Greetings friends,
The recent interest and craze into cryptocurrencies has fueled dozens of ICO's (initial coin offerings) per month. Many are obvious scams and should be avoided at all costs. However, some offer useful utilities that seek to solve an archaic and flawed system with privacy through decentralization.
David's ICO handbook is very informative to both the investor and the entrepreneur who may want to plan an ICO.
This post is a teaser to educate yourself. Far too many are burned in these ICO's. If you find the material useful, please upvote and resteem to spread the word.
I encourage all students to read the entire book can be read here: http://www.theicohandbook.com/
Read and Enjoy,
Viking747
If you’re planning an ICO, this is a handbook, guide, and some color from our ICO in July, 2017. In short, you’ll need good preparation, quick reflexes, and the ability to see around corners. Nothing in the ICO world goes as planned. Ours didn’t. Yours won’t. A successful token sale requires skill, game theory, fast reflexes, and luck (mostly luck).
This work is in five parts:
-The story of the evolution of the idea
-The real-time story of our ICO
-This ICO Handbook, which is also on the 20|30 web site
-A list of ICO resources (to come)
-There is also a recorded webinar on ICO principles and the Pillar ICO
A word of warning: a token sale to the public is not to be taken lightly. There are maybe 200 things listed here that you must do; you could do 199 of them perfectly and then lose all your money and all your customers in an instant. You are always one small step away from disaster, even long after the fundraise. A token sale is a very long-term commitment.
***Disclaimer: The information in this article is for informational purposes and does not constitute legal advice or instruction. You take your own risks with cryptocurrencies and tokens. I try to provide the best information I have but cannot guarantee you will be successful when acting according to my recommendations.
Part I: Planning
WHAT WILL YOUR TOKEN DO
It keeps coming down to this single question: what does the token do? As William Mougayar explains, it helps to break this down into three parts:
-Role of the token — how does it work in your system?
-Purpose of the token — what objective does it accomplish? Why is this token the best way to accomplish it?
-Features — what features does it have that make it the right tool for the job?
It’s easy to get sucked into having quick answers to these questions, but if you are just having a token sale to get money, people will smell it a mile away. The vast majority of token sales don’t reach their cap. More than 50 percent barely get over their minimum threshold, and you simply don’t read about them in the press. Keep asking the hard questions: what does the token do? How does it do it?
People are writing about token models. Vitalik recently published a piece about token models and offerings. I have my own framework, which I’ll link to here when it’s out.
CHALLENGE YOUR TOKEN
If you really believe in your token, it’s now time to bring in the best devil’s advocates you can find. Have them challenge your assumptions and force you to defend them. If they tell you it doesn’t sound as useful as you think, pay attention. As a result of many back-and-forth battles on what the Pillar token should do, we finally decided to call the unit of one one-millionth of a pillar a curmudgeon, for the two guys who forced us to make sure the token had purpose, a clear use model, and value in the system.
Ask:
-Who will want to buy and hold this token?
-Why would people want to use it?
-Under what scenarios will people need this token?
-Can the same job be done better in a different way?
TOKENS ARE PROJECT FINANCE
Tokens are nothing like stock. Anyone wanting to substitute tokens for the usual fundraising paperwork doesn’t understand what tokens are. Tokens are not a good choice for venture capital or private-equity funds (yet); tokens are not for start-ups. Most tokens are more like tradable Kickstarter commitments for projects — you’re selling a future product to early buyers, and the future token has utility to the buyer. Just as with Kickstarter, the platform or format of the sale does not magically bring buyers. You have to get every buyer yourself.
For example, even though the Pillar project raised over $20 million, the parent company, Twenty Thirty, has almost no assets. Not a single ether we raised can go toward the company — everything has to go to the project. In fact, as soon as we raise some equity money, I’ll go off the project’s salary to reduce drag. I’ll talk about spending money later.
TOKEN INCOME IS REGULAR OPERATION INCOME
Just as with Kickstarter, you’ll be taxed at the end of the year on your total income minus expenses. This is one reason why so many companies and orgs are located in Zug, Switzerland — corporate income tax is around 14 percent. It’s also a good reason not to raise money after July. The earlier in the calendar year you raise, the longer you’ll have to spend it in the first critical year before having to pay taxes. The government contributes to your spend by reducing your tax liability. This is especially true for open-source projects that have no business model or future income in sight. You’ll want to accelerate expenses if you have no income for the next several years.
Consider this scenario: You sold your tokens when ether was high, and you have to calculate your income based on the average price during the sale. Later, at the end of the year, ether has gone down, so you have an unrealized loss on your holdings. While you consider ether to be “cash,” the tax authorities don’t. You need to sell ether and buy it back just to realize the loss and reduce your taxable income for the year.
WHO IS YOUR AUDIENCE?
There are four main token buyers:
-Underwriters
-Investors
-Traders
-Natural buyers and users of your future system
You may be aiming for the big whales who have taken many of the early ICOs, but don’t count on that. Fewer and fewer of them are playing the ICO token-flip game. My advice is to aim your entire campaign at your natural buyers and be happy with a lot of them. If you’re the big deal of the day, your ICO will be over in minutes, but consider that a bonus and don’t plan on it.
Going after your natural buyers means about a three month campaign — two months to get the word out and one month of sale. It’s hard to estimate how many man-hours this will take, but it’s well into the thousands.
Check Back in the coming week of the rest of the ICO Handbook by David Seigel
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