Introduction to ICO’s by Himitsu Capital

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What is an ICO?

An initial coin offering (ICO) is a method of crowdfunding from the general public or a select group of participants, using a digital currency. Instead of being rewarded with equity/Stake or debt in the new company, these investors are awarded cryptocurrency tokens. The goal is to attract prominent early investors to fund the project in return for tokens that may yield returns back to the investors.

ICO’S for dummies

Let’s breakdown the stages of an ICO.

-The first stage is usually the idea. A start-up will come up with an idea and this idea will have an impact on the specific market they are trying to target by offering a service or creating a product through identifying a problem and addressing it.

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-This plan will be explained in detail through a White-paper which includes an introduction to the project they are building, specific information on token economics, Use-case and Utility and in some cases a road map which shows from start to end what the project is going to implement through the stages of development.

-ICO’s will be marketed via numerous channels like the company website, Influencers and word of mouth or even promotional campaigns pre-launch of the token. However social media platform Facebook banned the advertisement of ICO’s on their platform as well as Google which indicates the level of risk associated with investing in ICO’s

-Investors participating in early stages of fundraising like seed rounds and private rounds will send funds to the project via a SAFT(Simple agreement for tokens) where it is advised to read carefully in detail to understand all terms and rules that are required to participate as an early investor. These funds will be used to aid the growth of the start-up or build upon an existing product that they currently have, or even launch a new means of use for their services.

-Start-ups will apply a vesting period to early investors allocations to ensure that they don’t cause high price fluctuations to the token as vesting periods are meant to provide stability to the token price not allowing those early investors to sell off on TGE

-Investors will be able to acquire tokens they bought at a private price from the project around the TGE This is when the token can be bought and sold on the public market.

What is the difference between an IDO and IEO

There is often confusion between what differentiates an IDO to an IEO but in summary an IDO is where a crypto project will hold its coin offering on a decentralised trading platform while and IEO is the opposite where a project will hold its coin offering on a centralised trading platform. In recent years the IDO model has gained massive popularity due to crypto projects being able to raise funds through liquidity pools without intermediaries. In contrast to IDOs, IEOs have proven to be the safer option for investors as projects would have to be carefully examined and pass due diligence checks to meet requirements of the Exchange they are looking to list on.

(Key differences between an IEO and IDO for beginners)

Crowdfunding– This is the process of raising funds for a project done by a specific number of people or group.

Cryptocurrency tokens– Virtual currency issued by a project to represent a tradable asset.

White paper– Informative document issued by a project to highlight features including Utility, product or service that it plans to offer.

SAFT– Simple agreement for tokens is a sort of Security contract that is given by the Project developers to investors to ensure safety and regulation

TGE– Token generation event

Token supply– Total number of tokens in circulation and a given time

Launchpad– Platforms that allow crypto projects to raise funds while giving away access to early stage token sales for their investors

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