ICO vs IPO? How ICO and STO powered by Blockchain platform is transforming modern day start-ups for crowdfunding — A Very Extensive Look

We all know the magic behind the revolutionary Bitcoin is the blockchain technology. But there are scores of other benefits that this disruptive technology offers. In our previous blogs, we discussed how blockchain enables transaction of cryptocurrencies through a decentralized environment. As there are no governing body or third parties involved, the technology is highly transparent and trustworthy. In the past couple of years, the technology has evolved significantly and today, blockchain is much more than just cryptocurrencies.

In this blog, we are going to discuss perhaps the most persuasive offering of the blockchain platform, which is ICO. If you are a fan of blockchain technology and following the industry trends, you must have heard about ICO. Before we dig into it for details, let’s first tell you about ICO.

What is ICO?

“It’s like penny stocks but with less regulation.” — Jeff Garzik

Companies raise funds for various business purposes like acquisitions, expansion, resource hiring, etc. This is usually done via Initial Public Offering (IPO), where a company offer its shares for the public to purchase. This was an expensive affair as you have to utilize capital markets, which small and medium scale companies couldn’t afford. Powered by blockchain technology, ICO (Initial Coin Offering) was introduced as a fund-raising mechanism in which new projects offer their underlying crypto tokens in exchange for Bitcoin and Ether. ICO promise quick liquidity, immutable contract guarantees and most of all — they democratize access to investment capital.

After getting a lot of success, ICO witnessed increasing adoption among various companies who started developing ICO and use it instead of utilizing their capital markets. Notable companies like Telegram and Kakao have raised funds offering ICO instead of IPO. With a substantial piece of their cumulative money being raised in 2017 alone, ICOs have been able to raise more than $2.3 billion in funds since their inception. Rather than offering shares to the market, ICOs offer ‘tokens’ for the public to buy. Few of these tokens can be bought using fiat, while others accept payment via cryptocurrency. Before learning more about tokens, let’s first discuss the characteristics of ICO and how it is different from IPO.

Strategy

The strategy behind developing ICO is to raise funds for a project to enter the market. ICO is usually performed by start-ups. On the other side, IPO is performed at a bigger scale when a firm is finally stable and wants to expand with the help of the public.

Legal Aspect

ICOs are not limited to any legal document. They have a resource paper (usually white paper) where all the project information, it’s purpose, execution plan and possible results are explained. However, ICOs are not bound to create a white paper. On the other hand, IPOs are heavily legal bound. They must create a legal document called a prospectus. This is kind of a legal declaration which has to include various key information regarding the company.

Eligibility

To offer an IPO, a company require certain eligibility criteria which involve highly stable financial track records. But in the case of ICO, companies do not require any regulatory framework.

Duration

IPOs need to undergo a long legal process before being offered (usually take up to 6 months time). But the ICO process is much shorter and less complicated. A company can start with the crowdsale after issuing white paper and a smart contract. (take up to 1 month). The length of the crowdsale can be dependent on reaching the maximum hard cap, or a fixed sale duration, which usually lasts a month.

Target

IPOs usually target institutional investors such as banks. There is a small part of the entire process which is for retail investors. But ICOs are open for anyone. All you need is a currency in the form of Bitcoin or Ether which you can convert into a token of the particular ICO.

Purpose

IPOs purpose is to collect dividends while ICO’s promote adoption of the company and its associated services/platform, meaning the investors will receive the project’s utility token, stored in their personal crypto-wallet to avail the products or services of the company.

Ownership

IPO holders have a decent volume of ownership and control over the company. While owning ICO tokens does not mean you have ownership or control over the project or the company. However, it offers owners governing rights on the platform as well as access to that token’s utility. An ICO investor can reap future benefits in a number of ways. This depends on the design and utility strategy of the coin with a blend of the project goal.

ICO and IPO sound similar, but they are completely different in nature. Both have their own set of pros and cons, but in the modern business era where companies want to keep more control on their business while attracting more investors, they are more inclined towards ICOs because of it’s significant benefits.

Let’s run through the key advantages of ICO for which it is attracting many potential investors.

1. Lesser transaction costs

As transactions in an ICO happens in cryptocurrencies, the cost is always lesser. While trading directly in between individuals it is free, and when trading on a centralized crypto exchange, the cost will be merely around 0.1 to 0.3%. Smart contracts eliminate intermediaries, which in turn cuts down costs of service delivery. And the administrative costs of buying and selling are zero. On the other hand, transacting in stocks are highly expensive including a hefty intermediary charges.

2. 24*7 trading options

Cryptocurrency trading exchanges operate 24*7. This means you can purchase ICOs whenever you want. While stock exchanges opened for a limited period of time.

3. Transparency

The transaction in cryptocurrency is highly transparent and can be seen by anyone. This reduces the error percentage and eliminates any kind of dispute. Transparency is one of the most compelling benefits of an ICO.

4. Easy to kick-start funding

A small company or a start-up firm can use ICO to kick-start funding quickly without much hassle. As the process is less complicated and doesn’t require any legal document, this is easier for small companies. Anyone can get funding using ICOs.

5. Fungible

ICOs are highly fungible, movable and sellable assets. You can sell your ICO to whomsoever you want.

6. Quicker settlement

Cryptocurrency transfers settle in minutes. In contrast, stock exchanges typically settle in a few days. This allows both ICO issuers and investors quickly settle their transactions.

7. Zero regulation

As cryptocurrencies don’t have any regulatory bodies, ICO transactions and exchange process is not bound by any governing body. This drives more empowerment and accessibility.

8. Cross-border transactions

ICOs are cross-border transactions — subject to local regulatory restrictions. Blockchain technologies can be accessed by any investor irrespective of their geographical presence. This doesn’t include any additional cost. However, in the case of a stock exchange an overseas exchange costs higher.

9. Flexibility

ICO tokens like Ethereum ERC-20 are based on standard protocols and can be listed on a number of crypto exchanges seamlessly. This can be transferred between different exchanges and personal crypto wallets without any additional costs.

Earlier in this blog, we mentioned that ICOs offer tokens instead of shares to the market. Now let’s learn little more about token and how it is being used in ICO.

What is a Token?

A token is an asset (unit of value) issued by a company after launching an ICO. An investor gets tokens in exchange for his investment in an ICO, just like we get stocks in exchange in IPO. There are usually two types of tokens in ICO;

Utility Tokens

Utility tokens are basically user tokens or app coins. We can use utility tokens to avail the products or services of the company. So, utility tokens are not built to be an investment. Any start-up can create utility tokens and sell digital coupons for their services or products. Utility tokens are not intended to give their holders the ability to control how decisions are made in a company. They merely enable users to interact with a company’s services.

A perfect example of a utility token would be the underlying POE token. Po.et is a platform that aims to decentralize the creative sector by providing a way for content creators to maintain ownership of their content (through Ethereum-based smart contracts) throughout the duration of its digital life and monetizing content in a safe, controlled way. This Ethereum ERC-20 token, aims to bootstrap the network by attracting early users and contributors of content to the platform, to raise funds for the continued scaling and development of the platform, as well as to provide a mechanism that incentives and rewards early adopters of the platform. Other examples for popular utility tokens are Sia token which enables trust-less decentralized storage, Status Network Token (SNT), etc.

Security Tokens / STO

On the other hand, security tokens offering (STO) are like shares, selling participation in the fund through a liquid digital currency offering. The value of a security token can be derived from an external asset which can be traded. These tokens are subject to federal laws that govern securities. If you fail to comply with these regulations, this could result in unwanted consequences including financial penalties and also derailment of the development of a project. However, if a startup abides all the regulatory requirements, security tokens can offer a huge array of advantages. You can offer tokens as a digital representation of shares and provide investors with an array of financial rights, which include; equity, voting rights, dividends, buy-back rights and many others that utility tokens could not offer.

As above stated, companies issuing securities have to abide by essential anti-money laundering (AML) and know-your-customer (KYC) requirements, which are not only costly but also time-consuming. Most upcoming blockchain startups have now realized the importance of complying with the regulations, and several SEC (U.S. Securities and Exchange Commission-compliant) security tokens have been issued. Examples of such tokens include; Polymath, Corl, and tZERO.

While regulation on these types of securities remains beneficial for participants, but on the other hand more such regulations could limit the capabilities of these projects. It removes decentralization — when you file paperwork with any authority, you are removing your decentralization. The authority has control over everything you do, as a company, as an individual and as a project. It has to be done in line with the laws and rules of that country.

This eventually breaks the spirit of DAO (Decentralized Autonomous Organization) and token economics. Thus, readers must understand that there is difference between tokenized assets of a decentralized application and STO. The merge between the IPO and the ICO is the birth of STO.

Security tokens bridge the gap between the traditional financial sector and the blockchain framework; it’s one of the reasons banks have initiated the integrated Blockchain frameworks in their system. Issuing security tokens allows investors to raise funds through a thoroughly regulated digital share of its equity, asset or part of the revenue. This way STO targets the institutional investors as well such as banks, venture capital firms, etc. If you are creating a security token, you must know the importance of the Howey Test. The Howey Test was a precedent from a 1946 Supreme Court case. The ruling gave the SEC guidelines as to what could be considered a security. So, make sure your coin resemble one.

Security tokens also represent shares in physical assets such as gold or oil. In these situations, the purpose of the blockchain platform is to provide simple trading environment for all participants. For example, Dubai based OneGram uses blockchain technology to create ICO, where each coin is backed by one gram of gold at launch.

To bring all under the roof of cryptocurrencies and token world, it’s not bad to add the below classifications too to educate the readers.

Equity Token

The key difference between Security Token and Equity Token is that in the security token, an asset like real estate, gold, etc. are used as collateral. However, in the case of Equity tokens, the shares of the company are diluted into tokens.

Consensus Token

The first type to appear, and used by Bitcoin and Ethereum is the “consensus token”. This token is given out as a reward for ensuring the network consensus either via PoW (Cryptomining) or PoS voting. But, we refer to these types of tokens as cryptocurrencies in general. Also every other cryptocurrency that followed the first cryptocurrency Bitcoin is called an altcoin (alternative coin). Thus altcoins refers to all the tokens and all cryptocurrencies other than Bitcoin.

Stablecoins

Stablecoins are cryptocurrencies designed to minimize the effects of price volatility, thus they seek to function as a store of value and a unit of account. To minimize volatility the value of a stablecoin can be pegged to a currency, or to exchange traded commodities. There are Fiat backed stablecoins and Cryptocurrency backed stablecoins. Cryptocurrency backed stablecoins are issued with cryptocurrencies as collateral, which is conceptually similar to fiat backed stablecoins. However, the significant difference between the two designs is that while fiat collateralization typically happens off the blockchain, the cryptocurrency or crypto asset used to back this type of stablecoins is done on the blockchain, using smart contracts in a more decentralized fashion. MakerDAO is the first fully-decentralized stablecoin on Ethereum.

How to create an ICO?

“We need tokens to use, not just to keep in wallets. If we do not dive fully into Crypto and use the Blockchain as a way to enhance our lives and the world around us, instead of just collecting coins hoping for a Bull market, then our greed will have killed the greatest opportunity yet offered to mankind.” — John McAfee

As you now know what an ICO is and the types of ICO tokens, you need to check if this is applicable to your startup. You must be able to answer these questions before creating your ICO;

• Why do you need blockchain tokens in your startup?
• What advantages does blockchain technology give your project?
• What is the link your product with the blockchain technology?

Once you have figured out how to bring a token / blockchain system into your start-up and able to present your product with a white paper and a website, you can start looking at creating your ICO, the wallet and launching into the cryptocurrency exchanges. Let’s look into the various ICO platforms that helps creating your ICO tokens.

ICO Development Platforms

According to ICOWatchList’s data, more than 82% of projects choose to issue their tokens on Ethereum. This figure is not going to change in the coming future, as the platform currently offers the most convenient and easy to use service. Though Ethereum is the most popular platform for conducting an ICO, but there are many other options worth considering, depending on the type of project that is being built. Let us look at these various platforms in blockchain those have many successful ICOs held on them.

Ethereum

Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract functionality. Ethereum provides a decentralized virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes.

Ethereum’s ICO success credits to the ERC-20 token standard. These tokens are open source and can represent any fungible tradable good: coins, loyalty points, gold certificates, IOUs, in-game items, etc. They are universal that any exchange or wallet service that supports Ethereum can very easily integrate any other ERC-20 tokens. Over 99% ICO tokens issued on top of the Ethereum implements this standard. ERC-223 is a new proposal to solve issues with the current ERC-20 standard. This new standard prevents token to be transferred to a contract that does not allow token to be withdrawn. In ERC-20, if someone sends token into a contract that has not allowed anyone to use it, the token will simply be locked and can never leave that contract. Because of this, hundreds of thousands of dollars’ worth of ERC-20 token has been locked up. ERC-223 merges the transfer functions between wallets and contracts into one single function ‘transfer’, which can also save transaction fees in terms of gas. ERC-223 is backwards compatible with ERC-20. ERC-223 is a proposal right now, not a standard yet.

ERC-721 is a popular specification other than ERC-20. The goal of this proposal is to create a non-fungible token. The biggest difference between ERC-721 and ERC-20 is that, ERC-721 defines non-interchangeable tokens, which means that each token has an independent ID, so the independence of ERC-721 can be used in the transaction of assets and tracking. That is, in some cases we need to have unidentical tokens within the same platform, and add some extra parameters and price them differently. Popular blockchain games like CryptoKitties make use of non-fungible tokens on the Ethereum blockchain. Each CryptoKitty is represented in the form of a non-fungible ERC-721 token. Other example like WePower platform which is supporting green energy producers, and it’s tokens represent a certain amount of electricity. Each token has a number of parameters, including even the type of the energy produced (for example, solar or wind power). ERC-721 standard makes it easy to create marketplaces for multiple non-fungible token types.

Other popular Ethereum token standard proposals to look are ERC-621, ERC-827, ERC-1155. ERC is not a technology or program, It’s Ethereum General Request for Comments (RFC). ERC provides developers with technical guidance for construction. Developers can submit new ERC standard proposals to the Ethereum community by submitting EIP (Ethereum Improvement Proposal). EIPs describe standards for the Ethereum platform, including core protocol specifications, client APIs, and contract standards.

Ethereum can process between 10 to 30 transaction per second (tps). They already have many solutions in the works to upgrade the transaction speed like Plasma, sharding and Truebit solutions to bring Ethereum to Visa-scale transaction capacity. Ethereum also plans to switch from Proof-of-Work to Proof-of-Stake with the introduction of Casper, a partial consensus mechanism combining proof-of-stake algorithm research and Byzantine fault-tolerant consensus theory.

Ethereum has its own programming language, Solidity — similar to Javascript for writing smart contract. Serpent, one of Ethereum’s earlier smart contracting languages is no longer safe to use. While issuing tokens on Ethereum is relatively easy, you will need to be proficient in Solidity to be able to fine-tune your ICO to specific purposes. web3.js is a collection of Javascript libraries which allow you to interact with a local or remote Ethereum node, using a HTTP or IPC connection. MetaMask tool allows you to run Ethereum dApps right in your browser. Truffle is a development environment, testing framework and asset pipeline for Ethereum, aiming to make life as an Ethereum developer easier. It is one of the most widely used IDEs in the Ethereum community other than Remix — Solidity IDE. Thousands of ICOs held on Ethereum blockchain. State of the ÐApps website have an extensive details about the ICOs held on Ethereum.

Waves

Waves is an open blockchain platform that aims to make the process of launching, distributing, and using tokens easier. Waves is a decentralized financial trading platform written in Scala and built on its own blockchain with custom tokens being its main feature. They enable decentralized crowdfunding as well as transferring, trading and storing of fiat and digital currencies. Waves missions is to enable any business with development prospects, regardless of its size and geographical location, to run the ICO and raise funds for growth and development. The Waves blockchain can process up to 190 tps.

Waves Platform encourages blockchain developers and businesses, to create their project on top of the Waves blockchain through its public API and cutting-edge technology programmed in Scala. Waves has almost 14000 ICOs registered. Top ICOs that have already been held on Waves are Primalbase, Wagerr, PeerBanks, MobileGo, and ZrCoin

NEO

NEO is a decentralized and distributed ledger protocol that digitalizes real-world assets into digital ones, enabling registration, depository, transfer, trading, clearing and settlement via a peer-to-peer network.

NEO uses a new consensus protocol called dBFT — Delegated Byzantine Fault Tolerance. It’s a modification of the classic Proof-of-Stake (PoS) protocol where NEO tokens holders can vote for delegates, known as bookkeepers, who maintain the network for everyone. This way network can process around 1000 tps, as you don’t need to wait for a large number of nodes to confirm a transaction. NEO is used like a share of the company that can be used to vote and mine. Holding NEO gives dividend paid in GAS. GAS is a coin that is used to run all smart economy platforms created on NEO. NEO can transact at 1000 tps with a maximum of 10000 tps.

NEO uses e-contracts to keep record transfers of digital assets. Digital tokens generated by e-contracts function as a general underlying data that could be used for recording titles and assets like equities, creditor’s claims, securities, financial contracts, credit points, bills and currencies, and can be applied for equity crowdfunding, equity trading, employee stock ownership plans, peer-to-peer financing, loyalty programs, private equity funds, supply-chain financing, etc. NEO supports multiple well-known programming languages like C# , Java , Javascript and Python. NEO will never be a truly decentralized network, as the majority of bookkeeping nodes are operated by the NEO team.

NEO has more than 30 ICOs on its platform. Notable ICOs that were held on NEO includes QLink ($19 millions), Red Pulse ($14.5 millions), Trinity ($20 millions), etc.

Stellar

Stellar is open-source, distributed payments infrastructure that connects banks, payments systems, and people. Integrate to move money quickly, reliably, and at almost no cost. The platform has its own decentralized exchange, so the tokens sold during an ICO can start trading on day one. It is being marketed as cheaper and faster than other platforms, with a 5 seconds median settlement time (compared to Ethereum’s 3.5 minutes) and the cost of 100K transactions on the platform being a mere 1 cent.

Stellar is an excellent choice for any ICO that does not require Turing-complete smart contracts (unlike Ethereum, has the most expressive programming capabilities) and can benefit from immediate creation of a secondary market. Developers can use programming languages such as C++, Java , C#, Javascript, Go and Python. The platform utilises the Stellar Consensus Protocol (SCP), which works through the use of quorums, which are a set of nodes used to reach an agreement. Their extremely low fees and fast transaction times makes them an ideal choice for any ICO project with a lot of microtransactions. Mobius, the first ICO project on Stellar, has reported that they are already capable of doing 1000 tps and scale to 2000 tps.

NEM

NEM’s blockchain platform was designed and coded from the ground up for scale and speed. NEM’s permissioned private blockchain delivers industry-leading transaction rates for internal ledgers. And its revolutionary consensus mechanismand the Supernode program ensure that NEM’s open, public blockchain can grow without ever compromising throughput or stability.

NEM Smart asset system helps you building a fintech system, tracking logistics, ICO, document notarization, decentralized authentication, and much more. NEM platform is capable of processing 4000 tps, which is one of the highest figures on the market.

NEM’s blockchain exposes its functionality through an API interface that can be used with any programming language. The most notable ICOs held on the NEM platform includes Dimcoin ($14 millions raised) and Loyalcoin ($10.9 millions).

Nxt

The Nxt blockchain provides a simple, robust and secure private blockchain solution to tokenize any kind of assets an enterprise desires (e.g. shares, bonds, vouchers), which do not require the implementation of complex smart contracts or complex web site back-end and considerably reduces the security risks.

Nxt is coded in Java. Like NEM, Nxt offer a wide range of pre-built blockchain solutions that anyone with little prior knowledge can implement. The Nxt blockchain can handle up to 4.25 tps.

BitShares

BitShares 2.0 is an industrial-grade decentralized (DPoS) eco-system built for high-performance financial smart contracts. BitShares is responsible for the crypto trading pair concept. It’s also the first delegated Proof of Stake blockchain and uses community-elected delegates for governance.

BitShares is a smart contract network that can host tokenized apps. Tokens are exchangeable for BTS, which is then exchangeable for bitAssets, which are stablecoins pegged to real-world markets. BitShares 2.0 is coded in C++. It’s a part of the Microsoft Azure BaaS — Blockchain as a Service Package. It transacts at 3400 tps to theoretical maximum of over 100000 tps. Its unmatched transaction speed and the use of stablecoins allow for high transaction throughput decentralized exchanges, remittance, POS systems to thrive within its ecosystem. OpenLedger — Decentralized asset exchange built on BitShares platform.

Stratis

Stratis is a Blockchain-as-a-Service (BaaS) platform that allows companies to create permission blockchain inside the enterprise in order to tokenize elements of their business processes.

Blockchain platforms built on Stratis creates a sidechain that will act as its own blockchain, while still being attached to the Stratis mainchain network. This relieves a lot of congestion from the mainchain and allows each sidechain to act independently. The contracts are written in C# language. The Stratis blockchain can process up to 20000 tps.

QTUM

Qtum is an open sourced public blockchain platform, leveraging the security of UTXO while enabling multiple virtual machines including EVM and the revolutionary x86 VM. Qtum is PoS based and boasts a Decentralized Governance Protocol (DGP) which allows specific blockchain settings to be modified by making use of smart contracts. Currently, QTUM smart contracts have to be programmed in Ethereum’s Solidity.

Designed with stability, modularity and interoperability in mind, Qtum is the foremost toolkit for building trusted decentralized applications, suited for real-world, business-oriented use cases. Its hybrid nature, in combination with a first-of-its-kind PoS consensus protocol, allow Qtum applications to be compatible with major blockchain ecosystems, while providing native support for mobile devices and IoT appliances. The Qtum network currently can process up to 60 tps.

ICO Platforms Comparison

Most of these above mentioned platforms are not just limited to create ICOs only, rather they help to create your Blockchain dApps — Decentralized application that run on a P2P network of computers rather than a single computer with trustless protocols and where the application data are cryptographically stored in a decentralized open ledger popularly called as Blockchain or Distributed Ledger. They also provide Smart Contracts protocols that stores rules for negotiating the terms of an agreement, automatically verifies fulfillment, and then executes the agreed terms. While Ethereum still governs the market; EOS, Cardano, Tezos and many others are emerging platforms for decentralized applications and smart contracts development.

As earlier mentioned, your ICO project should embrace at least one of the blockchain technology features like decentralized application, P2P lending, micropayment, digital identity, remittance, POS system, etc., And it should be using smart contracts to bring transparent, and hassle-free way of digital asset movements by avoiding a middleman. Thus, to make your token popular and encourage the investors to buy it during the ICO, you need to use the token that is fully integrated into the company structure. The best option is to use a token sold at the ICO as an integral part of your system or app (dApps). ICOs developed using ERC-20 can use crypto wallets like Eidoo, imToken — Ethereum & ERC-20 mobile light-wallet to avoid custom development and integration of crypto wallets in their dApps when they are not required.

Auditing plays an important role in any business, but no more so perhaps than in ICO/STO. Once your ICO and dDapp is ready, you should think of ICO/STO auditing. You should bring reputable auditing companies with lawyers to audit and validate your project to bring smartcontracts assurance, regulation compliance assurance, off-chain components assurance using auditor nodes, KYC / AML assurance, pre and post ICO regulatory support, etc., which lends your ICO an added element of legitimacy. For example, Quantstamp audits, secures and drives the mainstream adoption of smart contracts providing a permanent, publicly verifiable security record that lives forever on Ethereum. And Zeppelin builds key infrastructure to develop and operate Ethereum smart contract systems and helps conducting security audits of decentralized applications.

Now that you have an idea of how ICOs and dApps are created with the help of these development platforms available today, it’s time for to discuss about the ICO stages — its launching strategies and methodologies, to the market and various easy-to-go ICO/STO issuance and campaign platforms.

How To Launch An ICO?

ICO Stages

Pre-announcement

The first step is a so-called “pre-announcement”, in which the information of an ICO project will be released in order to gain traction and create awareness in the cryptocurrency community, forums, web boards, and so on. This will thus also be the point at which the ICO’s website will be launched; usually, a one-page structure with different elements all represented on the homepage is sufficient. Potential investors will then look at the project’s whitepaper to assess the viability of a project. The whitepaper should be a lengthy document that goes in proper depth about the problem that the project is looking to solve, the solution to that problem as well as a detailed description of their product, its architecture and its interaction with users. To add credibility, the team’s background, token allocation and use of funds are also found in the document.

Offering

It is important that the whitepaper provides a roadmap that has a clear at least five-year vision for the business. The roadmap is typically presented as a chart, with a timeline showing various ICO’s activities from project development to launch, as well as project future milestones. The roadmap should express a confident vision for future development, without being overambitious. A roadmap without a long-term objective could be inimical to the development of the project and thus, turns potential investors away. It is also important for ICOs to explain their token’s utility, token lock-up period for certain investors and any bounty or airdrop campaigns. Also the economics of the project such as how much value want to raise, how many blockchain tokens to issue are decided in this stage.

During the offering state, the following token sale details are provided:

• Soft cap
• Hard cap
• Total Supply
• Token Price
• Accepted Payments
• Restricted Countries/Age

PR & Marketing Campaign

One of the key success factors of any ICO is a proper marketing strategy. A good project without a solid marketing campaign cannot gain the backing it deserves. Through a good marketing campaign, an ICO project can attract attention from the community, helping to put the project on the radar of potential investors. Successful marketing campaigns for ICOs are based on a combination of traditional marketing and PR. It is important to spread the news of your upcoming ICO far and wide: this can be done through posts on cryptocurrency forums, but it can also take the form of a subscriber button on your website, through social media channels (blogs, Telegram, Twitter, Facebook, Reddit, BitcoinTalk, Github, Slack, etc). A project should hire an ICO manager who knows which crypto community meetings and occasions you should be present at.

ICO Airdrops are being widely used by most of the ICO projects these days. Airdrop distributes free tokens to the entire crypto community. By executing airdrops, the team behind an ICO project will attract people who may be interested in it or may not have heard about it. In order to be eligible to receive airdropped tokens, you need to own some coins that are based on the same blockchain on which the project is built. For example, OmiseGo(OMG) Airdrop happened back in July 2017 for all Ethereum holders. OMG is an Ethereum ERC-20 token. People who had held Ethereum then would have seen OMG tokens deposited newly in their Ethereum wallet addresses. By this way, airdrops helps ICO reaching the investors and attract them to look into your project.

Token Sale

There can be many different stages of the token sale, including but not limited to a private sale, pre-sale, the actual ICO and a general sale.

Some project owners choose to run a preliminary fundraising effort, called Token pre-sale or pre-ICO. This is a sale event that takes place before the official token sales on the exchanges. Usually the fundraising targets will be lower in this stage and most ICO projects offer an early bird bonus, usually around 25% to 30%. Some even offer up to 100% bonus to encourage more investors on board. They are a good way to offset some of the costs involved in organizing the actual ICO sale, which then follows relatively soon after.

ICO projects should post information about the upcoming sale of tokens on special calendars called Token Calenders. There are many resources on which the schedule of an ICO is published: Coinschedule, TokenMarket.net, Cyber.fund, Icocountdown, Coinist, etc.

ICO and STO Issuance and Campaign Platforms

There are various ICO end-to-end issuance platform available in the market that allows anyone to build, audit, deploy and monetize ICOs easily. A one stop solution for your ICO. These platforms focuses on three groups of cryptocurrency users including ICO creators, funders, and promoters.

• CoinFactory: ICO and STO launch platform with a post-token issuance community and company management. It supports token issuance in four different blockchains — Ethereum, Stellar, EOS and Tezos. CoinFactory comes will all required marketing features to launch a successful ICO.
• ICOBox: ICO/STO Service Provider. A Blockchain Growth Promoter and Business Facilitator for companies seeking to sell their products via ICO/STO crowdsales. Supports Ethereum ERC-20 protocol.
• Coinlaunch: Free End-to-End ICO Platform based on Ethereum ERC-20 protocol.
• KICKICO: is a blockchain-powered crowdfunding 2.0 platform. The KICKICO supports three kinds of fundraising campaigns: ICO, crowdinvesting, and crowdfunding.
• Polymath: The securities token (STO) platform that facilitates the issuance and distribution of legally compliant token-based securities. The Polymath platform provides means to trade security tokens, authenticate investors, connect with legal delegates, and access a developers’ marketplace. Poly, an Ethereum ERC-20 token, powers the system and acts as the underlying economic unit that facilitates authentication, legal, and developer services.
• Securitize: A compliance platform for the primary issuance and lifecycle management of digitized securities STO on the blockchain. Securitize is a full stack technology & services platform with powerful features and specialized tools for both investors and issuers. The Securitize platform allows users to manage their digital securities from one convenient dashboard.
• Harbor: Harbor is an all-in-one platform for tokenized (STO) commercial real estate, investment funds, and more. It is an open-source platform that enables traditional investment classes to migrate seamlessly onto the blockchain.
• tZero: It is blockchain-focused subsidiary and trading platform that supports equity tokens. The tZero product offering consists of brokerage services, electronic private market place, digital brokerage, and Blockchain project development. The platform integrates cryptographically secure distributed ledgers with existing market processes to reduce settlement time and costs, increase transparency, efficiency, and auditability.
• Swarm Fund: Builds open infrastructure for digital securities. A fully decentralized capital marketplace that democratizes investing.
• Securrency: A global financial services technology infrastructure and product company delivering access , compliance and security.

Getting ICO On An Exchange

Your token needs to be in demand, it has to be valuable and, most importantly, it needs to get listed on at least one cryptocurrency exchange. Different exchanges will have different requirements for tokens to be listed , but if your project offers something unique and truly valuable to the cryptocurrency community, you shouldn’t have any problems getting it in.

One of the easiest ways to get your token listed on exchanges like Poloniex, Binance, etc., is to use the ICO listing service providers like Coinist — have a huge database of exchange partners they work with to help get your token listed quickly. Platinum is one another STO Listing service provider. With the help of such exchange listing service providers you can get your token listed on the exchanges.

Risks Of Investing In ICOs

We now know that ICO’s function like a crowdsale, where people can offer support for a company by purchasing their “token”, one that is required for the platform to function or simply to be used within the platform by the end user. Every investment holds some risk, that’s why they have potential to earn you money. ICOs are particularly volatile in nature and you need to perform due diligence before you invest a dime into an ICO. For example, there have been many ICOs that have failed because the token being offered did not offer utility or security, and the company was unable to achieve a growth in price. Most newly created tokens are utility tokens. All these various startups, which don’t have a proper use case for utility tokens, decide to make utility tokens instead of security token to avoid unwanted consequences for not complying with the regulations and eventually fails.

ICO Regulations by Countries

IPOs are heavily regulated, where ICOs are not as they bypass the centralized, regulated fundraising process required by banks or venture capitalists altogether. There are many startups have taken the funds raised during their ICO, and disappeared. Their projects get abandoned, and the investors have nothing to show for their money but worthless tokens. That is the reason in China, ICOs are banned for all businesses and individuals. And these Chinese ICOs that have completed their funding cycles have been requested to refund any altcoins raised.

But with the birth of blockchain powered SEC regulated tokenized securities, the smartest people in finance are waving goodbye to Wall Street’s security in search of tokenized securities. Soon, STO will become so popular that traditional stock exchanges and over-the-counter markets will be completely replaced over the next decade.

Final word

Although ICOs aren’t currently regulated, many governments are taking a closer look. Still debates are going on whether cryptos to act as a security, commodity, or currency. It’s only a matter of time before regulatory constraints are set-up to supervise the industry. If 2017 was the year of ICO utility tokens, 2018 will be remembered for blockchain powered SEC regulated tokenized securities (STO) to capitalize on the trillion-dollar opportunity and looking to hedge ICOs increasingly volatile portfolios. As a blockchain consulting and platform development company, BangBit can develop tokens for your company to offer ICO (both utility and security tokens) and dApps. Our blockchain experts have got the highest experience and expertise in developing various tokens using multiple platforms for varied industries to issue ICO. Contact us now for a free consulting session on blockchain and how to start your ICO journey.