{"id":35840,"date":"2022-09-05T08:14:50","date_gmt":"2022-09-05T12:14:50","guid":{"rendered":"https:\/\/coinscreed.com\/staging\/?p=35840"},"modified":"2023-06-27T05:29:54","modified_gmt":"2023-06-27T09:29:54","slug":"initial-coin-offering","status":"publish","type":"post","link":"https:\/\/coinscreed.com\/staging\/initial-coin-offering\/","title":{"rendered":"Initial Coin Offering (ICO): How to Plan Using Examples from Successful Projects"},"content":{"rendered":"\n

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An Initial Coin Offering (ICO) appears to be an easy way to raise money for a crypto project. It could be. But it has a poor reputation in its execution and this might affect its success.<\/p>\n\n\n\n

In 2018, Google<\/strong> banned advertising for Initial Coin Offerings because of a reigning lack of security for investors. Some ICOs turned out to be scams\r\n \r\n \r\n \r\n <\/g>\r\n \r\n \r\n \r\n <\/clipPath>\r\n <\/defs><\/svg><\/span><\/a>, while others appeared to be because of poor planning<\/use><\/svg><\/span><\/a>. <\/p>\n\n\n\n

If your goal is to fund your crypto startup, an Initial Coin Offering should be one of your options. This guide will give a step-by-step layout of what an Initial Coin Offering is and how to plan one.<\/p>\n\n\n\n

What is Initial Coin Offering? <\/h2>\n\n\n\n

Initial Coin Offering is a way to crowdfund a crypto startup<\/a>. When a person has an idea for a crypto project, they create an outline of the product. This will include the product's benefits and future valuation. After this, they pitch the project to potential investors for funding. Investors pitch in after a promise of an increase in the product's value.<\/p>\n\n\n\n

Instead of raising money from a venture capitalist, an ICO allows startups to sell tokens that may have future value. ICO projects raise money for the project\u2019s development. ICOs are commonly used for blockchain and crypto projects. These tokens can be used for many things like buy products from the company, pay for services, or earn revenue from the market\u2019s rise in price. <\/p>\n\n\n\n

Most ICOs are based on Ethereum smart contracts. These are computer programs that run like a legal contract. ICOs are used to get funding to create a new crypto token. In one of the earliest ICOs of 2013, BCNext<\/strong> launched “NXT<\/strong>“. The financial services industry is NXT\u2019s primary target market. Its initial tokens sold at $0.0000168 each. At the end of the ICO, they raised about $16,800 worth of bitcoin.<\/p>\n\n\n\n

In 2014, Ethereum<\/a><\/strong> raised over $16 million<\/use><\/svg><\/span><\/a> in an Initial Coin Offering that lasted from June to August. It introduced its native token, Ether<\/strong> (ETH), by selling 50 million of them for $0.31 each. <\/p>\n\n\n\n

In 2017, Blockchain technology brand, Electroneum<\/strong>, raised<\/use><\/svg><\/span><\/a> $39,930,000 of its proposed $40,000,000 in an Initial Coin Offering from 13 September 2017\u201322 October 2017. It launched its token ETN selling at 0.01 USD. <\/p>\n\n\n\n

Recently, LOFI EQ<\/strong> raised<\/use><\/svg><\/span><\/a> $5,550,000 of its proposed $6,050,000 in an ICO from 26th August 2022\u20134th September 2022. The watch-to-earn social-entertainment platform introduced its LOFI token sold for 0.005 USD. <\/p>\n\n\n\n

Each of these use cases has one thing in common: tokens. Each brand used it as a utility for investment.<\/p>\n\n\n\n

Types of Initial Coin Offering<\/h2>\n\n\n\n

There are two main types of Initial Coin Offering – equity and utility tokens.<\/p>\n\n\n\n

Equity tokens<\/h3>\n\n\n\n

Equity tokens are similar to the stocks that would be listed on a stock exchange. Equity tokens give the token holder a share of the company\u2019s profits. This profit could be in the form of dividends or a company buyback. The dividends are paid in a currency like the company\u2019s tokens. The company, in turn, has to pay out the dividends in a legal currency like the US Dollar. Equity tokens are risky, as the company would have to pay dividends. They are not a good option for startups that don\u2019t have a revenue model.<\/p>\n\n\n\n

Utility tokens<\/h3>\n\n\n\n

Utility tokens act like a coupon for a company\u2019s product or service. It\u2019s similar to a gift card that the company would redeem later. Utility tokens are not investments since the company wouldn\u2019t have to pay the investor anything. The investor would redeem the value in the service itself. Investors can resell their utility tokens. This means that utility tokens have liquidity. Utility tokens are a good option for startups that provide a service.<\/p>\n\n\n\n

How to Plan an Initial Coin Offering<\/h2>\n\n\n\n

Create a Token<\/h3>\n\n\n\n

This should be clear at this point. Investors will exchange the token for fiat currency. This is called a Utility token. It is given to investors in exchange for money that they can use to access the services on the platform. They have no monetary value but you get a discount for using them. Here are 5 tokens created via an ICO and their floor price<\/p>\n\n\n\n