ICO vs IPO? How ICO and STO powered by Blockchain platform is transforming modern day start-ups for crowdfunding — A Very Extensive Look (Part 2)

ICO vs IPO? How ICO and STO powered by Blockchain platform is transforming modern day start-ups for crowdfunding — A Very Extensive Look (Part 1)

Part 2 - Final. (Continued...)

ICO Development Platforms

According to ICOWatchList’s data, more than 82% of projects choose to issue their tokens on Ethereum. This figure is not going to change in the coming future, as the platform currently offers the most convenient and easy to use service. Though Ethereum is the most popular platform for conducting an ICO, but there are many other options worth considering, depending on the type of project that is being built. Let us look at these various platforms in blockchain those have many successful ICOs held on them.

Ethereum

Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract functionality. Ethereum provides a decentralized virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes.

Ethereum’s ICO success credits to the ERC-20 token standard. These tokens are open source and can represent any fungible tradable good: coins, loyalty points, gold certificates, IOUs, in-game items, etc. They are universal that any exchange or wallet service that supports Ethereum can very easily integrate any other ERC-20 tokens. Over 99% ICO tokens issued on top of the Ethereum implements this standard. ERC-223 is a new proposal to solve issues with the current ERC-20 standard. This new standard prevents token to be transferred to a contract that does not allow token to be withdrawn. In ERC-20, if someone sends token into a contract that has not allowed anyone to use it, the token will simply be locked and can never leave that contract. Because of this, hundreds of thousands of dollars’ worth of ERC-20 token has been locked up. ERC-223 merges the transfer functions between wallets and contracts into one single function ‘transfer’, which can also save transaction fees in terms of gas. ERC-223 is backwards compatible with ERC-20. ERC-223 is a proposal right now, not a standard yet.

ERC-721 is a popular specification other than ERC-20. The goal of this proposal is to create a non-fungible token. The biggest difference between ERC-721 and ERC-20 is that, ERC-721 defines non-interchangeable tokens, which means that each token has an independent ID, so the independence of ERC-721 can be used in the transaction of assets and tracking. That is, in some cases we need to have unidentical tokens within the same platform, and add some extra parameters and price them differently. Popular blockchain games like CryptoKitties make use of non-fungible tokens on the Ethereum blockchain. Each CryptoKitty is represented in the form of a non-fungible ERC-721 token. Other example like WePower platform which is supporting green energy producers, and it’s tokens represent a certain amount of electricity. Each token has a number of parameters, including even the type of the energy produced (for example, solar or wind power). ERC-721 standard makes it easy to create marketplaces for multiple non-fungible token types.

Other popular Ethereum token standard proposals to look are ERC-621, ERC-827, ERC-1155. ERC is not a technology or program, It’s Ethereum General Request for Comments (RFC). ERC provides developers with technical guidance for construction. Developers can submit new ERC standard proposals to the Ethereum community by submitting EIP (Ethereum Improvement Proposal). EIPs describe standards for the Ethereum platform, including core protocol specifications, client APIs, and contract standards.

Ethereum can process between 10 to 30 transaction per second (tps). They already have many solutions in the works to upgrade the transaction speed like Plasma, sharding and Truebit solutions to bring Ethereum to Visa-scale transaction capacity. Ethereum also plans to switch from Proof-of-Work to Proof-of-Stake with the introduction of Casper, a partial consensus mechanism combining proof-of-stake algorithm research and Byzantine fault-tolerant consensus theory.

Ethereum has its own programming language, Solidity — similar to Javascript for writing smart contract. Serpent, one of Ethereum’s earlier smart contracting languages is no longer safe to use. While issuing tokens on Ethereum is relatively easy, you will need to be proficient in Solidity to be able to fine-tune your ICO to specific purposes. web3.js is a collection of Javascript libraries which allow you to interact with a local or remote Ethereum node, using a HTTP or IPC connection. MetaMask tool allows you to run Ethereum dApps right in your browser. Truffle is a development environment, testing framework and asset pipeline for Ethereum, aiming to make life as an Ethereum developer easier. It is one of the most widely used IDEs in the Ethereum community other than Remix — Solidity IDE. Thousands of ICOs held on Ethereum blockchain. State of the ÐApps website have an extensive details about the ICOs held on Ethereum.

Waves

Waves is an open blockchain platform that aims to make the process of launching, distributing, and using tokens easier. Waves is a decentralized financial trading platform written in Scala and built on its own blockchain with custom tokens being its main feature. They enable decentralized crowdfunding as well as transferring, trading and storing of fiat and digital currencies. Waves missions is to enable any business with development prospects, regardless of its size and geographical location, to run the ICO and raise funds for growth and development. The Waves blockchain can process up to 190 tps.

Waves Platform encourages blockchain developers and businesses, to create their project on top of the Waves blockchain through its public API and cutting-edge technology programmed in Scala. Waves has almost 14000 ICOs registered. Top ICOs that have already been held on Waves are Primalbase, Wagerr, PeerBanks, MobileGo, and ZrCoin

NEO

NEO is a decentralized and distributed ledger protocol that digitalizes real-world assets into digital ones, enabling registration, depository, transfer, trading, clearing and settlement via a peer-to-peer network.

NEO uses a new consensus protocol called dBFT — Delegated Byzantine Fault Tolerance. It’s a modification of the classic Proof-of-Stake (PoS) protocol where NEO tokens holders can vote for delegates, known as bookkeepers, who maintain the network for everyone. This way network can process around 1000 tps, as you don’t need to wait for a large number of nodes to confirm a transaction. NEO is used like a share of the company that can be used to vote and mine. Holding NEO gives dividend paid in GAS. GAS is a coin that is used to run all smart economy platforms created on NEO. NEO can transact at 1000 tps with a maximum of 10000 tps.

NEO uses e-contracts to keep record transfers of digital assets. Digital tokens generated by e-contracts function as a general underlying data that could be used for recording titles and assets like equities, creditor’s claims, securities, financial contracts, credit points, bills and currencies, and can be applied for equity crowdfunding, equity trading, employee stock ownership plans, peer-to-peer financing, loyalty programs, private equity funds, supply-chain financing, etc. NEO supports multiple well-known programming languages like C# , Java , Javascript and Python. NEO will never be a truly decentralized network, as the majority of bookkeeping nodes are operated by the NEO team.

NEO has more than 30 ICOs on its platform. Notable ICOs that were held on NEO includes QLink ($19 millions), Red Pulse ($14.5 millions), Trinity ($20 millions), etc.

Stellar

Stellar is open-source, distributed payments infrastructure that connects banks, payments systems, and people. Integrate to move money quickly, reliably, and at almost no cost. The platform has its own decentralized exchange, so the tokens sold during an ICO can start trading on day one. It is being marketed as cheaper and faster than other platforms, with a 5 seconds median settlement time (compared to Ethereum’s 3.5 minutes) and the cost of 100K transactions on the platform being a mere 1 cent.

Stellar is an excellent choice for any ICO that does not require Turing-complete smart contracts (unlike Ethereum, has the most expressive programming capabilities) and can benefit from immediate creation of a secondary market. Developers can use programming languages such as C++, Java , C#, Javascript, Go and Python. The platform utilises the Stellar Consensus Protocol (SCP), which works through the use of quorums, which are a set of nodes used to reach an agreement. Their extremely low fees and fast transaction times makes them an ideal choice for any ICO project with a lot of microtransactions. Mobius, the first ICO project on Stellar, has reported that they are already capable of doing 1000 tps and scale to 2000 tps.

NEM

NEM’s blockchain platform was designed and coded from the ground up for scale and speed. NEM’s permissioned private blockchain delivers industry-leading transaction rates for internal ledgers. And its revolutionary consensus mechanismand the Supernode program ensure that NEM’s open, public blockchain can grow without ever compromising throughput or stability.

NEM Smart asset system helps you building a fintech system, tracking logistics, ICO, document notarization, decentralized authentication, and much more. NEM platform is capable of processing 4000 tps, which is one of the highest figures on the market.

NEM’s blockchain exposes its functionality through an API interface that can be used with any programming language. The most notable ICOs held on the NEM platform includes Dimcoin ($14 millions raised) and Loyalcoin ($10.9 millions).

BitShares

BitShares 2.0 is an industrial-grade decentralized (DPoS) eco-system built for high-performance financial smart contracts. BitShares is responsible for the crypto trading pair concept. It’s also the first delegated Proof of Stake blockchain and uses community-elected delegates for governance.

BitShares is a smart contract network that can host tokenized apps. Tokens are exchangeable for BTS, which is then exchangeable for bitAssets, which are stablecoins pegged to real-world markets. BitShares 2.0 is coded in C++. It’s a part of the Microsoft Azure BaaS — Blockchain as a Service Package. It transacts at 3400 tps to theoretical maximum of over 100000 tps. Its unmatched transaction speed and the use of stablecoins allow for high transaction throughput decentralized exchanges, remittance, POS systems to thrive within its ecosystem. OpenLedger — Decentralized asset exchange built on BitShares platform.

Stratis

Stratis is a Blockchain-as-a-Service (BaaS) platform that allows companies to create permission blockchain inside the enterprise in order to tokenize elements of their business processes.

Blockchain platforms built on Stratis creates a sidechain that will act as its own blockchain, while still being attached to the Stratis mainchain network. This relieves a lot of congestion from the mainchain and allows each sidechain to act independently. The contracts are written in C# language. The Stratis blockchain can process up to 20000 tps.

QTUM

Qtum is an open sourced public blockchain platform, leveraging the security of UTXO while enabling multiple virtual machines including EVM and the revolutionary x86 VM. Qtum is PoS based and boasts a Decentralized Governance Protocol (DGP) which allows specific blockchain settings to be modified by making use of smart contracts. Currently, QTUM smart contracts have to be programmed in Ethereum’s Solidity.

Designed with stability, modularity and interoperability in mind, Qtum is the foremost toolkit for building trusted decentralized applications, suited for real-world, business-oriented use cases. Its hybrid nature, in combination with a first-of-its-kind PoS consensus protocol, allow Qtum applications to be compatible with major blockchain ecosystems, while providing native support for mobile devices and IoT appliances. The Qtum network currently can process up to 60 tps.

Nxt

The Nxt blockchain provides a simple, robust and secure private blockchain solution to tokenize any kind of assets an enterprise desires (e.g. shares, bonds, vouchers), which do not require the implementation of complex smart contracts or complex web site back-end and considerably reduces the security risks.

Nxt is coded in Java. Like NEM, Nxt offer a wide range of pre-built blockchain solutions that anyone with little prior knowledge can implement. The Nxt blockchain can handle up to 4.25 tps.

Most of these above mentioned platforms are not just limited to create ICOs only, rather they help to create your Blockchain dApps — Decentralized application that run on a P2P network of computers rather than a single computer with trustless protocols and where the application data are cryptographically stored in a decentralized open ledger popularly called as Blockchain or Distributed Ledger. They also provide Smart Contracts protocols that stores rules for negotiating the terms of an agreement, automatically verifies fulfillment, and then executes the agreed terms. While Ethereum still governs the market; EOS, Cardano, Tezos and many others are emerging platforms for decentralized applications and smart contracts development.

As earlier mentioned, your ICO project should embrace at least one of the blockchain technology features like decentralized application, P2P lending, micropayment, digital identity, remittance, POS system, etc., And it should be using smart contracts to bring transparent, and hassle-free way of digital asset movements by avoiding a middleman. Thus, to make your token popular and encourage the investors to buy it during the ICO, you need to use the token that is fully integrated into the company structure. The best option is to use a token sold at the ICO as an integral part of your system or app (dApps). ICOs developed using ERC-20 can use crypto wallets like Eidoo, imToken — Ethereum & ERC-20 mobile light-wallet to avoid custom development and integration of crypto wallets in their dApps when they are not required.

Auditing plays an important role in any business, but no more so perhaps than in ICO/STO. Once your ICO and dDapp is ready, you should think of ICO/STO auditing. You should bring reputable auditing companies with lawyers to audit and validate your project to bring smartcontracts assurance, regulation compliance assurance, off-chain components assurance using auditor nodes, KYC / AML assurance, pre and post ICO regulatory support, etc., which lends your ICO an added element of legitimacy. For example, Quantstamp audits, secures and drives the mainstream adoption of smart contracts providing a permanent, publicly verifiable security record that lives forever on Ethereum. And Zeppelin builds key infrastructure to develop and operate Ethereum smart contract systems and helps conducting security audits of decentralized applications.

Now that you have an idea of how ICOs and dApps are created with the help of these development platforms available today, it’s time for to discuss about the ICO stages — its launching strategies and methodologies, to the market and various easy-to-go ICO/STO issuance and campaign platforms.

How To Launch An ICO?

Pre-announcement

The first step is a so-called “pre-announcement”, in which the information of an ICO project will be released in order to gain traction and create awareness in the cryptocurrency community, forums, web boards, and so on. This will thus also be the point at which the ICO’s website will be launched; usually, a one-page structure with different elements all represented on the homepage is sufficient. Potential investors will then look at the project’s whitepaper to assess the viability of a project. The whitepaper should be a lengthy document that goes in proper depth about the problem that the project is looking to solve, the solution to that problem as well as a detailed description of their product, its architecture and its interaction with users. To add credibility, the team’s background, token allocation and use of funds are also found in the document.

Offering

It is important that the whitepaper provides a roadmap that has a clear at least five-year vision for the business. The roadmap is typically presented as a chart, with a timeline showing various ICO’s activities from project development to launch, as well as project future milestones. The roadmap should express a confident vision for future development, without being overambitious. A roadmap without a long-term objective could be inimical to the development of the project and thus, turns potential investors away. It is also important for ICOs to explain their token’s utility, token lock-up period for certain investors and any bounty or airdrop campaigns. Also the economics of the project such as how much value want to raise, how many blockchain tokens to issue are decided in this stage.

During the offering state, the following token sale details are provided:

• Soft cap
• Hard cap
• Total Supply
• Token Price
• Accepted Payments
• Restricted Countries/Age
• PR & Marketing Campaign

One of the key success factors of any ICO is a proper marketing strategy. A good project without a solid marketing campaign cannot gain the backing it deserves. Through a good marketing campaign, an ICO project can attract attention from the community, helping to put the project on the radar of potential investors. Successful marketing campaigns for ICOs are based on a combination of traditional marketing and PR. It is important to spread the news of your upcoming ICO far and wide: this can be done through posts on cryptocurrency forums, but it can also take the form of a subscriber button on your website, through social media channels (blogs, Telegram, Twitter, Facebook, Reddit, BitcoinTalk, Github, Slack, etc). A project should hire an ICO manager who knows which crypto community meetings and occasions you should be present at.

ICO Airdrops are being widely used by most of the ICO projects these days. Airdrop distributes free tokens to the entire crypto community. By executing airdrops, the team behind an ICO project will attract people who may be interested in it or may not have heard about it. In order to be eligible to receive airdropped tokens, you need to own some coins that are based on the same blockchain on which the project is built. For example, OmiseGo(OMG) Airdrop happened back in July 2017 for all Ethereum holders. OMG is an Ethereum ERC-20 token. People who had held Ethereum then would have seen OMG tokens deposited newly in their Ethereum wallet addresses. By this way, airdrops helps ICO reaching the investors and attract them to look into your project.

Token Sale

There can be many different stages of the token sale, including but not limited to a private sale, pre-sale, the actual ICO and a general sale.

Some project owners choose to run a preliminary fundraising effort, called Token pre-sale or pre-ICO. This is a sale event that takes place before the official token sales on the exchanges. Usually the fundraising targets will be lower in this stage and most ICO projects offer an early bird bonus, usually around 25% to 30%. Some even offer up to 100% bonus to encourage more investors on board. They are a good way to offset some of the costs involved in organizing the actual ICO sale, which then follows relatively soon after.

ICO projects should post information about the upcoming sale of tokens on special calendars called Token Calenders. There are many resources on which the schedule of an ICO is published: Coinschedule, TokenMarket.net, Cyber.fund, Icocountdown, Coinist, etc.

ICO and STO Issuance and Campaign Platforms

There are various ICO end-to-end issuance platform available in the market that allows anyone to build, audit, deploy and monetize ICOs easily. A one stop solution for your ICO. These platforms focuses on three groups of cryptocurrency users including ICO creators, funders, and promoters.

CoinFactory ICO and STO launch platform with a post-token issuance community and company management. It supports token issuance in four different blockchains — Ethereum, Stellar, EOS and Tezos. CoinFactory comes will all required marketing features to launch a successful ICO.

KICKICO is a blockchain-powered crowdfunding 2.0 platform. The KICKICO supports three kinds of fundraising campaigns ICO, crowdinvesting, and crowdfunding.

Polymath The securities token (STO) platform that facilitates the issuance and distribution of legally compliant token-based securities. The Polymath platform provides means to trade security tokens, authenticate investors, connect with legal delegates, and access a developers’ marketplace. Poly, an Ethereum ERC-20 token, powers the system and acts as the underlying economic unit that facilitates authentication, legal, and developer services.

Securitize A compliance platform for the primary issuance and lifecycle management of digitized securities STO on the blockchain. Securitize is a full stack technology & services platform with powerful features and specialized tools for both investors and issuers. The Securitize platform allows users to manage their digital securities from one convenient dashboard.

Harbor Harbor is an all-in-one platform for tokenized (STO) commercial real estate, investment funds, and more. It is an open-source platform that enables traditional investment classes to migrate seamlessly onto the blockchain.

[tZero] (https://www.tzero.com/) It is blockchain-focused subsidiary and trading platform that supports equity tokens. The tZero product offering consists of brokerage services, electronic private market place, digital brokerage, and Blockchain project development. The platform integrates cryptographically secure distributed ledgers with existing market processes to reduce settlement time and costs, increase transparency, efficiency, and auditability.

Swarm Fund Builds open infrastructure for digital securities. A fully decentralized capital marketplace that democratizes investing.

Securrency A global financial services technology infrastructure and product company delivering access , compliance and security.

Getting ICO On An Exchange

Your token needs to be in demand, it has to be valuable and, most importantly, it needs to get listed on at least one cryptocurrency exchange. Different exchanges will have different requirements for tokens to be listed , but if your project offers something unique and truly valuable to the cryptocurrency community, you shouldn’t have any problems getting it in.

One of the easiest ways to get your token listed on exchanges like Poloniex, Binance, etc., is to use the ICO listing service providers like Coinist — have a huge database of exchange partners they work with to help get your token listed quickly. Platinum is one another STO Listing service provider. With the help of such exchange listing service providers you can get your token listed on the exchanges.

Risks Of Investing In ICOs

We now know that ICO’s function like a crowdsale, where people can offer support for a company by purchasing their “token”, one that is required for the platform to function or simply to be used within the platform by the end user. Every investment holds some risk, that’s why they have potential to earn you money. ICOs are particularly volatile in nature and you need to perform due diligence before you invest a dime into an ICO. For example, there have been many ICOs that have failed because the token being offered did not offer utility or security, and the company was unable to achieve a growth in price. Most newly created tokens are utility tokens. All these various startups, which don’t have a proper use case for utility tokens, decide to make utility tokens instead of security token to avoid unwanted consequences for not complying with the regulations and eventually fails.

IPOs are heavily regulated, where ICOs are not as they bypass the centralized, regulated fundraising process required by banks or venture capitalists altogether. There are many startups have taken the funds raised during their ICO, and disappeared. Their projects get abandoned, and the investors have nothing to show for their money but worthless tokens. That is the reason in China, ICOs are banned for all businesses and individuals. And these Chinese ICOs that have completed their funding cycles have been requested to refund any altcoins raised.

But with the birth of blockchain powered SEC regulated tokenized securities, the smartest people in finance are waving goodbye to Wall Street’s security in search of tokenized securities. Soon, STO will become so popular that traditional stock exchanges and over-the-counter markets will be completely replaced over the next decade.

Final word

Although ICOs aren’t currently regulated, many governments are taking a closer look. Still debates are going on whether cryptos to act as a security, commodity, or currency. It’s only a matter of time before regulatory constraints are set-up to supervise the industry. As a blockchain consulting and platform development company, BangBit can develop tokens for your company to offer ICO (both utility and security tokens) and dApps. Our blockchain experts have got the highest experience and expertise in developing various tokens using multiple platforms for varied industries to issue ICO. Contact us now for a free consulting session on blockchain and how to start your ICO journey.