Digital currency crowdfunding, often called an initial coin offering, refers to a blockchain project or startup raising funds by issuing its own digital tokens. Investors can fund projects by purchasing these tokens using other digital currencies (such as Bitcoin, Ethereum) or fiat currencies. ICOs are similar to initial public offerings (IPOs) in traditional finance, but are generally not subject to the same regulatory restrictions. A brief introduction to what digital currency crowdfunding means? There may be investors who are unclear. Next, the editor will give you a comprehensive introduction to digital currency crowdfunding.
Cryptocurrency crowdfunding is a public offering for investment in new digital currencies or other digital assets, such as non-fungible tokens (NFTs). Cryptocurrency crowdfunding can raise funds for anything related to digital currencies or blockchain, including the development of projects or new businesses. Some initial coin offerings use crowdfunding (ICO) to raise funds for development. New digital currencies, non-fungible tokens, or other digital assets are often released to the public through crowdfunding. Crowdfunding of digital currencies can raise millions of dollars, but has also been used in Ponzi schemes and other fraudulent activities.
The most representative example of ICO is undoubtedly Ethereum. In 2014, Ethereum founder Vitalik Buterin raised up to $18 million in Ethereum (the cryptocurrency of the Ethereum network) through a public crowd sale. Today, this number may be multiplied by 150 times, and it is certainly continuing to expand.
Crowdfunding is nothing new these days. Many equity crowdfunding platforms have been fully operational, but due to various reasons, have not achieved the desired results. However, this kind of crowdfunding of encrypted tokens is very different from traditional crowdfunding: through ICO, the equity value will be transferred from the token platform company to the company's protocol and tokens. This is undoubtedly a huge change for traditional equity investors.
The price of digital currency crowdfunding is usually calculated through the following steps and factors. The initial token price can be calculated by the following formula:
Token price = financing target/number of tokens sold to the public
For example , if the project’s financing goal is US$10 million and it plans to issue 100 million tokens, 50% of which will be sold to the public, then the price of each token is: Token price = US$10,000,000/50,000,000 tokens = US$0.20 /Token
The project team first needs to determine the overall valuation of the project, including project vision and potential, team background and experience, technical implementation, and financing goals. And determine the total supply and distribution plan, including pre-sale, public sale, team retention, rewards and ecosystem development, etc.
Before finalizing the price, the project team usually conducts market surveys and pre-sales to obtain feedback from potential investors and adjust the token price according to market demand. The price in the pre-sale stage may be lower than the official crowdfunding price to attract early investors.
Some ICOs will use dynamic pricing mechanisms, such as Dutch Auction or Continuous Auction, to determine the final token price based on investor demand. This mechanism can more fairly reflect the actual market demand for the token.
In some jurisdictions, ICOs need to comply with local laws and regulations, including anti-money laundering (AML) and know-your-customer (KYC) regulations. These factors may also influence the final pricing strategy.
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