Cryptocurrency: a New Gold Ecosystem
What is an Initial Coin Offering? Firstly, you have to understand the meaning of crypto currencies. A cryptocurrency is a digital or virtual currency that uses cryptography for security. Cryptocurrencies make it easier to transfer funds between two parties in a transaction, which is done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions. We can name cryptocurrencies digital gold, which enables incredibly dynamic, the fast growing market for investors.
Nowadays, the most famous cryptocurrencies are Bitcoin and Ethereum:
Editor’s note: This post was originally published in September 2017 during the rapid development of ICO phenomenon, but it was gradually loosing its value on the market due to some unmatured nature. Nowadays, in 2019, a new alternative, IEO, has arisen as a new level of coin-offering transformation. Is an IEO a justifiable alternative for an ICO? Read our article on initial coin offering explained.
So, What Is an ICO?
An ICO is a recently emerged concept of crowdfunding projects in the cryptocurrency and blockchain industries. It allows funding of projects through the sale of tokens or crypto coins, which are similar to IPOs. There are some differences. The first is that instead of selling shares to the public for money, a company distributes its own cryptocurrency called “tokens” to the investors in exchange for existing cryptocurrencies (like Bitcoin or Ethereum). The tokens can usually be resold immediately. To illustrate, Singapore-based company TenX managed to raise $34 million in 7 minutes.
What is the incentive for the investors to fund an ICO project? It is obvious: the motivation is that the price of the token would be much higher than the token’s price during the ICO. They can trade them on the public cryptocurrency exchanges, like Kraken or Poloniex, to obtain a considerable increase of the tokens.
The other crucial distinction is that the IPO is under strict government regulation and security. Therefore, its shares require preparation of large amounts of paperwork before being released. In such a case, cryptocurrency crowdfunding has an enormous preference due to its unrestricted scope. You can set up an ICO almost everywhere and at any time. However, such opportunities carry new risks both to the ICO team and investors. Before we highlight the hottest aspects of launching an ICO project, read the article about top ICOs carried out by Applicature.
When starting a crowdsale of tokens, one should consider whether it can be organically integrated into the business model of the product. Well-organized project economics and integration of the token into the company structure will make your token popular and will promote investors’ attraction. This information should be described in detail on the website and in White Paper.
To raise the necessary amount of money for your project implementation is not enough. ICO success is a chain of many other factors like future prospects, team professionalism, and trustful investors. BitcoinTalk provides direct interaction with the target audience, enables to answer questions, gives useful tips and advice on the appropriate theme.
Before launching an ICO it is important to wrap your idea correctly, define the goal, create an authoritative team and protect investors’ interests. And then you can proceed to the technical matters of the project elaboration.
There are some crucial aspects while preparing for an ICO campaign. Some ICOs have a competent team and elaborated scheme of project implementation and further development. But their marketing strategy hasn’t established a qualitative relationship with a key audience for the project, blockbuster enthusiasts, traders, investors, etc. To make the project successful and overwhelming one should understand the ICO milestones. Before starting an ICO project it is worth understanding of a technical structure of the whole mechanism.
Let’s consider them on the examples of the most trending ICOs running this summer 2017.
Projects’ Goal: Defined and Realistic One Will Lend Credibility of the Investors
The core pillars of the cryptocurrency community are transparency and authenticity reflected in the clear-cut goals. According to crypto industry standard, the project has to demonstrate its work-in-progress stages. Every product needs to have its own business card. The website is definitely one of the main open sources of information for potential supporters.
White papers and roadmap are key mechanisms in the world of blockchain technology. The purpose of a white paper is to promote a certain product, service, technology or methodology, and to influence current and prospective customers’ decisions. It is an informational document which aims to outline the technical features of the product to experts and opinion leaders, professionals and enthusiasts’ community. White papers are designed to be used as a marketing tool before a sale.
The roadmap has to list clearly defined and realistically achievable goals and their time frames. The valuable context in the roadmap can be provided with concrete goals and related success metrics. Structure of the roadmap and successive steps of the further actions are crucial while preparing a roadmap. Goals in the product retrospective indicated in the roadmap act as useful reference points:
- What is behind the scene of the project?
- What is the retrospective timeline of the company?
- How has it advanced during the roadmap?
- What programs was it involved in?
- The defined future perspectives of the project
To illustrate a good example of the roadmap, let’s go to TenX.
Making Digital Currencies Spendable Anytime Anywhere
TenX is a Singapore-based Fintech payment company that offer users debit cards and mobile wallets funded by cryptocurrency. This payment system will enable users to spend their crypto currencies as easily as fiat, thanks to a debit card that is accepted on the Master Card and VISA networks and a mobile wallet, by connecting any blockchain through COMIT.
According to the white paper, the TenX roadmap is divided into three parts:
- Timeline Preview Overview
The Idea of TenX pitched at DBS Blockchain Hackathon and was awarded 15 000 SGD. Money was invested in the foundation of the company TenX in mid-2015.
In 2015 alpha version of TenX wallet was live rebranded as TenX.
The company was admitted to the Paypal incubation program which means their product is reliable and trustworthy.
In 2017 beta test was conducted with 1000 users generating approximately 100 000 SGD in transaction volume. So, they’ve already had a working product which makes them in priority.
The company completed a $1 million seed round in March 2017.
- TenX 12 Month Road Map
- Tenx 36 Month Road Map
You can see that the team offer the product of triangle value. Having already a working product puts them ahead of competitors such as Tokencard and Monaco. Detailed plan in the white paper on how to spend the money raised demonstrates the company’s realistic goals and perspective to be further developed.
Perfect team is a key factor for investors’ contributing to a project. Team members, especially, development team and advisory board, should be openly available to any potential supporter or investor. Unknown names give no confidence to the project intention. To ensure trust from the audience the staff may have high-level professionals, along with their faces and social media profiles, Linkedin profiles. Relevant experience in the industry, conducting other ICO projects and the impact they had, are weighty arguments for contributors’ decision to invest the project.
One example of an ICO successfully leveraging an accomplished team is Bankera.
Bankera: Regulated digital bank of the blockchain era
Bankera is a bank that will be built for the blockchain era using technology to reduce the number of counterparties, thus lowering the cost of banking for the end consumer. In the whitepaper, it is said that the founding team already owns and operates a successful product under the brand name SpectroCoin since February 2013. It is cryptocurrency exchange, e-wallet, debit card provider and payment processor. From day one SpectroCoin was built with the intention of providing access for customers to a range of crypto currencies. However, to remain competitive, SpectroCoin was required to produce a number of products that are seen in traditional banking, such as debit cards, payment processing, international bank account numbers, foreign exchange and so forth. As such, SpectroCoin has already developed core infrastructure comparable to traditional banks. A natural extension of SpectroCoin is to leverage existing technology to build Bankera, a revolutionary bank for the blockchain era.
MVP (Minimal Viable Product)is one of the main objectives for the development team before an ICO. The functional prototype shows the capabilities of the product to the community and the potential investors.
One more example of a good team reputation is Monetha
It is creating a decentralized, blockchain-based payment solution with an integrated trust and reputation system, what differentiates it from other cryptocurrency merchant solutions.
Having worked on prototyping, Monetha has developed an MVP with which merchants can accept Ethereum payments in their e-commerce store (https://www.monetha.io/en/mvp)
What is the strength of an ICO team? First, educated and high-level members play a great role in the project development. Second, the background of the team and their advanced activity during the roadmap. Third, the product they have elaborated. From this points of view, Enigma project will be a good example.
Enigma: Trading on Cryptocurrency Markets
What Is the Idea of this Project?
Enigma is creating a decentralized, open, secure data marketplace that allows people, companies, and organizations to contribute and consume data. Subscribing to a data source is managed on-chain, including rewards and penalties, which are exchanged using their token. The data itself, its storage and transmission, live off-chain. In that sense, the blockchain acts as the controller of the network while the off-chain network handles everything else.
Enigma team consists of experts, who are MIT grads, traders and ex-employees of Mc-Kinsey. Among the advisors, it is worth mentioning Prof. Alex Pentland, a Director at MIT Media Lab and a board member at Google and Telefonica. Justin Lent, a former director of hedge fund development at Quantopian. The leading team is promising with strong experience and knowledge in related spheres. It is backed by strong VCs as well: FLOODGATE, FLYBRIDGE CAPITAL PARTNERS, CONVERGE, HEROIC VENTURES, and one more crypto VC: DIGITAL CURRENCY GROUP.
Since July 2017 Enigma Catalyst has an alpha version of the platform released, everyone can try out. More detailed at Enigma Blog.
How to Protect Investor’s Interests?
What are incentive mechanisms for contributors to facilitate the project’s success? Let’s consider them:
- discounts, premiums, and bounty programs
There is a must-rule, in the first few days of the campaign investors get discounts.
- returning the funds in the case of failure
You should also take into consideration that there is always a probability of fiasco of your goals and targets. It is imperative to be a cautious player on the multiple-choice scene. There are always scammers who can affect your reputation and fail your purpose. Therefore, you have to be always ready for returning the funds to their contributors.
Incentivize the Audience with Discounts and Bounty Programs!
As a rule, there are bonuses and discounts for early-bird investors. Defining the terms for investors would be reasonable before launching an ICO. To visualize this aspect of running an ICO, we suggest reviewing the most trending summertime ICOs.
According to the white paper, there are such bonus and bounty programs:
- TenX Initial Token Sale Bonus Schedule:
One (1) ETH will give you 350 PAY tokens. That means that one PAY token is worth 1/350 ETH. Extra tokens are offered as a bonus for users who commit earlier (early-bird bonus). See the time table below for the exact bonus schedule:
- Limited Edition: TenX Special
If you buy 25 ETH or more worth of tokens, you will be amongst the first recipients of new and highly exclusive limited edition TenX Card, which will only be issued in the TenX Initial Token Sale.
- Founder Edition: TenX Platinum
If you want to be part of the super exclusive TenX token sale founders’ team circle and you 1,250 ETH or more worth of tokens, you will receive the founders’ edition TenX Card, which will only be issued in the TenX Initial Token Sale.
- TenX Bug Bounty Program
This program allows independent security researchers to submit vulnerabilities. Besides earning a place in the security hall of fame and receiving a free TenX card, every security vulnerability submitted that results in a fix on TenX side will receive a monetary reward.
Who and What Can Affect Your Reputation?
You always must have plan B in the case of the project’s failure. Your reputation depends on the ability to protect investor’s rights. A good example is Enigma’s recent red flag: the hackers nab around $500,000. The attacker gained access to Enigma’s Slack community, website and some of its mailing lists to posts the messages, apparently because CEO Guy Zyskind had not changed a previously compromised password for his email account.
Despite the team’s poor security that caused such an incident, this was a good decision to refund ICO investors.
PR Strategy and Marketing the ICO campaign
It is crucial to establish a qualitative relationship with supporting community on social networks (Slack, Twitter, Telegram, Facebook) and blog platforms (Medium).
Not quantity, but quality. You can own many channels of communication, but the main point is the strategy you invent. Remember that ICOs are becoming competitive. Develop amazing content formats. This may help you to compel investors via social communities.
We covered the most reasonable marketing instruments below to show their determinant role before setting up an ICO. Let’s consider some current ICOs and their marketing strategy while running token offerings.
Social Networks (Facebook, Twitter)
If you decided to launch an ICO, your campaign should be comprehensive in the administration of social networks, providing all the solid information about the project and the campaign. Timely posts and appearances in mass media are also the part of presentable ICO.
Community Discussions in Slack and Telegram
Slack and Telegram are the most important channels of communication. It’s a big community connecting project founders, users, investors, and team members. Feeling the atmosphere within these communities can be relevant when evaluating the ICO project. What is important? It is time management; raised questions in the community must be answered in time and on a regular basis.
Medium is a perfect location of information about the project itself, its terms and conditions, roadmap and future perspectives, development and current activity of an ICO. A number of your followers depends on the post frequency, activity in the blog, captivating info.
Threads on Bitcointalk.org
Bitcointalk.org is an enormous Blockchain platform about Bitcoin and related issues. Creation of the campaign on this forum is imperative, as it provides you direct interaction with the traders and investors, with the targeted audience who are introduced to the developers. Bitcointalk is a mixture of negative and positive reviews of the projects. However, critical points of view can be favorable in improving and fixing your project.
Collaboration with the investors and the audience is strongly recommended. Read the messages carefully, trying to answer all types of questions. Do not avoid negative comments, always monitor them and be involved in the communication process.
PR in Mass Media
Promotion of the project in mass media is fundamental in the creation of positive opinion and announcement of the team success, expertness, and reliability. The media is the central vehicle of PR industry, means of communication with the public. Therefore, the PR campaign should launch at least 3 months before the setting up an ICO. Build the ongoing relations with journalists and reporters.
PR manager who promotes the project has to know key marketing instruments:
- press releases and post-event articles
- publications in the media
- video and audio news releases
- events and conferences, meetups
The press release is >one of the basic instruments for supplying content to the media. It can be quickly spread in different publications. They are recommended to be written by professionals, concerning the crypto theme.
This channel of communication can be a good alternative for written information within the mass media publications. People prefer vlogs to see the person talking to them. Video news is easier to grasp, and it has a tangible effect on apprehension and realization. Make your own channel for public interests, and you’ll see how the news is circulated.
Bounty programs are the zest of an ICO project. They motivate the users for certain PR promotion in exchange for tokens reward. Everyone may participate in this kind of reward campaign. Tokens can be paid, for example, for social activity, website translation, writing the articles and blog posts on the project or submitting secure vulnerabilities.
There is a variety of ICO-trackers, where your project can be on the list. For example, ICO-list. Its preference is in extra related platforms located together with the names of ICO projects.
To illustrate qualitative marketing strategy, let’s review current relevant ICO projects:
- Facebook: 12 533 likes https://www.facebook.com/tenxwallet>
- Twitter: 29 000 followershttps://twitter.com/tenxwallet
Informing the public with the current activity demonstrates openness and ensures trust and confidence in team goals:
- Bitcointalk:read 159959 times https://bitcointalk.org/index.php?topic=1953612.0
- YouTube: 8 070 subscribershttps://www.youtube.com/channel/UCrh49JX-9UQJbee6e4EGhog
- TenX Reddit: 5 246 readers https://www.reddit.com/r/TenX
- Mass Media:
- Facebook: 979 likes / 1 150 followers EnigmaCatalyst
- Twitter: 8 147 followershttps://twitter.com/enigmampc
- Telegram: 8 121 members https://t.me/enigmacatalyst
- TenX Reddit: 680 readers https://www.reddit.com/r/enigmacatalyst
- Medium Blog: 2K followers https://blog.enigma.co
- Mass Media:
- Facebook: 13 994 likes/ 14 407 followers https://www.facebook.com/bankeracom
- Twitter: 2 977 followers https://twitter.com/Bankeracom
- Telegram: 1 677 members https://t.me/bankera
- Medium Blog: 138 followers https://medium.com/@Bankera_blog
- Bankera Chat https://chat.bankera.com/channel/community
For better understanding of the process, technical and regulatory aspects of conducting ICOs check out the following posts:
- Best ICOs: Projects Most Effective in Funding
- The Best Countries for an ICO Launch
- How to Write a Good Whitepaper
- How to Launch an Initial Coin Offering?
- How to Start an ICO Project: Technical Components
- How to find the best ICO team before launching an Initial Coin Offering
- How Much Does It Cost to Do an ICO?