One of the key concepts behind an Initial Coin Offering (ICO) is to use the blockchain as a way of bringing together a decentralised and self-contained mini investment economy. The token that is created and “sold” as a part of the ICO is the key access point into this ecosystem and removes any need for a third-party middleman. When it comes to designing a functional token, it is the most important part of the new system as this alone will decide the flow of payments and rewards to anyone that uses the system.
When developing an ICO, first of all, the creator must determine the cryptoeconomics that is behind the token. This should include the maximum number of tokens that will be created, the value of each token (usually based on BTC or ETH), any discounts for purchasing it early, and how the token will be distributed to backers, founders, developers, and other users. Consideration and careful planning must also be given to marketing, legal, and security processes and strategies.
The key to determining the tokenomics behind an ICO should begin with estimating the size of the digital ecosystem as well as exactly how users and contributors will engage the system. One should also consider the number of transitions that are expected to be made and enough tokens should be issued to not only run the core system but to allow system growth over time.
Creating a digital ecosystem
The token can and should be optimised to the full for a range of different goals. For example, whilst most ICOs issue tokens that allow the building of the system and running it on a basic level, creators should take a much longer view and price the value to facilitate an increase in the usage of the platform. One could also price the token to encourage developers to create a digital ecosystem that exists around the ICO.
It can be difficult to develop a plan for the entire life of the blockchain system, as predicting the future has never been an easy task. Due to this fact, many developers consider issuing another type of token at a later date that can provide users with a higher level of access to the digital ecosystem as it matures past a certain point.
Developers also have the option to create different types of token for the ICO which can give unique benefits to users. As the system continues to grow, new applications and higher value benefits can become available.
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