The tokens offered in a Security Token Offering (STO) are called security tokens. They are basically crypto tokens that pass the Howey Test.

Just as the name suggests, security tokens are grouped as securities and are therefore subject to the federal securities regulations. This is why STO is said to be the most regulated method of raising funds for blockchain projects, compared to other means like ICO and IEO.

Security tokens are developed in a special way because they require an additional layer in their smart contract to make them regulatory compliant. This additional layer helps in identifying who is allowed to purchase, trade and interact using the token. That is why Security tokens are not developed using common ERC-20 standards. The ERC-20 standards lack the crucial layer that makes security tokens to comply with regulations.

Therefore, a number of companies and organizations have come up with different standards to help in creating security tokens. One of those companies is Polymath, which has gained lots of popularity since its launch a few years ago.

Polymath security token standard

Polymath designed a security token standard referred to as ST-20, which defines a number of rules for Security tokens. For instance, ST-20 tokens define who can use the token and how the token should be used within the smart contract.

 Creating a Security Token for your blockchain project using Polymath

Below is a step by step guide on how you can develop a security token for your security token.

  1. Create a funded Metamask account

To create a Metamask account, you download the Metamask chrome extension and then fund the account using Ethereum (ETH).

Metamask is an API that allows you to access Ethereum enabled Dapps using your browser. It is simply an Ethereum wallet.

Then, open the Polymath website and click on the ‘Configure Your Security Token’ so that you can start creating your security token.

Note: You cannot proceed without first downloading the Metamask plugin on your browser. If you try clicking on the ‘Configure You Security Token’ button without first downloading the Metamask, you shall be directed to the page below. However, you don’t have to worry, just click on the Metamask link on the page to download and install the Metamask.

  1. Create a Polymath account

When you click the ‘Configure Your Security Token’ button, you will be directed to the registration page where you will be required to fill in your name and preferred email address.

When you click on ‘Create Account’, you shall be required to sign in with Metamask also. This is done so as to sign your email address with your Metamask wallet.

  1. Choose your Token name, symbol and register it

After completing the registration process in Polymath, the next step is registering your security token. You will have to choose a name and abbreviation (better referred to as token symbol).

When choosing the name of your security token, it is advisable to choose a name that is in line with the name of your blockchain project.

An example of a security token name can be ‘Transporty’ with a symbol ‘TRP’.

You have to ensure that the name and symbol that you choose is not used by any other blockchain/cryptocurrency project anywhere in the world.

Once you click on the ‘Reserve Token Symbol’ button, you are given a 15-days window where you can consult with your team members and advisors before submitting the symbol name and symbol for approval.

Once you submit the name and symbol, you get a confirmation email to contain the full information about your security token.

  1. Choosing your partners

The next step is usually selecting the people that you want to help you with your STO. Here you choose the KYC/AML providers, legal team, advisory team, and marketing team.

It is, however, important to note that the portal doesn’t directly contact the selected persons or organization. It only sends you an email containing a sample of the email you would send to them.

Once you are done with selecting all the four teams (Advisory, Legal, KY/AML and Marketing), you go on to create your token.

 

  1. Creating the Token

When creating the security token, you can add a link to a file containing any additional information on the token.

  1. Setting up the details of the STO offering

Here, you are supposed to choose the currency that you want the investors to use when purchasing your security tokens.

When you click on the ‘Select And Configure STO’ button, you proceed to configure all the important aspects like the start and end date, the hard cap, the amount to be raised, and etc. of the STO.

Once you complete the process an email address containing the details of the STO configuration is sent to your email address.

  1. Whitelisting investors

The last step is whitelisting your investors. This enables the investors to buy your security token in the future. Since STOs are highly regulated, it is important to know who holds the securities.

However, the whitelist can be changed during the STO. You can add new investors along the way as the STO continues to allow them to purchase the security tokens of your STO.

Due to the additional layer of standards required for the security tokens so that they can comply with security regulations, STO requires more advanced standards when it comes to their creation. STO security tokens are not created using the ERC-20 standards as most ICO and IEO are.

To cater for the additional regulatory layer, there are a number of companies and organizations that have come up with platforms where STO issuers can create their security tokens with ease.

Below are some of the best platforms for creating your STO’s security tokens:

  1. Polymath

Polymath allows security token issuers to create tokens using the ST-20 standards which were designed by Polymath.  It works similar to the Ethereum network and it has its own crypto token referred to as POLY.

It connects the smart contract developers, advisory experts, legal experts, KYC/AML providers, and token investors.

The process of creating security tokens is quite simple as one does not have to do any programming. You just have to follow through the steps and end up getting a fully functional security token and a configured STO.

  1. Swarm

Swarm uses the SRC20 protocol to create security tokens for real-world assets. In short, the platform allows users to create asset-backed security tokens. Therefore, users can create tokens backed by assets like real estate and so forth.

The Swarm platform also has its own crypto token that can be used for operations within the platform. The Swarm token has a symbol of ‘SWM’.

  1. Harbor

Harbor platform is a special security token creation platform since it allows traditional assets to transform into security tokens. It allows the creation of security tokens backed by real-world assets like real estate, fine arts, etc.

The platform uses a regulated system token referred to as the R-token. The R-token is a token on the Ethereum blockchain that allows the transfer of tokens once an On-chain Regulator Service is approved. The token basically gives permission for transfers.

  1. Securrency

This platform allows the creation of security tokens through a drag and drop process.

Furthermore, the platform allows users to perform Know-Your-Customer (KYC) and Anti-Money- Laundering (AML) verifications over 155 countries on both crypto and fiat transactions.

Users can use the InfinXChange™ APIs to select blockchains of their choice and also get an abstraction layer.

  1. Securitize

This platform manages the entire process of security token creation and issuance throughout the token’s lifetime. It manages the processing of the investors to the received capital.

Security Token Offering (STO) is considered one of the safest crowdfunding methods for blockchain and fintech companies. However, for it to be secure, there are quite a number of regulations that go along with it and anyone who chooses to use it has to adhere to all the regulations provided.

The entire scenario is complicated by the fact that there is no internationally recognized legal framework governing cryptocurrencies around the world. Therefore, individual countries are left to fetch for themselves as they race to feel the gap by establishing their own rules and regulations for cryptocurrencies together with anything else like STOs, ICOs, and IEOs that go along with them.

Generally, things have gradually changed with most governments accepting cryptocurrencies contrary to the past. For instance, when the first cryptocurrency, Bitcoin, was launched, it took some time for governments to accept it. At the time, governments were wary of digital currencies since criminals became too fond of them since they could enable them to transact anonymously.

The adoption of cryptocurrencies around the globe can be attributed to the various legal frameworks put in place by the various governments together with regional regulatory authorities.

Today, blockchain projects can almost flourish within any part of the globe. Most countries have accepted cryptocurrencies, with some even laying foundation for the development of their own state-owned cryptocurrencies. However, since blockchain technology is evolving fast, governments are now caught up with yet another handle, the regulation of the crowdfunding of blockchain projects.

To begin with, Initial Coin Offering (ICO) and Security Token Offering (STO) were among the first crowdfunding methods that were invented by blockchain developers. However, due to the fact that it was not easily regulated, scammers could easily get their hands on it to swindle funds off investors. That led some countries like China and South Korea to ban the use of ICOs in funding blockchain projects.

The embattled ICOs led to the invention of Initial Exchange Offering (IEO), which is simply an ICO run through a crypto exchange, so as to ensure that it was easy to apply some regulations to the crowdfunding.

STOs, on the other hand, were well regulated from the word go. Just as the name suggests, STOs deal with securities and governments already had certain laws governing securities within their borders. Therefore, it was easy to draft regulations for the STOs. Interestingly, these laws and regulations have made it quite difficult for developers to use it. Some fear the long process while others fear the strict rules that they have to adhere to in order to be allowed to conduct an STO.

What is an STO?

Before indulging into cracking the nut on the regulations and rules governing STOs, it is quite important to clearly understand what these STOs are.

An STO is a funding method that involves the selling security cryptocurrency tokens to potential investors.

The next question then becomes, what are these security tokens?

Security Tokens

A cryptocurrency token can only be classified as a security token if it passes the Howey Test and is consequently subject to the federal regulations. Different countries have different regulations for STOs.

Holders of security tokens become part of the company behind the security tokens and are therefore entitles to some dividends out of the overall profit that the company makes.

There are four types of security tokens that a company could choose to use. These include:

  1. Equity tokens

These tokens are basically used to state the ownership of an asset like stock or debt for a certain company.

2. Debt tokens

These are just like short-term loans to a company where there is an interest rate on the loaned amount.

3. Utility tokens

These are the most common security tokens and they give users the ability to access the products or services of the project once the project becomes operational.

4. Asset-backed tokens

These are tokens whose value is tied to a tangible or nontangible asset. For instance a company could have a security token whose value is tied to the value of real estate assets.

Reasons why security tokens stand out

  1. It provides an improved way of accessing real-world assets that have been digitized. Companies can digitize almost anything from debt, real estate assets to the parking fee.
  2. It provides investors with some degree of ownership and they are entitled to dividends out of the total amount of profit made by the company.
  3. Security tokens also provide increased liquidity.
  4. In comparison to traditional tokens, security tokens ensure that the founders or board members do not have to surrender board seats in Venture Capital deals.
  5. The regulations set in place ensure that there are no loopholes for scammers.

Steps of developing an STO

  1. Come up with a viable idea that entails solving a certain problem within the society/community.
  2. Carry out research on the probable solutions to the problem(s) that you intend to solve.
  3. Carry out research on other companies or projects offering solutions to the identified problem and identify key areas of improvement.
  4. Recruit a competent team for the development of the project and the STO. At this stage, you should also look for a competent legal advisor or a consultancy firm like Gravitas International to guide you through the regulatory handles. The regulatory mainly depends on your geographical location and you should ensure that you clearly understand what STO regulations are in place for your location.
  5. Identify the exact security within your project that you wish to tokenize. This tokenized security is what you shall offer in the STO.
  6. Choose a platform where you shall launch your STO. Examples of such platforms are Polymath and Harbor.
  7. Create a compelling website that clearly outlines your project goals and asset tokenization.
  8. Develop the security token with the help of your development team, and legal advisors.
  9. Market your STO in accordance with the set rules within your location.
  10. Launch your STO and offer the security tokens for sale to accredited investors in accordance with the set regulation within your location.
  11. Look for a good partner Security Token Exchanges where you shall list your security token.

Security token development

This is normally one of the hardest phases of STOs that make developers crack their heads. However, it is not as hard as people may think. All that is needed is the right team and legal advisor.

With STOs, you have to be careful to ensure that you stick to all the set regulations within your location from the word go. Normally, you should go for a consultancy firm that will help in auditing both the financial and legal matters concerning your project. The legal team should run jurisdiction checks on the security titles like credit ratings among others that you may specify for use.

STO becomes an exception when it comes to the type of tokens. Contrary to other crowdfunding methods that easily depend on Ethereum ERC-20 tokens, STOs do not use ERC-20 tokens due to the gas prices, protocol changes and network congestion that is associated with the ERC-20 tokens.

You could be wondering if Ethereum is not used, then what other platform is there for token creation.

Well, experts had to come up with platforms that could solve the issues with the ERC-20. Organizers and companies came up with new standards that enabled whitelisting and locking, which could enable tokens to comply with the required security regulations.  These standards include ST-20, R-Token, ERC-1404, and ERC-1400. These standards still use Ethereum smart contracts, but they are improved versions that have an additional layer to accommodate regulations.

To make the process of creating security tokens, there are platforms dedicated to the creation of security tokens. Examples of these platforms are the Polymath, and Harbor platforms. These platforms provide an easy way of creating your security tokens.

The selected security token issuance platform should ensure that the value of the token is well scrutinized and in line with all the required regulations. It also takes you through all the remaining steps from setting the STO start or end date/time and payment acceptance.

The most important thing with STOs is that the required regulations have to be embedded within the smart contracts used for the STO.

What happens if your STO doesn’t meet all the requirements

  1. You will have problems getting your security token listed on security token exchanges. Normally, security token exchanges do not list STOs with legal issues. Worst, delisting from an exchange could greatly hamper your project brand.
  2. Failure to comply with the Anti-Money Laundering (AML) and Know-Your-Customer (KYC) requirements makes future relationships with banks a problem. In case you already had funds deposited in the banks, the banks could seize the funds.
  3. If you do not comply with all the regulations and laws set in place by the regulatory authorities within your location, the authorities could penalize you or even shut down the STO.

Security Token Offering (STO) is for sure one of the safest methods to conduct crowdfunding for your blockchain project. Nevertheless, if you decide to go for an STO, you have to be ready for the strict regulations that go along with it.

Security tokens are normally backed by real assets, therefore they have to comply with the US Securities and Exchange Commission regulations. Therefore, before marketing your STO, you have to ensure that you have fully complied with all the required rules to avoid being on the wrong side of the law.

Once you start marketing your STO, your project becomes known by many including the authorities. If the authorities get wind of your project and you have not complied with the set rules, you can be sure you will not like the repercussions.

Therefore, before marketing your STO, you have to adhere to a number of prerequisites generally referred to as general solicitation which allows any security issuers to solicit and advertise their offering widely. The conditions that must be met include:

  1. All the purchasers of the security tokens in the STO should be accredited.
  2. The token issuer must take all the required steps to confirm that the investors are accredited.
  3. For US issuers, all the conditions provided in Regulation D must be satisfied.

To understand what Regulation D entails and how it influences STO marketing, let us have a look at it.

Regulation D

Rule 506 (b) of Regulation D states that a company can be assured of exemption from Section 4 (a) (2) by complying with the following:

  • The company should refrain from general advertisement or solicitation in order to endorse the securities.
  • The company offering the securities can sell its securities to a limitless number of accredited and verified investors and up to 35 extra buyers.
  • The company should ensure that it gives the accredited and verified investors the correct information to avoid misleading information.

Therefore, for a company to solicit and market its security token offering, all the investors must be accredited and it must take all the necessary measures to confirm that the investors are accredited.

STO marketing depending on the STO development stages

  1. Initial Stage

These are normally the things that one should do to ensure that the general public is aware of the project and STO. The activities under this stage include:

  • Writing a whitepaper
  • Coming up with a one-pager
  • Creating a responsive website
  • Simplifying your project idea to interested investors
  • Blog writing about your project and Search Engine Optimization
  • Guest posting

When writing the whitepaper, you should ensure that you clearly explain your project and also lay out all the regal compliances for the STO. Furthermore, it should give a detailed technological, financial and commercial overview of a security token. Therefore, you ought to look for a professional writer who clearly understands about STO whitepapers.

The one-pager, on the other hand, is a one-paged document which is actually a summary of your project, giving clear reasons as to why investors should invest in the project.

For STOs, the websites created for the projects should be HTTPS sites to ensure that they are secure.

  1. Pre-STO stage

This is the stage just prior to the launch of the STO and the marketing team should ensure that word about the STO has reached as many people as possible. Some of the most commonly used marketing strategies used at this stage include:

  • Press Releases and Media outreach
  • Getting High Domain Authority backlinks
  • Getting the STO listed on STO listing websites
  • Creating profiles on professional websites like LinkedIn and CrunchBase
  • Social media marketing (using platforms such as Facebook, Twitter, Reddit, Telegram and Steemit)
  • Running video campaigns depicting use cases

For the Press Release, you can pay for articles to be written and published on websites, especially those that you are sure that they receive a high amount of traffic. You can have some of those articles posted on High DA websites with backlinks to your website.

Listing your STO on popular STO listing websites like ListICO, InitialCoinList, and CoinIntelligence also go a long way in ensuring that investors looking for prospective STOs to invest in easily find you. When listing your STO on such a website, you should not forget to include the following:

  • A summary of the entire project and why investors should cash in
  • Link to the website of the projectLink to the project’s whitepaper
  • All the regulations that have been applied to the Security Token.
  • Know-Your-Customer and \Anti-Money Laundering Regulations
  • The specific STO Launch date
  • The Roadmap of the entire project
  1. STO running Stage

At this stage, the STO has already been launched and it is running meaning investors are flocking in to invest. Though not much awareness can be done in this phase, the marketing team should ensure that they are able to catch the attention of every investor that comes across the STO.

Some of the most effective methods used include:

  • Carrying out Airdrops of the security tokens
  • Building on the project’s credibility via networking
  • Deal marketing
  • Contributing to related forums

Nevertheless, these activities should be done in moderation to ensure that the main goal of raising funds for the project during the STO is maintained. For instance, when carrying out airdrops, you should refrain from giving away too many free tokens since it would compromise the amount of funds you shall receive during the STO.

It is always important to factor in the cost before undertaking any project. Otherwise, you may get stuck along the way due to a lack of funds. A clear picture of the cost will enable you to financially plan in advance to ensure that you have enough funds to run all the necessary activities for the success of any project.

For a STO, the cost depends on a number of things throughout the various phases of the STO, which include:

  1. The concept phase: this includes the development and drafting of the project concept and it entails the selection of the token standard and the whitepaper.
  • Choosing the token standards

For the token standard selection, you will need to choose the best standard to build your token on. The most commonly used standards are the ECR20 though there is a large list of standards ranging from the ERC20 to ERC1450.

The selection of the right token standard can be easy with the right standard consultant. Ideally, it is better to engage a consultancy that provides the full suite of STO services including legal instead of looking for a consultant for every task.

  • Whitepaper

As the founder or owner of the STO, you could have the best description of the project, but you require a professional to draft the whitepaper nicely and professionally.

  1. The development phase: This is the bulk of the entire project. It includes the creation of the smart contract, deploying the smart contract, and creation of an investor panel.

You will need to hire a development team depending on qualifications. Most importantly, you will need UI and UX experts, blockchain engineer (s) and product experts. All these professionals come at different costs depending on their level of expertise.

At this phase, it is wise to go for the highest experienced individuals to ensure that you get the best. You can always negotiate your way out with the professionals to charge you fairly instead of going for novices who may compromise your entire project.

  1. Security and legal audit: You will have to test your blockchain project for bugs before launching the STO. The testing requires an internal auditor and a third-party auditor who can also be a community auditor.

Above the security, you should also ensure that the tokens are checked for compatibility with the available crypto exchange platforms.

Most people ignore this phase due to the added cost, but it is an important phase which would prevent future problems with your STO.

  1. Legal and marketing: Contrary to ICOs, STOs have rules that they must adhere to. Therefore, you will require a good legal team to follow up on the issue of KYC, AML in addition to the other rules and regulations touching on STOs.

You also need to market the STO so as to attract as many investors as possible. However, you will need to involve the legal team to ensure that marketing is GDPR compliant. Most importantly, you will require website developers to create an attractive landing page.

You will also have to explore all the marketing avenues, especially through digital platforms. However, you have to strike a balance to avoid overspending on marketing.

 

Business Remodeling

After the COVID-19 pandemic, business startups may have to restructure their business plans to remain viable in the market.  While doing so, it is important to note that the pandemic has left the economy in a bad state and majority of people, including your customers, are facing tough economic times and may therefore not be able to afford your services or products at the previous prices.

Though lowering the prices would work, it could be difficult for you to just slash the market price of your products/services because you will still need to cover your production cost. To achieve a balance, you may have to restructure your business model to include ways of reducing your production cost that will enable you to avail quality products and services at a price that your customers can afford.

Some of the technics may include automation of the production processes to reduce the cost of labour. In addition to the Internet of Things (IoT) and Artificial Intelligence (AI), blockchain technology could also come in handy.

Branding

Being unique and giving your customers a unique selling proposition would certainly place you at the hearts of your customers.

You should concentrate more on your customers’ experience. You could achieve this by getting the right e-Commerce platform to position your startup firmly in the marketplace.

Reconsider the target audience

Probably, before the pandemic struck, you had targeted a wide audience. However, with the current situation, there could be reduced feedback from your audience, which may require you to narrow down your target audience. That way, you shall also be able to make your services/products more innovative and unique for the specific target audience.

Consider crowdfunding

For blockchain-based fintech startups, crowdfunding could help.

However, this will require a balanced approach. Conducting an ICO, STO or IEO could be a great way to raise funds, but it may not be as successful as before the pandemic struck especially with the current economic conditions.

Nonetheless, if your startup shows great prospects of growth, investors may still be interested in investing in it. However, to avoid frustrations you might consider lowering the target while ensuring that the raised amount is sufficient to fund the development of your startup’s project.

Coming up with an innovative blockchain project is just a tip of the ice bag when it comes to pulling through a successful project. You have to find a way of explaining the blockchain project to your potential investors and the whitepaper is your best shot in doing so.

What is a whitepaper?

Before going any further, let’s first look at what a whitepaper is.

A whitepaper is a document that gives a detailed architecture of your blockchain project, elaborating on the problem that your blockchain project intends to tackle, the proposed solution for the problem, and giving a detailed description of the products or services that the blockchain project will be offering. It can be closely paralleled to the business plan of your blockchain project.

The whitepaper is intended to help investors study your blockchain project in detail so that they can decide whether to invest in it or not. Therefore, it has to give investors enough reason as to why they should invest in the project.

Functions of a whitepaper

Let us elaborate more on the specific functions of the whitepaper so that you can hit each of them while coming up with your project’s whitepaper.

 

  1. Introducing the idea or concept

Any investor looking at your whitepaper will be looking to find out what your blockchain project intends to accomplish. Therefore, you should ensure that you let them have a clear picture of the problem you have identified and your solution to the problem. This should be done at the earliest point possible to capture the attention of the reader.

The best blockchain projects are those that address the challenges that the larger society faces while going about his day to day activities.

  1. Explaining this new idea or solution in details

The whitepaper should then take the reader/investor the extra mile of understanding how your idea should work. You have to breakdown the entire project into a simple form for investors to understand how it will function.

Here you have to strike a balance between getting too technical and putting things in the lay man’s language. Technicality shows some sense of sophistication but if you get too technical, you risk losing the attention of the investor, who is most likely than not just a layman looking for a chance to invest in the best investment opportunity that comes his/her way.

  1. Justifying your idea/concept, token and team

You are probably not the only person that has tried tackling the same problem you identified. Therefore, you have to carry out extensive research into any other existing projects related to the problem you are solving and show your reader/investor what your projects bring to the table.

You have to give him a reason to invest in your project and not in your competitors’ projects. Therefore, you have to identify what you intend to do different and how that is an advantage compared to the rest of the solutions.

When justifying your blockchain project, you also have to justify the benefits of your token/coin to those who will invest in your project. After all, the only way investors will invest into your project is by purchasing the project’s tokens/coins either through an Initial Coin Offering (ICO), Initial Exchange Offering (IEO) or Security Token Offering (STO). Therefore, you have to clearly explain your token/coin and also classify it accordingly; shall it be a utility or security token).

Another thing that the whitepaper should justify is why the team behind the project is the best. Remember, investors are looking at investing in a project that has the prospects of going all the way through to become a success. Therefore, they will have to scrutinize your team to see if they are capable of seeing the project through. A strong team will instil confidence in the hearts of investors to invest.

Questions that the whitepaper should address

To have a good whitepaper, you should ensure that it answers the following questions:

  • What prompted you to come up with the idea?
  • How will blockchain technology be incorporated into your idea?
  • What is the market analysis?
  • Who are your competitors?
  • What is the growth potential of your project?
  • How does your product work?
  • What are the technologies used in your project?
  • What is the commercial application of your project?
  • What kind of token do you intend to use? What platform shall it be based on?
  • How do you intend to raise funds? Do you intend to use an ICO, IEO or STO?
  • What are the conditions if any for investors to invest?
  • What has already been done on the project and what is the approximate time required to accomplish the rest?
  • How do you intend to use the funds raised through the crowdfunding?
  • Are there any bounty campaigns?
  • Who are in your development team?

Steps to writing a good blockchain whitepaper

To answer the above questions, you could follow the following steps:

 

  1. Identify your primary target

Before embarking on drafting or writing the whitepaper, you should first consult with the development team to identify the target of your blockchain project.

Some of the questions that you should seek to answer include:

  • Is it just the ordinary person?
  • Is it a professional e.g. a professional cryptocurrency investor?
  • Is it a blockchain developer who would use your solution to develop other networks?
  • Is it an executive in a business who might influence his/her company to buy your blockchain technology?

Once you identify the target group, you should go ahead and create a detailed profile about them. the profile should point out the following:

  • Gender
  • Age
  • Occupation
  • Location (country, state, province or continent)
  • Interests/hobbies
  • Education level (to understand the language, either formal or informal, that you shall adopt in explaining your blockchain project)

With the above details, it will be easy for you to understand how best to explain your concept. If for example, you are dealing with a target audience who are experts in cryptocurrencies, the use of technical terms won’t hurt. However, if your target is the ordinary man, you will have to use a simple to understand language.

Also, since your blockchain project is something that you would want to be adopted around the world by people with different languages and cultures, you will have to do white paper localization.

Localizing the whitepaper means translating the original version of the whitepaper into different versions fit for the various parts around the world. It might include translating into various languages. The translation should go beyond the linguistics; it should include analogies, norms and examples that are local to the demographic localities you are translating for.

  1. Identify the goals that you want to achieve with the whitepaper

Your goals should be specific, measurable, achievable, relevant, and time-bound (SMART). An example of the goals include:

      i. Raising funds

Most blockchain whitepapers are intended to make investors gain confidence in the blockchain project to a point of purchasing the tokens offered wither in a Security Token Offering (STO), Initial Exchange Offering (IEO) or Initial Coin Offering (ICO). This way, the project developers can raise capital for the project.

If your whitepaper is intended for this goal, you should put in mind that at the end of reading the whitepaper, you want the investor to cash in on the project. Therefore, you have to include the projects potential to grow and how the investor shall make money out of the project. Every investor wants to invest in something that will bring returns and if possible in the near future.

You have to indicate how much you want to raise and by what date. You should also clearly indicate how those funds will be distributed into your project so that the investors can make informed decisions.

You should also include a clear roadmap indicating the various milestone. The roadmap should have realistic timeframes. Remember, if you fail to hit the milestones by the anticipated timelines, your investors will start losing faith in you and probably even want to opt-out.

     ii. Awareness creation

In any case, the whitepaper plays a great role in informing people/readers that there is a blockchain project that is about to be launched.

In some cases, this could be the sole goal, without the need to raise funds. An example of such a whitepaper is the Lightning Network Whitepaper whose main objective was to introduce a new scaling method for the blockchain network. After its launch, various blockchain networks among them, Bitcoin and Litecoin adopted the scaling method while others like ZCash and Ethereum were inspired by the technology to develop their versions of the solution.

    iii. Selling services and products

If your whitepapers goal is to sell a product or service, you should first identify and describe the problem that your audience has and then list the benefits of the solutions (products or services) that you are offering.

Such whitepapers are subjective. However, you should restrain from making in overly promotional.

An example of such a whitepaper is the Sirin Labs Whitepaper that was written to describe how its blockchain-enabled smartphone, Solarin, works and how its users were to benefit.

  1. Make a draft of the whitepaper

Your project’s development team (especially the designer, developer and engineer) should be actively involved in making the draft since it should give the main points that should be included in the whitepaper.

The team that creates the first draft should be keen to provide the necessary information on the:

i. Problem statement

ii. Market description

iii. Product description (how is shall solve the problem)

iv. Tokenomics (Token Economics)

v. Fund distribution

vi. The team

vii. The roadmap

viii. Partnerships

  1. Come up with a structure for the whitepaper

Before delving into writing the final copy of your whitepaper, it is important to come up with the structure. The right structure emphasizes the right points at the right juncture.

There are three most commonly used structures when it comes to writing whitepapers:

  • The Before (current world with the problem) — After (World without the problem) –Bridge (Your solution as the one eradicating the problem) structure
  • The Problem (identify and explain the problem) — Agitate (show the ugliest part of the problem) –Solve (introduce your solution to the problem) structure
  • The Features (Describe the features of your solution) — Advantages (outline what makes your solution to stand out) — Benefits (describe how the users shall benefit from using your solution) structure

The first structure is best for explaining a solution that is completely new in the market. The second structure is best for writing a whitepaper that is intended for marketing purpose. The third structure should be used if the problem you are tackling is obvious to the target audience and there are very many solutions out there.

  1. Hire an expert to write the final copy of the whitepaper

Since the members of the development team may be too busy on the project and lack time to write the whitepaper, it is advisable to hire an expert writer to write the final copy. The writer should be experienced in writing blockchain-related material; meaning he/she should have some knowledge of blockchain technology so that he/she can explain some technical issues well.

As the writer writes the whitepaper, the writing should be closely monitored by someone on the development team. The writer should be able to freely interact with the team to get assistance with concepts and things when the need arises.

If the writer is someone from the outside, the team should understand that the writer is too green on the project and shall require explanation on many things so that he/she can understand the concept and objective of the project. That way the writer shall be able to relay the information better on the whitepaper.

You can hire a freelance writer from one of the online working platforms or get a referral from your colleagues for the writing task.

What to include in your whitepaper

Let’s now look at what your whitepaper should look like. We shall first give a general template and then get to explain what should be included in each section of the template.

You could use the following template when writing your whitepaper. It has all the necessary sections that a good blockchain whitepaper should have.

The above headings should cater for everything that a good whitepaper should have.

Now let’s get into explaining what should go to each section.

Introduction

This introduces your blockchain project to the reader. It should be a summary of the entire project and it should be presented in a compelling manner that leaves the reader in thirst of knowing more about the project.

You could choose to use an executive summary or introduction as the title of this section.

In some cases, the summary is written as a letter from the CEO addressing future token holders or investors.

Disclaimer

In this section, you should place any legal notice or disclaimer about your project or the ICO, IEO or STO you intend to issue. The disclaimer or legal notice should contain information on any restrictions or notifications.

This is the section where you should explain any exceptions of countries if any. For instance, it would be an exception of residents from certain countries from buying the tokens. This could save you a great deal in future since you may not have registered with the regulatory authorities from those countries. It could save you from issues like the ones we witnessed with Telegram where investors from the USA bought the tokens without Telegram following the rules outlined by SEC for issuing ICO tokens to US citizens.

Table of content

The table of content gives a clear outline of all the heading and subheadings used throughout the whitepaper.

You could also include a table of the graphics that you have used.

These help the reader in navigating within the whitepaper, which is normally a large document.

Problem statement

In this section, you should outline the problem that your blockchain projects seek to solve. You may delve into why it is important to solve the problem or explain its effects on society.

You could also explain the consequences of not solving it.

You should capture the readers’ attention and give him/her enough reasons as to why they should read the document and even give an overview of what they expect to come across.

You could use graphics, photos or charts to expound more on the problem and its effects.

Market description

This section is especially important for ICO, STO or IEO whitepapers. Investors would like to see how your project shall perform in the market.

You should, therefore, explain to the investors where your project fits in the market. Though numbers are sometimes convincing, if you choose to include them, they must be backed by facts, research or analysis.

You should give a clear picture to investors of how your project shall be adopted and its growth projection.

Product description (how it shall solve the problem)

This is the key part of the whitepaper. You should start by explaining the technology behind your solution. How it is unique from any of the currently available solutions if any.

Secondly, you should explain how the users shall benefit from the project.

You should use diagrams, graphics and photos to explain hard concepts so that the investors can get a clear picture.

Tokenomics (Token Economics)

Since your solution is blockchain-based, you have to explain the token that you intend to use for your project. You should clearly state the type of token it is; is it a utility or security token? Is it an ERC-20 token?

This is the section where you also state how and when you intend to distribute the tokens. You should state the date when the token issuance shall start and state the price of each token.

If possible, you should draw a graph showing what percentage will go to who.

Fund distribution

In this section, you should outline how you intend to use the raised funds. Investors need to know where their money is going. They also need to see how much is needed to accomplish certain tasks.

It is not a must for you to go into the details of the expenditures. Just group them generally. Like product development, marketing, team and so forth. However, it is important to allocate more funds for product development. You should avoid using terms like miscellaneous.

The team

This is an integral part of any blockchain project. Besides the whitepaper, you should also indicate the team on your project’s website.

You ought to include photos and short biographies of all the members of your team.  You should also include their contacts. The biographies help in instilling confidence to investors that the team behind the project is qualified and that they shall deliver. The contacts make it easy for investors to verify that the team members are real and not just a scam.

It is also important to state any past projects or positions that the team members have held in other institutions or projects.

A good number of investors will invest in your project because they are confident in the development team. That is why it is important to use qualified individuals for various positions.

The roadmap

In this section, you should include a detailed development roadmap of your project. The roadmap should clearly outline the milestones of the project while clearly outlining the timelines.

The roadmap should be for the next 12 to 24 months.

If some milestones are already accomplished, it is important to state that too. That will go a long way in convincing the investors that the team is serious about the project. Majority of investors will only cash in on projects that already have something to show. Nobody wants to invest in something that only appears on paper with no hopes of it ever starting; some have turned out to be mere scams!

The roadmap should also state when investors can start getting returns from their investments. This could include things like when the token shall be listed on crypto exchanges for trading.

You could have a graphic of the roadmap and also explain each of the milestones outlines on the graphic.

Partnerships

In this section, you should list any company that you have partnered with. Also, you should list any venture capitals that may have invested with you already.

Partnerships go a long way in promoting your blockchain project since they show that companies are confident that your project shall become a success.

When Initial Coin Offering (ICO) was unveiled, blockchain startups and fintech companies were rushing to make use of the new crowdsourcing technique due to its simplicity in raising capital for projects. 2017 specifically was a very successful year for ICOs and the world witnessed some of the best ICOs to date. The total amount of funds that were raised in 2017 was close to $6 billion up from about $200 million raised in 2016.

However, not all the projects that used ICOs turned out to be successful and some also turned to be scams since ICOs are not regulated in most parts of the world. At the moment, only a couple of countries like Singapore, France, and Germany have come up with ICOs regulations to make them safe for investors.

Having said that, ICOs are still a viable option for raising capital for your blockchain project. In this article, we shall review some of the successful blockchain projects that started by raising capital through ICOs. You can still leverage ICOs and pull out such successful projects amidst the regulatory issues facing ICOs.

However, you will have to put more effort into the project development by putting together the best team for the job. Again you will want to ensure that you comply with any regulatory laws in the region where you investors come from to avoid court cases like those that hit BLOCK.ONE and Telegram ICOs.

The list below was developed taking into account the Returns on Investment (ROI) for each of the projects and also by how much the blockchain project has been adopted across the globe.

10 most successful ICOs

  1. Ethereum

Ethereum ICO was conducted in August 2014, making it the second blockchain project to leverage ICO to raise capital, after Mastercoin ICO conducted in July 2013. At the end of the ICO, Ethereum raised a staggering $16,000,000.

Today, Ethereum is a force to reckon with in the cryptocurrency and blockchain world. The blockchain network completely revolutionized the world of cryptocurrency by enabling blockchain networks to do more than just offering payment services. Ethereum introduced smart contracts which have been the cornerstone of every other blockchain use case.

Ethereum was developed as an open-source distributed ledger platform that enabled its users to create and deploy decentralized applications (Dapps) and also apply and use smart contracts. It introduced the ERC-20 token standard that offered other blockchain developers a basis for creating their crypto coins; most altcoins use the ERC-20 standard to create their tokens.

Ethereum is by far one of the most successive blockchain network second to Bitcoin. Currently, the ETH, which is Ethereum crypto coin, trades at $207.75 USD. Towards the end of 2017 and beginning of 2018, ETH was trading at over $1200 USD.

  1. IOTA

IOTA ICO was conducted towards the end of 2015 and was one of the first blockchain projects to use ICO to raise capital. A single IOTA token was going for 0.00000133 BTC, which translated to less than $0.001 at the time. The ICO was able to raise $590,000.

IOTA blockchain holds lots of prospective use cases since it merged Internet of things (IoT) technology and blockchain technology. The project developers envisioned a future where different ‘things’ using the internet would be able to communicate with each other using blockchain technology.

IOTA stands out as the only blockchain technology that doesn’t rely on blockchain fully for its transactions. It uses another system known as The Tangle to verify transactions as they are being made. This way IOTA has been able to dodge the scalability problem affecting most blockchain networks.

IOTA has been adopted across various industries across the world. For example, Taipei signed an agreement with IOTA Foundation for its Taipei smart city project. Also, a Netherlands company called Elaadnl dealing with smart charging has succeeded in developing the first working prototype using IOTA. The list keeps on growing as more and more industries fall to IOTA’s technology.

At the moment, one IOTA token is trading at 0.00002073 BTC.

  1. DigixDAO

The DigixDAO ICO was the first crowd sale to be conducted on Ethereum. It was conducted in March 2016 and it raised $5.5 million.

DigixDAO is one of the main Decentralized Autonomous Organizations (DAOs) developed on the Ethereum network.  DAOs are normally new business structures that have no bosses but rather all decision affecting the networks are made through proposals and voting.

One of the main features of the DigixDAO blockchain is that it has two crypto coins; the DGD and DGX.

The DGD tokens were the ones that were issued during the ICO. During the ICO, a single DGD token was going for $4.2000 USD.

Contrary to most other ICOs, buyers of DAO tokens hold the rights to vote in the proposals submitted to the DAO.

The main objective of DigixDAO is to create a stable cryptocurrency that is backed by real gold bars. According to the DigixDAO, the token that is backed by the gold bars is the DGX. The gold is stored in a custodian vault in Singapore that can hold up to 30 tons of gold. The gold goes through a Proof of Asset protocol, where its existence is verified through the Ethereum blockchain.

Currently, the DGD token is going for $39.98 USD.

  1. NXT

The official announcement of NXT ICO was made in Sep 2013 on BitcoinTalk forum.

The NXT blockchain is viewed as a descendant of the Bitcoin blockchain and it was developed to solve some of the issues affecting Bitcoin. Some of the issues that NXT promised to fix was shifting the mining algorithm to proof-of-stake and also resolve the issue of bloated blockchain.

The ICO which was conducted on the BitcoinTalk forum platform raised $16,800 in Bitcoin. At the time of the ICO, the value of NXT token was $0.0000168. However, at the moment the token’s value is above $0.01.

Besides the fact that the NXT is tradable on most crypto exchanges, the NXT blockchain is now fully operational and blockchain developers use it to develop decentralized applications. It also has an asset exchange platform, the Nxt Asset Exchange, and a messaging system.

  1. NEO

NEO ICO was conducted in September 2016 and it raised $5,050,000. During the ICO, a single NEO token was going for $0.032.

NEO blockchain is often referred to as the Chinese version of Ethereum. It offers smart contracts and on top of that provides digitized assets, identification decentralized commerce. The developers saw a future where blockchain would be used to represent legal proof-of-ownership for the broader society rather than the cryptocurrency community alone.

Today, NEO is traded on most crypto exchanges and currently trades at over $9.87. Towards the end of 2017 and early 2018, NEO was trading at over $120.

  1. Stratis

The Stratis ICO was conducted from August 2016 to January 2018. It was raised $610,000 by selling a single STRAT token for $0.007.

Stratis blockchain is a project that was developed to offer end-to-end solutions for the development, testing and deployment of Blockchain-based applications for the businesses worldwide. Its main aim was to make it easy for blockchain developers to develop blockchain networks that address whatever problem that is faced in the business sector.

The project has become quite a success since it ended up with a platform that is fully compatible with the C# and .NET programming languages, which are common among coders. One of its best use cases was when Microsoft added it as a Blockchain-as-a-service (BaaS) to its Azure cloud service. Stratis has become a darling for enterprises that use Microsoft products and looking to incorporate blockchain technology.

Currently, the Stratis (STRAT) goes for over $0.30. It reached its all-time high at the start of 2018 when it was going for $21.21.

  1. Ark

Ark ICO was conducted from November to December 2016 raising $22,000,000 USD. During the ICO, a single ARK was valued at $0.1 USD.

The Ark blockchain project was developed to create a platform that could link different blockchain into one network of use cases. In so doing, users of different blockchains could transact. Besides, Ark provides an open-source code and blockchain creation tools to enable users to leverage blockchain technology.

Ark has won a number of partnerships with different firms including Ledger, Atomic Wallet, Exodus, Changelly, and Spend among others.

Currently, the Ark token is trading at over $0.21.

  1. Lisk

Lisk ICO was conducted in March 2016 raising $6,472,497 USD. During the ICO, a single Lisk (LSK) was going for $ 0.07647059.

Lisk was the first modular blockchain that has the main chain that hosts the LSK coin with other side chains, which are personal blockchain networks attached to the main chain. The side chains are built and tailored using Lisk tools.

Most importantly, the developers of the side chains are allowed to hold their own ICOs. And most importantly Lisk allows developers to use JAVA programming language to develop the side chains.

Besides, several Ethereum players have also invested in this blockchain project.

Currently, the Lisk (LSK) is trading at above $1.11.

  1. QTUM

QTUM ICO was conducted in March 2017 and raised $15.6 million. During the ICO, a single QTUM was going for $0.3.

QTUM is a blockchain network that aimed at bridging Bitcoin with Ethereum’s smart contracts. By this, QTUM hoped to open up more use cases for smart contracts, especially for businesses.

Different business can leverage the tools, templates and smart contracts provided by the QTUM blockchain to enable them to build and deploy the smart contract.

Currently, the QTUM token is trading at above $1.5 USD.

  1. Spectrecoin

Spectrecoin ICO was conducted from November 2016 to January 2017 and raised $15,427. During the ICO, one Spectrecoin (XSPEC) was going for $0.00081.

Spectrecoin platform combines blockchain and tokenized ring signature scheme to add a layer of privacy and anonymity in transactions. By using the ring signature mechanism, any member of the network can append a signature on any transaction and it, therefore, becomes hard to trace the specific person that signed a transaction.

Besides the ring signature, Spectrecoin uses the Tor network to increase privacy within the network. All the nodes in the Spectrecoin blockchain communicate with each other through the Tor network. Therefore, contrary to most blockchains, the transactions carried out within the Spectrecoin go through a number of “middlemen” to make the transactions untraceable.

Currently, the Spectrecoin (XSPEC) is going for over $0.12, which is quite an appreciation from its ICO price.

Conclusion

The above blockchain networks are just examples of the best performing ICOs. There are other blockchain projects like Brave, OmiseGo, Ox, waves, Cardano, ChainLink, and Golem among many others that have used ICO to raise capital for the projects.

Although investors are currently shying away from ICOs due to lack of proper regulations, some countries have already come up with laws governing the ICOs or means of making the ICOs safer, like in the case of the German’s rICO.

If you are in countries where there are rules that have been put in place, you should ensure that you comply with all of them. For instance, if you are from France, you could apply for a VISA from the AMF to have your ICO whitelisted, which would certainly attract investors since they would be sure it is not a scam.

In the USA, the SEC requires you to disclose information about your project to ensure that investors make informed decisions. You may also be required to disclose how the collected funds were distributed, which would certainly instil confidence in your investors.

Failure to comply with regulations may land you into trouble hampering the success of your blockchain project like what was witnessed in the case of Telegram’s TON or the court cases that BLOCK.ONE is facing.