How to: An ICO Tutorial

ICO tutorial

ICO tutorial for newcomers in the field, read on to find out what boxes you need to tick before announcing your token crowdsale.

ICO (Initial Coin Offering) is a new type of crowdfunding that has been trending lately and will only become more popular in the next few years. It’s a great opportunity for small businesses to get funding from their dedicated communities in the early stages. On the one hand, it’s much easier to get venture capital. On the other hand, it’s not a sure fire way of gaining capital needed for your business. Keep in mind that the same things (business prospectives, team, revenue stream, technology) matter for both types of investors. Coming unprepared will not serve you well. So, how do you make your first steps into the world of launching an ICO for your business?

ICO tutorial step 1: How is the token used in your business model?

There are different types of business models to choose from, the three most widely used models are:

  • Token as a mechanism for voting,
  • Token as a mechanism for investment,
  • And token as a mechanism for payment of services within your product.

The most important thing to keep in mind is that the token must be closely connected to the product. Most of all, it must makes business sense to use the token and not some other form of currency (for example fiat). With growing concerns about safety in this new ICO environment, make sure that you are using smart contracts.

ICO tutorial step 2: Distribution

Make a schedule up front about how you want to distribute your token, and how much of the token is available. Do you want to limit your token to a certain amount, so it will never be more than say, 100.000.000 tokens? You can also decide to distribute when it makes business sense. Or entrust distribution of the extra token to a selected council or simply ask all your token holders to vote on the matter. From an investor point of view, a limited amount of tokens is preferable. A limited amount will mean increased demand over time, which will lead to the token going up in value.

ICO tutorial step 3: Platform

The most popular platform for token distribution is Ethereum. As it has an extended smart contract virtual machine, you can use it to customise or program your logic from scratch. This adds lots of options to your smart contract. But the downside is that you will have to be able to code it yourself. Or hire coders familiar with smart contracts. If you want to do it more straightforward, you can use Plug and Play platforms like Bitshares. However, you are limited to the choices they offer in the customisation of your logic. Bitshares has the option to accept any cryptocurrency for your token, which will extend the list of possible investors markedly.

There are a few alternative platforms like Ripple and Waves that have made token distribution easy for anyone. But that also means that those platforms are crowded with lots of various tokens, making it harder to find good investment opportunities.

ICO tutorial step 4: Jurisdiction and legal steps

Although there are not many regulatory laws surrounding crypto, there is a good chance this might change in the future. The step of where to incorporate your company is one that should be well thought-out, as it impacts the way your business might grow in the future. Singapore will monitor not only the token distribution, but also how you operate your company afterwards. Other common countries for incorporation are Switzerland, Virgin Islands, and Europe. Some countries are not connected to English law but are setting up their own regulation,like Belarus or Russia. Keep in mind, you’ll have to incorporate two companies: one for the token sales and one for your operations

ICO tutorial step 5: Listing on exchanges

The final step of the process is to get your token listed on various exchanges, so investors can easily buy and sell your tokens. Each exchange has their own requirements and the pricing differs. Some exchanges ask for more than 50 BTC to get listed. However the more exchanges you are listed on, the easier it is for more investors to buy and sell your tokens.

Another option is distributing your tokens on Bitshares, which has its own exchange called DEX. Other popular exchanges include Poloniex, Kraken, and Bitstamp. Specific countries also have their own exchanges, for example, Korbit in South Korea or BTCC in China.

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