Hello, how is your week going? I couldn't make a post last week due to some constraints. Today, I wish to take a look at the business side of things in the web 3.0 space. Today, I wish to discuss a basic step in the launch of a cryptocurrency.
One of the buzzwords of web 3.0 is "ICO" or Initial Coin Offering. It can be likened to the IPO or the Initial Public Offering where corporate entities make their companies' shares or stocks available to the public in exchange for their funds. In the case of ICO, a company sells a new cryptocurrency to raise money. Investors receive cryptocurrency in exchange for their financial contributions.
This new cryptocurrency token offered may have some utility related to the product or service that the company is offering or represent a stake in the company or project. For as many tokens or coins out there, there was an ICO that went with their launch.
So how does an Initial Coin Offering work? There are three basic ways of structuring an ICO, according to expert sources and they are ;
Static supply and static price: This is when a company sets a specific funding goal or limit. It then means that each token sold in the ICO has a preset price, and the total token supply is fixed.
Static supply and dynamic price: Here, the issuing company has set a static supply of tokens and a dynamic funding goal—this means that the amount of funds received in the ICO determines the overall price per token.
Dynamic supply and static price: In this case, the ICO has a dynamic token supply but a static price, meaning that the amount of funding received determines the supply.
The role of the White Paper - For every ICO goes a white paper. This is a document that elucidates the goal, objectives and expectations of the cryptocurrency project. Usually, the promoters will make the white paper available on a dedicated website. Some of the notable information contained in a typical ICO's white paper includes the following;
What does the project address? what problem does it aim to solve?
How much money does it aim to raise during this ICO?
What would be its currency?
How long would the ICO last?
How can investors purchase the tokens?
Would there be an Airdrop? etc
Pros and Cons of an ICO
Just like with any business venture, there are advantages and disadvantages associated with ICOs. One clear advantage is that it offers a quick way of raising funds for the project as there is little or no regulatory policies governing them. A major disadvantage of ICOs on the other hand is the potential exposure to scams in the industry. In a situation where funds are leaked to a dubious source, it is almost impossible to recover them.
Notable Examples of ICOs
There are roughly 22,000 listed cryptocurrency tokens today. Therefore we can say that there have been as many Initial Coin Offerings as that. However how many have been successful and how many have not? A successful ICO is one that could be said to have met all or most of the promoters' goals especially as laid down in their white paper. Another parameter that can be easily verified is its ROI or Return on Investment where the profitability on its token price is a handsome one and the investors would have realized that their investment was a good one too. On the other hand, there are numerous unsuccessful ICOs. Let's look at some examples of successful ICOs over 3 years or more.
Bitcoin(BTC) - Bitcoin is the most valued cryptocurrency and also the most popular known for its payment utility. Over eight years, it has grown from $796 when it launched to $18,321 which it trades today. This is an astounding 2200% growth in that period!
Ethereum(ETH) - Ethereum is another example of a successful ICO. Launched about seven years ago, the foremost Dapps enabler today trades at $1,238 from a miserly $0.8221 at launch resulting in an ROI of more than 122k%! You could see that even if Eth drops to $10, the early birds at the ICO would still be smiling to the bank.
Quant(QNT) - Quant was launched in 2018 to address the lack of interoperability between the different blockchains. You can read more about Quant here. Back at the ICO, the tokens were sold at $1.48. Four years later, it is selling for $117, a growth of 11,552%.
OKB(OKB) - OKB is the OKEx utility token that enables users to access the crypto exchange's special features. The coin is used to calculate and pay trading fees, grant users access to voting and governance on the platform, and reward users for holding OKB. At launch 3 years ago, the token price was $2.72. Today it retails at $21 generating a modest ROI of 1,828%.
So in summary, for your cryptocurrency project to go from the planning desk to the wallet of your prospect investors, you would need to carry out an Initial Coin Offering. A relatable and detailed white paper should also come along. It would also be nice to have at least one reputable person on your time to offer some amount of assurance and confidence to your prospective investors.
Next week, I will take on the art of Air drops. It is a fancy way of distributing crypto tokens. So let's keep it a date then. Till then, do have a fruitful weekend.