You might already be aware of the best solutions for launching an ICO. Perhaps the whitepaper is in order and you have a team of experts and advisors to see your project through. You may even have a website that you have built specifically for your launch and are putting all efforts into marketing and SEO.
Now, the challenge is to create the token, which will be the driving force of your ICO. The underlying ‘tokenomics’ will define the extent to which investors would be willing to invest in your project. You will have to convince them that in exchange for their money, you are providing them with a valuable asset, which will reap rewards for them in the future.
Know the Different Types of Tokens
First of all, you need to know the difference between a “coin” and a “token.” While both are cryptocurrencies, coins operate on their own blockchain, quite like Bitcoin or Litecoin, while tokens are built on an existing blockchain network, like Ethereum.
Then there is the concept of “utility-based tokens” and “security tokens.” Utility-based tokens are not designed for investment purposes. A startup can launch them in the form of “digital coupons,” promising investors access to any future services they will provide via their blockchain project. For example, Filecoin launched its ICO with the idea of providing decentralised storage space on its network, which can be accessed with its utility token.
Security tokens, on the other hand, are tradable securities. They are subject to the same regulatory laws as security assets in the financial market. The US SEC has strict guidelines concerning them and more countries are establishing protocols for regulating them even as you read this. Equity tokens, with the promise of profit, dividends or part of company’s stake also fall into this category.
How to Create Your Own Token
There are many platforms to build tokens on, with Ethereum being the most popular choice these days. Regardless of the platform you choose, each token needs to be built with its own support code, which allows it to interact with the blockchain. Thankfully, the field of blockchain specialists or developers is gradually becoming mature, with the growing ICO market. Here are a few ways tokens can be created.
· Building a Separate Blockchain or Fork from Existing Ones
High technical expertise is required for both types of cryptos. Coins are built on their own blockchain, so you either create your own or modify an existing one. The latter can be done by taking an open-source code, available on GitHub, and modifying it to suit your purpose. Litecoin is an example of such a coin. But, this might not be the best solution for launching an ICO. The process can be extensive, costly and time consuming.
· Using a Cryptocurrency Creation Platform
Almost 90% of the tokens are built on Ethereum. Out of the 7 ERC standards, ERC-20 is by far the most popular option for developers. The code for these token contracts is quite complex, but there are certain platforms that can guide you through the process. For instance, on CoinLaunch’s CoinCreator, you will need to add the MetaMask extension. This will connect your browser to the Ethereum network. But the platform takes a commission from your ICO for this.
There are other networks that also have the functionality of smart contracts. They have their own pros and cons. Wave tokens, for instance, can handle more transactions than the Ethereum ones. Hyperledger has rich functionalities and so does Corda.
Tokens Have Other Uses Too
Did you know that tokens can be built with or without a public ICO? Blockchain enables us to create tokens that can represent any asset. If you are not looking forward to building your own blockchain, you can simply use an existing one to create something like concert tickets, just for fun. You can also create tokens to distribute amongst your friends. All this will help you understand the technicalities before you plunge into the real deal.
The creation of tokens is only the beginning. The real challenges lie in building the infrastructure, defining the token economy, maintaining the system and convincing others to invest in them. The technology has to be kept stable and the community has to be kept engaged. The legal framework also needs to be taken into consideration to avoid problems at a later stage.