Before approaching an ICO, it’s necessary to understand how one is created.
Knowing the process has many benefits for investors. For example, it helps you understand the experience of the project team in cryptocurrencies.
Also, it helps you gauge the marketing ability of ICO creators.
Finally, it also helps you track feedback from other investors towards an ICO.
So below, we’ll provide a briefing into the steps followed when creating an ICO.
This article is for investors, where we’ll mention what to keep track off to gauge the health of the investment. Regardless, you can still benefit as a business, especially if you’d like to start an ICO!
1. Pre-Announcement Phase
This is when the white paper is handed out.
The pre-announcement phase is when the ICO publishes the details of the project. Here, you should receive detailed information on project logistics and teams.
Do note that ICOs, in general, are unregulated. Thus, the method of publishing white papers will differ from one project team to another.
But, as a general rule, white papers are first published online. Social media platforms where keen investors are available review the white paper publicly.
They also provide feedback as to the feasibility of the goals, unmentioned details, and important questions.
Common mediums include subreddits and Bitcoin talk forums. They may also include social media business pages (especially for experienced companies).
ICOs are crowdfunding projects, and thus they come with research advantages.
The online existence of white papers means online critique is readily available. Beyond your normal research framework, you have the experience of other investors to help.
Thus, when reviewing a white paper, always look for other’s feedback. Look for questions that you may have forgotten to ask.
Also, don’t forget to check for the responsiveness of ICO teams.
2. Offering Phase
This is where ICO teams begin to formalize their white paper into a contract.
As with any contract, you get terms, guarantees, deadlines and a project life cycle.
As an investor, you must pay attention to security guarantees of the offering phase. You must ensure that the contract secures your investment, guaranteeing a long life to the project.
The contracts of the offering phase also provide the right of investors. They also provide limitations on what investors and ICO teams can and cannot do.
Also, the offering phase discusses terms of cryptocurrency use. In other words, it mentions what the possible allowed uses of the tokens you get.
For example, tokens may be used to acquire special favours from the company.
The offering phase also mentions how you can pay to get the tokens.
Some ICOs accept payments in other cryptocurrencies. But many require you to pay in fiat currencies.
The start and end dates of projects are also announced.
If a contract is comprehensive enough, it should also provide dates of different phases. For example, the distribution of tokens may be done across the period of weeks or months.
The amounts to be distributed, in addition to dates, should be mentioned in the contract.
3. Marketing Phase
No project is ever complete without appropriate marketing.
Do note that with the marketing phase, contracts are not yet finalized. In fact, sales of crypto tokens are completed after the end of the marketing campaign.
Such campaigns are professional in nature. Specifically, they include press releases to major online news networks.
4. Token Distribution
The end of the marketing phase marks the beginning of cryptocurrency sales. This is when the contract offers begin to kick in. It is also when you should expect the initial token handouts of the project.
Do note that at the start of token distribution, many companies choose to start sales. For example, it is common to see 25 to 30% off for token purchases.
Discounts tend to decrease over time, as the ICO approaches its funding goals. Thus, acquiring tokens early and selling them at the end of fund collection may be a good trading opportunity.
This may be an excellent opportunity for investors who do their homework before the marketing phase.
Tokens are distributed at specific sites advertised by the ICO team. Those could be specific currency exchanges for the sale to take place. Or, they could be other investor offices.