, the computational expenses of developing an application on top of Ethereum is a lot more costly than something like AWS. You need to have a strong reason for why you are developing a decentralized application vs. a central application.
If you are unsure whether your application ought to be built on the blockchain or not, you ought to do more research and spend more time finding out about Bitcoin and Ethereum. Constructing a decentralized application is essentially different than an application utilizing client-server architecture, and you’ll need to fully comprehend the parts of a blockchain and exactly what can be built on top of this new architecture.
An ICO is fundamentally various than raising money through VC’s or other traditional means.
On one-hand, you are selling future usage of your platform (not quiting equity). On the other-hand, you are ending up being a public company on the first day. You’ll have a substantial neighborhood you’ll have to handle post-ICO, and you need to make certain you want to deal with this concern ahead of time.
Here are a couple of things to remember while thinking through whether your task needs to do an ICO in the first place:.
- Everything you do and all the actions you take will be shown in the cost of the token.
- Your team will get bombarded non-stop, multiple times a day, with questions about the cost of your token.
You’ll need to be a global company from day one.
- All of your internal team conversations will likely be pressed openly.
- There will be terrific stress in trying to construct things that are long-term important vs. short-term important.
- If your product isn’t open sourced currently, there will be a big backlash to become totally open sourced. There is a strong expectation that lots of blockchain tasks are open-sourced projects.
- In general, cryptocurrency jobs are way more public/transparent than typical start-ups, or perhaps traditional public companies.
In general, great blockchain jobs look and function much more like open-sourced software tasks vs. standard tech businesses. You and your team will have to choose both whether your application makes sense to be built on a blockchain + you wish to operate as a transparent and open business.
Marketing is insufficient, people need to understand and trust your skills.
A number of these early ICO’s were carried out by deep stack blockchain designers that were part of the core crypto community, with high track record and performance history. The ICOs that sold out fast and quick did not come out of thin air. Early token investors– who by the way were likewise part of the core crypto community– understood these designers well, and trusted them, as their respective product concept had been discussed and peer examined for numerous months over Reddit, Twitter, Slack, Bitcoin Talk, various crypto podcasts, etc.
White documents are the business plans of the Web3 with which teams attempt to raise your funds, often prior to having a prototype. Writing a great whitepaper is the main job for every group. Prevent outsourcing the writing to third parties. If you want people to take you seriously, you have to include the whole team: from core devs to your sales people. You need a semi-technical explanation of how your job works and an easy to understand walk through for non-techies. The whitepaper needs to be attracting financiers without any technical knowledge and designers alike. It needs to consist of:.
Reputable technical roadmap.
Possible company roadmap.
Clear tokendistribution design.
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 provide a further insight into the technical application and are only aimed at people with deep understanding of blockchain innovation. They provide more reliability to your tech understand how, and allow for online swarm review. Technical documents have up until now mainly been used for blockchain token sales and not for dApps token sales.
You will be more reliable if you already have a product prototype. Encourage people to visit your GitHub page and play with the code. Please note, projects without a single line of code raise numerous warnings in the eyes of investors. If your name is not Vitalk Buterin or Gavin Wood– just utilizing examples here– you may have problems raising money just with a white paper.