Technical notes for a ICO novice investor

7 min readNov 23, 2017

ICO is becoming more and more popular. Hundreds of start-ups organize crowdsales for fund-raising, often offering their investors huge amounts of profit for purchased tokens, and assuring them that the smart contract that they developed is a security guarantee. I think many people have a question: how to understand that a smart contract will fulfill what the project team promises? How to choose a safer ICO? What are tokens? And how to work with them?

In this article we’ll try to clear up ICO from the technical point of view, exactly the smart-contract security and operation with the tokens you buy during crowdsail.

Keep in mind, that we are going to consider the examples of ICO and tokens issued on the Ethereum platform, as it is one the biggest and most popular one.

WHAT IS A SMART CONTRACT?

To begin with, every self-respecting ICO must have a contract. It is a “program” that is run in the blockchain. Its main task is to sell you tokens and to be responsible for meeting the conditions that the founders of ICO have designated for investors.

Let us consider pre ICO of the METTA company

Once a smart contract is loaded into a blockchain, it has its own unique address, to which ETH (ether) is transferred to purchase tokens and to track its operation. In this case, the address of the pre-ICO METTA contract is

0x3cecd05537ea3a9de9267c0e8a8abf218a903148

Next, we consider the conditions the fulfillment of which the smart contract must guarantee.
The METTA project team announced that in the period from November 20 to December 19 inclusive, there will be a sale of 8,895,539 tokens at a price of 0.00027 ETH for 1 token + discounts depending on the time of purchase: 45% in the first week, 40 in the second, 35 in the third and 30 in the fourth. The team also promises that in case the project doesn’t get the necessary amount (in this example it is 409 ETH), all investors’ funds will be returned to them in full.

The smart contract is there to guarantee that these commitments are fulfilled. If we go to the address https://etherscan.io/address/0x3cecd05537ea3a9de9267c0e8a8abf218a903148#code we will see the code of the given contract, where all the above conditions are listed.

Of course, if you are not an experienced programmer, you will find it difficult to understand what the contract says. Nevertheless, I will try to explain the most essential points.

The figure below shows the main numbers responsible for the time when a smart contract will allow you to buy tokens, for the period during which the sale will take place and for the amount that the smart contract must raise in order for the pre ICO to be successful or, otherwise, allow to return money to the investors.

A short explanation:
The date on line 278 is recorded in the Unix TimeStamp format, and using any online converter, you will be able to verify that 1511136000 in Unix TimeStamp format is Mon, Nov 20, 2017, 00:00:00 GMT (November 20, 00:00 GMT)

The purchase rate (line 276) is specified in the number of Weights (Wei is the smallest unit of the ether, 1 eth = 1 * 10 ^ 18 Wei) otherwise this line might look like 0.00027 * 10 ^ 18 or 0.00027 * 1 ether.
The number of tokens available for sale (line 284) is also multiplied by 10 ^ 18 because the METTA token has 18 decimal places.

How can you get your investment back ?

In my opinion, one of the most important moments for an investor is a guarantee to return the invested funds if the startup does not obtain the minimum amount of ether (Softcup) needed to implement the project. To guarantee the return of investment, a smart contract must have a special function that the investor could use if the minimum amount is not raised at the end of the ICO.

Pay attention to the part of the code for METTA project contract:

The investor can activate this function of the smart contract after ICO is completed. If the team has not achieved the announced Softcup the invested funds will return to the investor ‘s ETH address from which the token purchase was made.

How can I return the invested funds in the case of an unsuccessful crowdsale ? How can I activate this function?

It’s quite simple, as a basis let’s take one of the most popular Ethereum wallets https://www.myetherwallet.com/ from which you can purchase tokens in the ICO.

So, to get the invested funds back, you need to turn to the refund function of the smart contract, open the website https://www.myetherwallet.com/ and go to the “contract” tab and enter the address of the contract whose function you want to activate.

Then you need to enter ABI / JSON interface (there you will find a list of the smart contract functions available for execution)

You can always get the ABI / JSON interface on the smart contract page of the website etherscan.io

So, let us go to the page of the METTA smart contract. https://etherscan.io/address/0x3cecd05537ea3a9de9267c0e8a8abf218a903148#code Then copy the data from the window Contract ABI:

After that paste the received string into ABI / JSON field of the interface on the website myetherwallet, click on the “connect” button and in the dropdown list that appears below, select the refund function.

Further, you need to connect to your ETH wallet and click on the “write” button.
Do not forget that when you send something to the blockchain, you are charged for Gas, so you must have an ether reserve to execute the transaction. The gas limit for the refund transaction should be the same as for the purchase of the token, that is 150,000 (which is about 0.00015 eth, but in practice the price per transaction is slightly less).
If METTA project pre-ICO does not raise the claimed 409 eth, then the investor can perform this function and get the invested funds back.

We have considered the key points , necessary for the novice crypto- investor . Now we can proceed directly to the tokens.

Surely, there are still many different nuances that are worth paying attention to in a smart contract, before investing, and we will talk about this in the near future in another article.

How to buy tokens ?

The procedure of buying tokens is quite simple, you need to transfer the necessary amount of ether from your wallet to the address of a smart contract, which in return will send a certain number of tokens to you.
In the case with the METTA preICO, if you send an amount of 0.00027 eth to the address of the smart contract in the first week of the crowdsale, then in return you will receive 1.45 tokens (1 token + 45% for the purchase in the first week).

When the smart contract has sent you the tokens, they must immediately appear in your wallet. If not ( this may happen) you have to do the following ( let’s consider myetherwallet as an example):

Log in your wallet and click on “ add my token” button on the right. Enter token address, for example METTA token address 0xbc3fc18d5b0b7eb53760ef1a38c94ae139cef0d, its symbol and decimal places 18 and click on “save” button.