Issuing Cryptocurrencies and Tokens. Holding ICO and IEO

• Typical crypto project components
• Cryptocurrency creation costs
• Legal and financial matters
  • Watch out for SEC!
• Cryptocurrency creation technology
  • Coin (a cryptocurrency with its own blockchain)
  • Token (utility and investment)
  • Cryptocurrency website
• What an ICO is
  • Entering an exchange
  • Initial Exchange Offering (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

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:

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)

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)

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!