How to Raise Money on a Blockchain with a Token

Tokens refer to a set of rules encoded in smart contracts referred to as token contracts. Every token belongs to a blockchain and is accessible through dedicated wallet software. This wallet communicates with the blockchain and manages a public-private key. Blockchain refers to a system in which records of transactions made in cryptocurrencies are maintained through several computers linked in a peer-to-peer network. As opposed to traditional fundraising methods such as venture capital financing, blockchain token sales is the new way of raising funds. Raising money in a blockchain with a token will take these mentioned forms:

Initial Coin Offering

The initial coin offering (ICO) is creating a digital coin and offering it for sale. This is similar to an initial public offer (IPO). However, the idea is to raise funds to help create a new type of token instead of security. This token represents some value and having ICO can attribute equity as tokens, and thus ownership. This gives eligibility to vote and get access to dividends and the end of a calendar. This is well explained at nakitcoins.com. If the cryptocurrency rises in value based on speculation, just as stocks do in public offers, then you make money. However, before investing in an ICO consider the following:

Be Aware of the Risks

ICOs are new and unregulated. Therefore, a failure in ICOs could lead to you not being able to raise funds for future venture funds. The volatility of ICOs makes them both tricky and thought-provoking.

Utility

Since digital assets are built to provide you, as an investor, with something other than a means of payment. Tokens created in blockchain are essentially utility products built to have value for the user and are thus utilitarian, not necessarily for profit. Your token will not be considered as security and subject to laws if they have a utility value.

Build a Community

Communities can take time to build whereas the value of your token heavily depends on its perception by the community. In the conceptual stages of considering an ICO, you need to engage the community and build a base.

Have a Product

The success an ICO is determined by the existence of a visible product. Although some ICOs have raised funding essentially by brand like the MVP, products with maturity have proven a major success. By maturity, it means the period or the number of years it has been in operation.

Establish Reasons Behind the ICO

Some things have a token on them which is important for the network, similarly, some have not. You need to establish the need to decentralize since each token is intended to be used on a single platform by blockchain, or for initiating an ICO for the buzz in the market.

Conclusion

Startups have moved away from using ICOs for purely technical reasons. An example is the crowd sale of the Etherium cryptocurrency to raise funds for the its technical development that was based on a distributed computing platform. To raise funds, your startups should diversify into areas such as peer-to peer-live streaming, medical records security to mention just a few.

Related posts

Leave a Comment