What You Need to Know Before You Launch Your ICO Token
ICOs are transforming the capital-raising landscape, especially for tech companies. If you're looking to have your own, you'll want to have a look at this post first.
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Planning an Initial Coin Offering but you’re worried that your specs are too vague? Anxious that there are certain things you haven’t considered? Truth is – there probably are. But we’re here to help out (whether it’s for building your ICO or just good advice). This list started out as a document for our internal use. We ask those questions ourselves when we discuss custom ICO tokens with our clients. The answers will shape the smart contract and the way you’ll handle your investment plan. We’ll go through them one by one.
What’s the Minimum Pre-Sale/ICO Cap?
1) Part of the answer is obvious – you need to collect at least a minimal amount to get something done in the project you’ve put out there. But it usually also implies that you should consider the return process (you’ll return the money to all those who have taken part in the ICO if you don’t reach the minimum).
What’s the Maximum Pre-Sale/ICO Cap?
2) The max bar is another matter and isn’t always set. The ICO stage may have a cap set, as there are those who just don’t need more money than a particular amount as they see no way to invest it. This doesn’t concern the pre-sale, however. Furthermore, you usually sell a little cheaper during the pre-sale stage, because you want to attract people to your project. So, you don’t want to sell too much then. But otherwise, you can just forgo that max level and just transfer the pre-sale ‘excess’ funds to your ICO stage, or even further.
When Should Your Pre-Sale and ICO Start? How Long Should They Last?
3) and 4) When should your pre-sale start? We’ve found that many of our clients are already on their pre-sale when they reach us! The actual ICO start, now that’s a different matter. The pre-sale can be started manually as it doesn’t even have to be coded in the smart contract, but the ICO needs a smart contract to be ready. And how long does that take? We can only tell you that it’s a bespoke process (like the ones we do on the Ethereum blockchain) and depends on a number of factors. Also, there are no particular rules as to how long an ICO should last, but it matters from a marketing perspective. You should definitely consider who you’re targeting.
What’s Your Conversion Rate?
5) Or – how much does the ICO token (or pre-sale token) cost? You determine how much ether you’re focused on getting. So, you’re more or less thinking how much $$ you’ll need in fiat money. Obviously, that will be an approximation as ether prices can vary. Of course, you can collect funds in another currency – altcoins of any kind, dollars, euros, etc. The pricing can be more than just a simple ETH/token rate. You can plan bonuses based on time, amount of sold tokens, and many more factors.
Should the Invested ETH Be Returned if Min Cap Is Not Reached by the End of the Pre-Sale or ICO?
6) Should the invested ETH be returned if min cap is not reached by the end of the pre-sale or ICO? In general, the answer is yes, give it back. You can encode everything in the smart contract. However, there are possible alternatives. In one of our projects, they’ve decided to go on with the ICO token sale forever until the min cap is eventually reached.
What Happens to the Smart Tokens I Don’t Sell?
7) Are they rolled to the next phase, burned, or awarded to Founder or something else? The smart contract is an elastic document indeed – you can choose what you want to do with the tokens. We’ve found that rolled has been the most common choice so far.
Are There Any Other Constraints?
8) There’s often nothing to add, but if there is, it can be important. A lock-out is a good example. A lock-out means you can’t sell the tokens you’ve acquired for a set time period, like two years. The smart contract won’t allow for it. This is so that your principal investors or founders don’t quit the project so quickly. You just won’t let them cash in on the tokens. What’s more, this isn’t only to lock them in. If they sold their part of the tokens they’d likely get a hefty sum, and they’d lower the price of the pre-sale or ICO tokens overall, and you might not want that.
How Many Decimal Points Do You Want to Track?
9) Decimals – so what do we mean by that? A dollar has 2 decimal places because it consists of 10² = 100 cents. You can decide that you won’t be dividing the currency into any smaller units – or you can go ahead and create some. That’s only an issue when the ICO token is worth a lot.
What’s the Name of the Smallest Unit of Your Cryptocurrency?
10) And now – the naming. You should decide what your currency will be called. It doesn’t matter much in the contract itself. However, for marketing purposes, it’s nice to think of something catchy.
The answers to the ICO questions are not that different from those you’d ask before the pre-sale stage. Sometimes, the main difference is the smart contract. Many pre-sales don’t have a smart contract. Though there is the possibility to get the pre-sale done without it, this is not something we’d advise. A smart contract entails adhering to certain rules. It also means that certain things will be coded in the contract instead of just being set manually. We work on a smart contract deployed on the Ethereum blockchain (on production). The rates change according to your bonus scheme.
Also, while the ICO is for everyone, the pre-sale doesn’t have to be. You can conduct the pre-sale sale among a chosen group if you like.
Published at DZone with permission of Natalia Brzozowska, DZone MVB. See the original article here.
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