When evaluating an initial coin offering, many aspiring investors typically know the importance of uncapped and capped ICOs. However, many don’t know how to differentiate Hard Cap VS Soft Cap, neither do they understand the token emissions schedule. Let’s do some analysis below.
Hard Cap VS Soft Cap : Key Differences
A hard cap and soft cap are fundraising goals. A soft cap is speculative while a hard cap is the certain upper limit any team will take. A soft cap is a lower limit, depending more on how much the team is aiming to gather. If a team receives contributions exceeding their hard cap, realized funds are returned to investors swiftly. Failure to do this can be a red flag for investors. Sometimes funds are also returned when a team does not reach their soft cap.
Understanding The Token Emission Curve
A key piece of knowledge regarding evaluating a coin is its supply. This, with the price, determines what the market capitalization will be. Also important is knowing the number of coins that will be mined. The schedule is highlighting how coins are going to be extracted. Note that minable virtual currencies start easy to mine, which is an incentive to potential miners regarding the coins minimal worth. However, when the coin becomes more desirable, it’s mining rewards decrease.
The emissions schedule helps miners to select the particular coins to mine. It also helps them to anticipate the value of a virtual currency over time. But there are hindering factors, if millions of a coins are dumped in the market every day, the value of such currency will fluctuate drastically. Any coin that is mostly mined will be less volatile. Different types of coins have their individual emissions schedule. In between the hard caps, market caps, soft caps, uncapped ICOs, and capped launches, there is a lot to consider when evaluating an ICO offering and the subsequent coin. The next time you are considering the prospects of another coin, make sure you monitor their caps and emissions curve.