Since cryptocurrency is growing so rapidly, a successful fund-raising campaign is also one of the strongest drivers towards the development and growth of your cryptocurrency project. Three of the most well-known methods of fund-raising for blockchain projects are Initial Coin Offerings (ICO), Initial Exchange Offerings (IEO), and Security Token Offerings (STO). All three of them have laws, benefits, and drawbacks.
Throughout the course of this guide, we will discover how to market these products, and how to make your cryptocurrency development project stand out.
1. ICOs, IEOs, and STOs: Understanding the Fundamentals
Firstly, you should have some idea about the fundamentals of the main differences between these products.
- ICO (Initial Coin Offering): ICO is the most powerful fundraising tool available in the cryptosphere. ICO allows the natively created currency or cryptocurrency to be issued by the project and sold among the masses as compared to established coins such as Bitcoin or Ethereum. ICOs seem to be the most decentralized, but are not completely free of regulation issues and traps either.
- IEO (Initial Exchange Offering): IEOs are similar to ICOs but trade on a cryptocurrency exchange. The exchange is an established middleman, organizing the sale of tokens and ensuring the project and investors comply with regulations. There’s a trend towards moving towards IEOs as it incorporate an element of credibility along with convenience for investors.
- STO (Security Token Offering): STOs are the security tokenized offering for sale, backed by real-world assets such as equity, debt, or revenue streams. They are completely security-compliant and hence safer but more complicated and legally more complicated to implement.
2. Steps to Launch an ICO, IEO, or STO
Good project management of your cryptocurrency project fundraising campaign entails quite a sequence of steps from conception to selling your tokens for the last time. The following are the steps that you need to take for each type of offering:
Step 1: Define Your Project and Tokenomics
The initial part of the release of any of these projects is having your idea of your project and where your token will position itself in the ecosystem. This is where you have your use case, target market, and value proposition for your project.
- Tokenomics: The token’s economics, i.e., supply, distribution mechanism, usage, and the incentivization mechanism. Good tokenomics will kill or save your project and thus is actually very important that all this is done right.
In an ICO, the token is usually sold to investors to resell to raise product or development capital, while in an IEO, tokens are traded on a crypto exchange platform. In an STO, the token is company equity and in most instances resides on real-world assets, so your tokenomics will be governed by securities law.
Step 2: Legal Considerations
Compliance works best in association with any offering. In an ICO, you will have to put your token into the category of a utility token and not a security token unless you are forming an STO. If you form an ICO or an STO, then you would fall under the compliance where you reside.
- For ICOs: Above all, ensure your token is not a security. This is a very close analysis of the form structure and purpose, and promotion and use of the project.
- For IEOs: Since exchanges prefer to carry the compliance and KYC/AML load, legality is effectively less of an issue for the project creator.
- For STOs: You will be made to follow the most stringent regulation requirements as your token will be considered a security, and you will have to register under the US securities regulations (SEC) or the whole world.
Step 3: Build Your Cryptocurrency and Smart Contracts
Once you have your legal structure in place, then you will then need to construct your cryptocurrency or token. That involves constructing your blockchain platform, token designing, and coding your smart contracts that will govern sale of your token.
- For IEOs and ICOs: You will need to design a secure and stable smart contract that will be responsible for the reception of funds, distribution, and token issuance. This will offer a smooth and clean process to the investors.
- For STOs: Smart contracts should be more sophisticated as they are typically linked to actual assets and property rights. A well-drafted and legally sound smart contract is of the highest value to an STO.
Step 4: Marketing and Building Community
Marketing is included with the release of any ICO, IEO, or STO. Building a strong community for your crypto development project is necessary. Engage with your future investors on social media sites such as Twitter, Telegram, and Reddit. Making educational content, and whitepapers, and having a strong online presence will attract a loyal investor following.
- For ICOs: You will need to make noise and convince would-be investors that your project is one you cannot possibly miss out on.
- For IEOs: Since exchanges do most of the promotion, you will need to collaborate with them in order to promote your token sale.
- For STOs: Due to the regulatory nuances, you will need to explain how your token plays into securities law and win over accredited investors’ trust.
Step 5: Release the Offering
Finally. You can now depart. Release your ICO, IEO, or STO. Make sure token sale is successful, there is proper call of smart contracts, no token deployment bug and fund management bug.
- For ICOs: Token sale typically occurs on your platform or a custom platform.
- For IEOs: Token sale occurs on the exchange, and you will have to comply with their specific protocols.
- For STOs: The sale is usually done on a regulated platform trading in securities offerings.
3. Post-Sale Activities
Upon finalizing the token offering, the next is sustaining long-term success for your project. That includes continuing to work on your cryptocurrency development project, fulfilling promises made to investors, and future regulation compliance.
Final Words
Releasing an ICO, IEO, or STO for your cryptocurrency project is a multifaceted but exciting experience. Raising funds through an ICO, in collaboration with an exchange for an IEO, or through the sale of security tokens through an STO, in all cases the distinct characteristics of each are the cornerstone of a successful project. Good legal counsel, good tokenomics, and good marketing will put your project on the road to success.
If you are ready to jump into the next phase of cryptocurrency growth, today is the day to learn more about these pools of capital.