An initial coin offering is an event where small businesses or startups offer investors unit(s) of cryptocurrency tokens for funds in forms of cryptocurrency or fiat currencies. Initial coin offerings have been in use for quite a long time now (since 2013) to raise funds for the marketing or development of cryptocurrency or blockchain-based projects by releasing tokens that are integrated into the project.
The fundraising process via ICOs by small business ventures and startups usually begin with the creation of a detailed document, the whitepaper. This document usually states and contains the complete details of the project such as the problem the project is meant to solve, the fund required to execute the project, the duration of the campaign, the accepted type of currency, and how the fund will be distributed once raised.
There are three different phases associated with the initial coin offering, below are the three of them:
Phase One: Analyzing
It’s important for small business enterprises or startups to analyze cryptocurrency tokens or blockchain technology requirements for their projects or businesses. In fact, businesses and startups need to know that the deployment of Dapps (decentralized application) are far more expensive than centralized apps.
Phase Two: Planning
The planning phase is very important as it has to with the safety and precaution against hackers, designs of the token, the token offering, and communication strategy. Businesses and startups will need to define the amount of fund they want to raise as well as the results they want to achieve. When it comes to the planning phase of an initial coin offering, one of the major focuses is the requirement of the business.
Phase Three: Launching
The launching phase comprises of the execution of the ICO project. This is where all the plans for the project are executed.
The following are the steps involved in an ICO:
- ICO offering
- ICO marketing campaign
- Legality of the ICO