An IPO, or an Initial Public Offering, refers to the process wherein corporations publicly offer shares to institutional investors. In the world of cryptocurrencies, however, tokens do not have tangible shares to launch a public offer. The IPO equivalent of a cryptocurrency token is known as an ICO, or an Initial Coin Offering.
In this article, we’ll go over the basics of an ICO, how it works, and the different types of ICOs that can be offered by different tokens. Keep reading to learn more about ICOs, and how to launch successful ICOs for your token or project.
What is an ICO (Crypto)?
Much like IPOs, an ICO is meant to raise funds for a cryptocurrency project. Developers often offer tokens to their platforms, games, or DApps to interested investors for their projects. Unlike IPOs, however, an ICO is typically done at the start of a project, where startups launch ICOs to raise capital, and to further foster a community in anticipation for the project.
An ICO is a direct offer from the startup project, and removes the necessity of intermediaries to conduct the transaction. Initial coin offerings leverage the capabilities of blockchain, keeping their token sales secure.
Similar to stock investments, an ICO is expected to provide a return on investment once the project is completed, so investors typically seek out ICOs that have the highest potential for earning, and aim to get on the whitelist of these tokens.
Pros and Cons
ICOs are easily accessible to any developer with a new cryptocurrency token. This enables developers to innovate and create better projects, DApps, and more. Tokens connected to convenient or inventive platforms tend to be more sought after by investors, as are tokens that have complete, transparent, and open-source files.
However, the lack of regulation can also have its downsides as there are no governing bodies or organizations that can monitor token sales, and ensure transparency. Getting into whitelists for popular ICOs are notoriously difficult, even for the most seasoned crypto investors.
How Does It Work?
The basics of launching an ICO includes creating a token, and setting a launch date. However, launching a successful ICO is a different process. Because Initial Coin Offerings are typically done as a capital-raising practice for a new token, the project will need to entice investors to participate in the ICO though proper marketing.
New projects do not have historical data or financial statements that investors can use to determine whether participating in the ICO will be lucrative for them. Instead, cryptocurrency tokens and blockchain projects offer files such as whitepapers, roadmaps, and limited-time exclusives to entice investors.
In this next section, we’ll go through the step-by-step process in launching an ICO, and how you can launch a successful ICO through proper promotions.
How to Launch an ICO
Launching an ICO can be divided into 4 main steps: determining the details, developing the token, marketing the ICO, and the launch itself, which can be done with or without the assistance of a crypto launchpad.
Step 1: Determining the Investment Target
First, determine the cause of the ICO. The ICO should cover the capital being raised by the project, so it is a must to calculate the market cap, price, and type of token to develop. Determine the network in which the token will build on as well.
Building the tokenomics beforehand will provide a guide for token development, and will determine whether the ICO can effectively raise enough capital to move forward with the project.
Step 2: Developing the Token
The next step is developing the token. Most tokens operate in the Ethereum network, which hosts nearly 90% of all blockchain projects. However, newer ecosystems, such as Solana, Polkadot, and more, have increased in popularity as there is room for growth in newer networks. The Bitcoin network, where cryptocurrencies started, continues to be a popular choice as well.
Step 3: Introduction and Marketing
Once the token is ready for launch, it will need to be promoted in order to amass a large-enough following to gain the interest of investors. Popular forms of promotion include releasing the whitepaper and open-source codes for transparency, but other forms of marketing are:
- Creating Telegram and Discord Communities;
- Digital Marketing through Writeups and Announcements in Medium;
- Promotional Deck;
- Partnering with Existing Projects, Launchpads, Platforms, or Apps;
- Etc.
Overall, the more investors know about the token, the more they are willing to participate in its ICO. A token must have a potential for growth and returns to gain traction within the community, so marketing campaigns should reflect these factors.
Step 4: Launch With or Without a Launchpad
The final step is to set a launch date, announce it, and move forward with the token launch. There are two ways to do this: (1) without a launchpad, and (2) with a partner launchpad.
Launchpads are platforms that enable projects to launch ICOs with increased visibility and promotion, but may incur additional costs. Some crypto launchpads are picky when it comes to the projects they partner with, so not all projects are eligible for launchpad ICOs.
Types of ICOs
There are two main types of ICOs that a project can do: a private ICO, and a public ICO. The main difference between these two is that private ICOs are limited in terms of the number and type of investors, while public ICOs are typically open to the public.
- Private ICO: Private ICOs limit the number and type of investors that can participate in the launch. Typically, private ICOs only whitelist a number of high-profile and high-net worth individuals, and set a minimum investment requirement for the launch.
- Public ICO: A public ICO is similar to a crowdfunding campaign for startups. Unlike a private crowdfunding, a public ICO does not typically have minimum investment requirement, and is deemed an accessible ICO for different investors, regardless of portfolio size.
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