Issuing Cryptocurrencies and Tokens. Holding ICO and IEO

Creating a cryptocurrency, carrying out an initial offering, and bringing the created coin or token to the exchange are tasks that crypto startups and we, developers, usually deal with.

With that, most people think creating a cryptocurrency is not a big deal at all and one only needs to find a couple of experienced programmers. However, 99% of such cryptocurrency (if they even make it to the release) are doomed to fail and will never pay off. The development of successful crypto projects capable of making their creators wealthy and famous always involves teams of experts of different specialities that work shoulder to shoulder to achieve the common goals.

We will tell you how to create a cryptocurrency and get through the major stages you can’t blow over.

Typical crypto project components

• Project concept and White paper development. Just as the construction of a reliable house starts with design, the cornerstone of creating a new cryptocurrency is the concept. The principal document called the White paper contains a detailed description of your idea, supposed to persuade the investors that the demand for your coin or token will only grow. This tome is the most complex document as it takes extremely long to draw and work out. The concept development usually covers the following aspects:
  • Selecting a base coin for a fork, or a smart contract for a token; forming cryptocurrency characteristics;
  • Creating the legal framework of the coin;
  • Describing product specifics and values;
  • Planning the initial offering;
  • Outlining a roadmap, i.e. the general project development plan with its milestones on the timeline.
• Legal and financial matters. One of the anchoring development stages is forming the legal concept of the coin that will help avoid tons of regulatory issues (including SEC prosecution and legal liability).
• Technological matters. This stage features the development of the technological framework, engine, wallets, promo website, and personal account. The key thing to solve here is whether it will be a coin with its own blockchain or a token underpinned by the blockchain of a well-known coin (Ethereum, EOS, NEO). You will find the key differences between those approaches below.
• Initial offering (ICO, IEO). The initial offering of a coin or token to the investors. The initial coin offering (ICO) implies developing the investor account and heavy marketing expenses aimed at attracting investors. This stage includes cryptocurrency promotion, advertising, and forming a community. At least, it means running a blog or social media channels (Twitter, Facebook, Telegram, Reddit, Medium). How one manages marketing efforts affects the fund generation volume. Conducting bounty campaigns also catalysed the coin’s evolvement and growth. In 2019, the market demonstrated the demand for initial exchange offerings (IEO). Generally, this event is handier as it doesn’t require creating an investor account, carrying out KYC verifications, etc. as all of it falls within the crypto exchange’s responsibility. However, the exchange charges developers for its services and takes a share of the profit derived from the offering.
• Entering crypto exchanges, market making. What sets up a ground for the growth of your currency is a couple of crypto exchanges to trade on. Sometimes the trade volume may be poor or zero at the beginning. In this case, startups resort to market makers.

Cryptocurrency creation costs

Project concept and White paper development	On average, developing a proper concept and White paper costs some $5000–8000 and takes about a month.
Legal and financial matters	You will need to register legal entities, draw up legal documents (including the Legal Opinion), and open accounts in the appropriate financial institutions. The end-to-end legal preparation journey may take up to a few months. Good news: you can set up the legal framework concurrently with arranging technical matters. We recommend allocating $8,000–16,000 to this stage.
Technological matters	Developing the coin protocol, deploying nodes, creating wallets and a website will jointly take around $50,000. You can save some $15,000 if you create your tokens based on the Ethereum blockchain. However, this may entail some inconveniences.
Initial offering (ICO, IEO)	It is safe to allow $50,000 to initial offering-related processes. You will have to pay 10–25% of the generated income for the initial exchange offering and 2–10 BTC for getting listed. Please remember that exchanges set extremely severe requirements when selecting candidate projects. You will need a promising concept, comprehensive development plan, MVP, established legal basement (including the Legal Opinion), practised team, and brilliant-reputation advisers.
Entering crypto exchanges, market making	Depending on the popularity level, there are 3 types of exchanges: Top exchanges. Require $300,000–500,000 for listing, select projects rigorously, and require legal compliance. Mid-level exchanges. Charge 10–20 BTC for listing. Exchanges rated 50th to 100th at CMC. Require 2–7 BTC for listing. Make sure the exchange is present at Coinmarketcap.com and CoinCap.io !

Legal and financial matters

Financial regulators of states seeking to streamline the crypto market have already developed guides that classify crypto assets:

• Swiss Financial Markets Authority — February 2018 version;
• The U.S. Securities and Exchange Commission — April 2019 version;
• The UK Financial Conduct Authority — July 2019 version.

Despite some terminological differences, those authorities divide cryptocurrencies into three groups:

1. Payment tokens (FINMA) / Coins (SEC) / Exchange tokens (FCA). Classic cryptocurrencies with the own blockchain (Bitcoin, Ethereum, Litecoin, other altcoins). Recognized as a mode of payment in some countries (mostly Bitcoin), considered only a digital asset in other countries. However, not a single country reckons coins among securities and thereby does not require registering the issue (creation) of such coins. This type is designed for payments and does not imply deriving any profit or holder rights.
2. Utility tokens (FINMA, SEC, FCA). Tokens granting access to a service or app, often only within a crypto project that created them. Resemble a virtual currency used in games or on social media. The only difference lies in the fact that the price of such tokens is not set by the creator but depends on the supply-demand relationship. Though the creation of utility tokens is not subject to any legal difficulties, one should be always ready to persuade a regulator that such tokens are only used in an operating service. Otherwise, they will be recognized as investment assets.
3. Asset tokens (FINMA) / Security tokens (SEC, FCA). Their holder may be eligible for a share of the company’s profit or right to participate in project management. This type of tokens has a feature of securities, but the majority of Western countries consider unregistered securities emission and trading a severe financial crime. Registering the issue (creation) of security tokens and obtaining the trade permit is a long and effort-consuming process.

British regulator FCA has an additional requirement regarding stablecoins. As stipulated, if stablecoins are backed by certain assets or a basket of crypto assets, they may be recognized as e-money. That said, they will be placed alongside fiat currencies of electronic payment systems (e.g. PayPal and Worldpay). This may cause even more confusion, especially because stablecoins are not coins (despite what the word ‘coin’ suggests) but utility tokens.

Watch out for SEC!

A proper concept and being aware of the specifics of different jurisdictions are advantages that may help avoid a ton of problems. Creating tokens in the US and for the American market, be ready to become a target for the Securities and Exchange Commission. Below is the list of companies and cryptocurrencies involved in SEC-initiated litigation during 2021:

Date	Company (cryptocurrency)	Funds raised ($)	Status
December 2021	Unikrn, Inc. (UKG)	31 million	Civil penalty of $6.1 million
November 2021	ShipChain, Inc. (SHIP)	27.6 million	Civil penalty of $2.05 million
September 2021	GTV Media Group, Inc., Saraca Media Group, Inc. (G-Coins and G-Dollars)	34 million (+339 million from the stock offering)	Settlement; disgorgement, civil penalty, and prejudgment interest in the amount of $539.4 million
August 2021	Blockchain Credit Partners (mTokens and DMG)	31.6 million	Disgorgement and prejudgment interest in the amount of $13.1 million
July 2021	Blotics Ltd. (Coinschedule)	no info	Settlement; disgorgement, civil penalty, and prejudgment interest in the amount of $201,688
June 2021	Loci, Inc. (LOCIcoin)	7.6 million	Settlement; civil penalty of $7.6 million
April 2021	BitClave PTE, Ltd. (CAT)	25.5 million	Disgorgement, civil penalty, and prejudgment interest in the amount of $29.3 million
April 2021	Paragon Coin, Inc. (PRG)	12 million	Civil penalty of $250,000
January 2021	Blockvest LLC (BLV)	100 million	SEC initiated a claim (pending)
January 2021	Wireline, Inc. (WRL)	16.3 million	Civil penalty of $650,000

Cryptocurrency creation technology

Coin (a cryptocurrency with its own blockchain)

A coin is a cryptocurrency created from scratch and based on the dedicated blockchain, or developed based on a fork of an existing cryptocurrency (e.g. Bitcoin or Ethereum). Coins have nodes to support the dedicated protocol, user community, and development team. Also, there is the term ‘altcoin’ (alternative coin) which means any cryptocurrency besides Bitcoin that had been the only blockchain-powered cryptocurrency until 2011.

Five highest-price coins from the top 100 (February 2022)

1. Bitcoin (BTC) — $40,759.82;
2. Ethereum (ETH) — $2917.50;
3. Binance Coin (BNB) — $408.44;
4. Bitcoin Cash (BCH) — $317.52;
5. Elrond (EGLD) — $179.53.

Polygant’s blockchain developers have already created 10 coins of different complexity and are now working on 2 from-scratch coins.

To create a cryptocurrency, we take a relevant source code, adjust it, and carry out the compilation. Usually, the development of a cryptocurrency consists of the following stages:

• Terms of reference for the development of a system;
• Compiling the coin core and wallet for Windows/Linux;
• Deploying two primary nodes;
• Creating a block explorer and mining pool;
• Compiling mobile wallets for iOS/Android.

Top 5 highest-capitalization coins (February 2022)

Rank	Name (ticker)	Capitalization, $	Market price, $
1	Bitcoin (BTC)	772,711,407,623	40,759.82
2	Ethereum (ETH)	348,593,157,752	2917.50
3	Binance Coin (BNB)	67,404,311,754	408.44
4	XRP (XRP)	38,448,443,172	0.80
5	Cardano (ADA)	34,941,996,575	1.04

Token (utility and investment)

What makes this token unique is that it doesn’t have its own blockchain or supporting nodes but is driven by an existing coin’s blockchain. Most often, Ethereum’s blockchain is used for the creation of tokens, though this function is provided in blockchains of many other coins (e.g. Omni, Tron). Despite tokens are designed to be used as an internal currency or mode of access to services/applications, first investors try to buy them out to resell on exchanges later. To create a token, one needs to craft a smart contract and embed it in a blockchain.

Five highest-price tokens from the top 100 (February 2022)

1. Wrapped Bitcoin (WBTC) — $40,771.45;
2. Bitcoin BEP2 (BTCB) — $40,752.02;
3. renBTC (RENBTC) — $40,674.30;
4. yearn.finance (YFI) — $22,918.96;
5. Maker (MKR) — $2000.48.

You should keep in mind an important feature of Ethereum-powered tokens: any transaction conducted on the Ethereum blockchain (including wallet-to-wallet transfers) are subject to a fee called ‘gas’ which is worth several ethers. Thus, to perform a transaction, the sender must have not only unique tokens but also ETH coins. And this is not always that comfortable.

It takes at least a week and $3,000 to develop a smart contract. The integration with web services and web wallet, as well as further token offering, are also worked out.

Top 5 highest-capitalization tokens (February 2022)

Rank	Name (ticker)	Blockchain platform	Capitalization, $	Market price, $
1	Tether (USDT)	Omni / Ethereum / Algorand / TRON / Binance Smart Chain	78,737,079,914	1.00
2	USD Coin (USDC)	Ethereum / Solana / TRON / Binance Smart Chain / Fantom	52,459,486,633	0.9996
3	Binance USD (BUSD)	Ethereum / Binance Smart Chain / Avalanche	18,058,788,066	1.00
4	Shiba Inu (SHIB)	Ethereum / Binance Smart Chain / Solana / Terra	16,288,039,714	0.000030
5	Crypto.com Coin (CRO)	Ethereum	11,379,897,958	0.4509

As you can see, some tokens are as well capitalized as coins.

Our developers have 10-year experience in developing smart contracts for tokens and creating blockchain-powered coins. Learn more about the turn-key cryptocurrency development.

Cryptocurrency website

For sure, you will have to build a dedicated website that will clearly convey the value of your crypto project to potential investors. What most projects stay with is a one-page structure which comes in very handy for awareness purposes. The main website and White paper language is English but often developers translate their resources into 4-5 popular languages. As a rule, the website comprises the following:

• General project info, White paper.
• Creator and developer team. How much you can raise hinges on the image of your team. Usually, 5-6 key team members are mentioned.
• Social communities. A blog, pages on Facebook, Medium, Reddit, Telegram, Twitter. Most success factors rely on social media management skills.
• Wallets, personal account. Any ethics-respecting cryptocurrency should provide online, desktop, and mobile wallets.
• Exchanges. The list of exchanges and open markets where people can purchase your new cryptocurrency.

What an ICO is

An initial coin offering is an event during which a token or coin is presented to investors. In simple words, ICO means creating a specific number of coins or tokens with the purpose of getting investors to buy them for more liquid coins (e.g. BTC or ETH) at the price set by the creator. Quite often, Ethereum-based tokens are used in this context as the Ethereum blockchain only requires developing a smart contract.

Entering an exchange

Once you’re done with creating a cryptocurrency and selling some through your website, you might wonder how people will trade new coins and how to expand the audience. To interest new investors and traders and engage them in trading, you need your cryptocurrency to be listed. Before listing your cryptocurrency, the exchange will require you to get through some preparatory procedures:

1. Your coin must have a community, communication channels (e.g. Facebook, Telegram, Twitter, etc.).
2. You will have to pay the exchange for the listing services. The listing fee may vary depending on the exchange’s popularity. It starts from 1000 USD for little-known and reaches 500,000 USD for popular ones. Moreover, the most demanded exchanges only allow a new cryptocurrency in if the candidate project has proven its reliability and gathered a large community around.
3. The project must present the technical team responsible for arranging the integration.

Initial Exchange Offering (IEO)

Since early 2019, the initial exchange offering has begun to conquer the crypto market. With that, ICO and listing held their positions but the market got itself an alternative solution for those creating cryptocurrencies and bringing them public. The initial exchange offering is kind of a hybrid of the ICO and listing. In other words, IEO is a token sale conducted on the exchange. One only needs to cooperate with a proper exchange. Crypto startup founders find a lot of advantages in this model, which include the following:

• The project website does not need to have the investor account;
• A crypto exchange has an established and loyal user community;
• Traders and investors want to buy a new cryptocurrency that passed the exchange verification;
• A crypto exchange acts as a partner in promoting the cryptocurrency by publishing posts on its channels;
• Accelerated market entry and sales of developed cryptocurrency.

The most successful and liquid crypto projects that carried out IEOs in 2019 are:

1. BitTorrent token (BTT). 34 IEOs, currently traded at $0.00029.
2. Matic Network token (MATIC). 10 IEOs, currently traded at $0.01511.
3. Super Zero coin (SERO). 10 IEOs, currently traded at $0.04082.

Besides the ICO and IEO, other solutions facilitating the cryptocurrency supply were introduced, namely Security Token Offering (STO), Initial Airdrop Offering (IAO), Initial Fork Offering (IFO), Initial Miner Offering (IMO).

Want to get into all the nuances? Submit a request and we will explain everything in detail. And then together we will develop a strategy on creating a cryptocurrency from scratch and offering it on exchanges!