Today, a case of ICO is becoming widely known around the globe. This issue is directly related to the cryptocurrency market that is rapidly developing and has unprecedentedly broken through over the past year. What is an ICO? How can it be used to attract investments in your gambling project? Slotegrator has answered to these questions in the following review.
Table of contents
What is an ICO
ICO is an abbreviation referred to Initial Coin Offering. ICO is an analogy of IPO standing for Initial Public Offering, but within cryptocurrency market. It serves as a tool for attracting funds from investors into the Internet companies.
By analogy with IPO, a process of capital attraction based on an initial sale of so-called digital tokens at the price set by the organizer. These tokens are similar to shares of a company; however, they are issued within blockchain system in the form of a registry entry, which Bitcoin is based on.
These are virtual replacers for coins, which may shortly be used by investors to pay for services within the project on terms that are more favorable. On the other hand, subsequently, their owners will be able to exchange them for cryptocurrency or fiat money, thus earning a profit.
The ICO market began to evolve along with the crypto economy. In essence, it is a technology for cryptocurrency production over other digital currencies, which is financed by third parties in search of profits. In other words, ICO is a fund-rising instrument for cryptocurrency startups with a profit guarantee.
The ICO market provides an impetus for crypto economy growth, serving as an effective tool for startups funding within blockchain. It has already become a competitor to the traditional venture market.
Economists note that crypto market has strong fundamental reasons for further rapid growth. It does not have significant transactional costs, such as classical gold and currency reserves, and also has high profitability and transparency in blockchain operations.
ICO Market Volume
It is now difficult to ignore a volume of crypto economy and the opportunities it offers. The market capitalization of leading cryptocurrencies over the 2016-2017 has increased almost tenfold, exceeding $100 billion.
Thus far, there are more than 800 digital currencies in the world. The top ten have capitalization of more than $1 billion. Nevertheless, the ICO market grows so rapidly that the data changes every day. It hits all the records: There have been already established the ICO funds, while classic venture players have started actively investing in blockchain projects. According to Forbes, there was an investment of about $232 million in Q2 of 2107 and more than $1 billion over the last year.
As of October 2017, the global cryptocurrency market, as stated by Forbes, amounts to about 2% of the value of all gold produced on the planet, and there are over 6-12 million cryptocurrency wallets.
As of the middle of 2017, the total amount of capital raised through ICO exceeded world investment in venture funds at an early stage.
Which projects go with ICO
As mentioned earlier, it is necessary to operate on blockchain technology in order to produce digital tokens and attract investments.
The pioneers of ICO were fintech-startups that initially had only a product on paper. However, the gambling industry being an active user of cryptocurrency and blockchain technologies is increasingly interested in ICO.
Considering the distribution of investments rose through ICO, it is evident that gambling and betting market takes 7th position.
In addition, with time and further expansion of crypto market, the ICO industry will successfully move ahead in the online gaming field that is also growing rapidly.
Before to start any ICO project, you need to determine how to legalize your attracted money and to display them in fiat currency on the bank account. In fact, not all of the necessary services, equipment, etc. required for business operations can be paid with cryptocurrency.
In addition, it is also necessary to maintain accounting, to file accounts and to pay taxes.
Thus, the first step is the choice of jurisdiction. It is a State on territory of which you will conduct your business and comply with its legislation.
Such concepts as tokens and financial operations with them are far from being defined by most jurisdictions.
Therefore, it is necessary to choose the country with regulated ICO that will be the best option for both sponsor and buyers of tokens. It should be a jurisdiction where all the necessary concepts are clearly defined with legal and regulatory framework.
Why ICO is so appealing to investors
Today, not only venture funds but also common Internet users invest in the ICO startups. People purchase tokens in the hope of getting a good profit in the near future.
However, unlike IPO, where an investor becomes a co-owner of company and has certain guarantees, there are huge risks with ICO project to be closed down which will devalue its token consequently.
But this type of investment is available to everyone, allowing to profit within short time. That is why today's Internet community is simply swept by a wave of thousands of ICO projects.
Unfortunately, their quality is not always at the appropriate level, and the number of ICO fraudulent is growing exponentially. This adds certain per cent of risk for investors.
This is possible, because during ICO stage, companies almost never have a finished product. There is only an idea and a project on paper. Project is detailed in a White Paper - a document for investors. It is the initial phase of project and the most risky for investing as well. The organizers have yet to find right people on their team, create a product itself, and attract customers to it.
However, there is one more important factor: Tokens have a powerful advantage for earning a heavy income.
With the rapid growth of ICO in the world, many regulators began to consider legal frameworks development. First of all, a clear legislative framework is necessary to protect the interests of investors against scam ICO projects.
However, this is a complex and laborious exercise, as a legal definition of ICO is not easy to provide in today's legislative terms. The concept itself is something of a middle between Crowdfunding and IPO and is directly linked to the concepts of "blockchain" and "cryptocurrency".
The United States has had a useful first experience in managing ICO projects. They fall within a scope of the Securities Act as tokens are assimilated to securities. The United Securities and Exchange Commission (SEC) plays a role of regulator.
Thus, U.S. law guarantees investor protection against fraud actions through ICO. All companies willing to issue and sell tokens are required to register them as their own cryptocurrency and follow the rules prescribed by law.
Following the United States, similar legislative initiatives have been implemented in Singapore. The process of issuing and selling new tokens is regulated in accordance with the Securities Act. In order to improve the startups quality, the Government of Singapore has envisaged a licensing procedure. It is not allowed to develop or sell tokens without a license.
The Gibraltar Financial Services Commission has recently included rules for ICO into new legislation on usage of blockchain technologies. The relevant amendments should enter into force in January of the following year.
Nevertheless, there are other legislative examples.
Having studied the cryptocurrency market, the Chinese government has verified that 90% of current ICO projects are scam. It was therefore decided to completely ban ICO in the country. This news was also followed with information on imminent closure of the Chinese cryptocurrency exchanges.
South Korea also announced its decision to ban ICO projects within the state.
The right way to hold your own ICO
It is possible to conduct ICO independently, or with a help of third-party companies and consultants. Let us consider what you need to do at the stage of preparing and conducting the ICO.
- Project idea formulation. You should remember that tokens to be used in your project are the basis for investing in cryptocurrency.
- Competitor analysis. You should carefully examine some close projects that has recently conducted ICO. It is important to identify all their strengths and weaknesses. An example of a proper ICO in gambling is Dao.Casino.
- Determination of conditions for investors. Moments, such as the start and end time of ICO, the maximum amount of investment, the cryptocurrency, and what will be the basis for tokens, etc., must be determined in advance.
- Creation of team. The creation of a successful ICO will require specialists in content, marketing and PR, SMM, community, design, targeting, etc., depending on your project direction.
- Registration of company. The first step is to define a jurisdiction. Today, many prefer to have an ICO in the following countries: Switzerland, Estonia, Cyprus, Belize.
- White Paper development. This is the main document of every ICO. It consists of many sections; the main ones are in-depth market analysis and prospects, competitor analysis, product testing, description of working with blokchain, etc.
- Website development and launch. Initially, this can be just a landing page - a single-page site created under a specific activity. It is important to make it multilingual, place a description of the project, and create a personal account for the investor. In advance, you should take care of a good and safe hosting to avoid DDoS attacks.
- Tokens issuance. Nowadays, it would be better to issue tokens on the Ethereum platform and sell them in ETH respectively.
- Promotion. For this purpose, you should use all the advantages of the modern Internet: Forums, media, blogs, social networks, channels in messengers, GitHub, etc., as well as information from ICO trackers, such as Tokendata.io, Cointelegraph.com, Coingecko.com, Icobazaar.com, Ico-list.com, Cointelegraph.com, Tokenhub.com etc. It is also useful to use the capabilities of Bounty programs, which involve reward for users who are actively involved in the promotion of your project.
- ICO launch. During the start and the time of the ICO, you need to keep everything under control. Because the project site may be hacked and all the wallets may be faked as well.
Cost of ICO
The cost of ICO goes up with each day. Hundreds of new projects are emerging every day, and it makes them more and more difficult to understand. This variety poses a particular challenge for ordinary investors. Therefore, well-prepared and successfully launched ICOs are becoming the most needed ones.
Today, the cost of ICO ranges from $500 thousand up to $1 million, including fees of external consultants. However, in the near future, the entry threshold may be increased, and even $1 million will not be enough to carry out a quality ICO.
Successful gambling ICO
DAO.Casino protocol has become a successful gambling ICO-startup. This protocol will enable any online casino to integrate blockchain technology into its system. The protocol is based on Ethereum. It defines an interaction between participants in the absence of trust, which is of the utmost importance in the gambling industry.
Most of the problems in today's gambling are caused by two reasons: Trust (random number generators, management of players' balance accounts) and market access for developers.
In this way, DAO.Casino is not just a decentralized casino that uses blockchain technology. This new gambling blockchain protocol will allow any user to run a decentralized online casino.
The startup's ICO began on 29 June of this year and ended in a few days at the time of reaching the maximum investment threshold of $25 million.
The DAO.Casino token is called BET. This is internal cryptocurrency for all of the game contracts integrated with the DAO.Casino protocol.
Soon, the BET tokens will provide the DAO.Casino rewards system. It allows players to collect tokens that can be played. You can also use the BET tokens not only for betting at online casino. They can be earned by providing other users with various services, such as generating random numbers, sponsoring bankroll, and so on.
The gambling industry is developing at a rapid pace and will be continuously growing. Given current realities, gaming platforms working on blockchain will be increasingly competitive with each passing day. They are now in a better position than other online casinos, as the industry has recently been increasingly faced with trust issues between players and gambling establishments.
Taking into account recent trends, the Slotegrator experts have concluded that ICO ideally suits gaming Internet startups and offers enormous opportunities for their implementation and development.