Ethereum has been seeing a bullish trend in its adoption and applications ever since it was invented. Though the ETH coin isn’t the most valued of cryptocurrencies, Ethereum revolutionized the applications of blockchain technology by being the first open-source blockchain platform where developers could develop their decentralized applications (DApps) and introducing smart contracts.

However, despite its huge popularity, Ethereum’s full potential has been held down by being less scalable because it was developed to use the Proof-of-Work consensus mechanism just like its predecessor, Bitcoin. Though Ethereum’s program was slightly improved to make transactions faster compared to those of Bitcoin, Ethereum still lags behind some newer blockchain technologies like DASH, Ripple and the like, which use Proof-of-Stake consensus mechanism. Initially, Ethereum could only handle 15 transactions in 16 seconds.

Change of the consensus mechanism

Ethereum users are egaelry waiting for the mich anticipated ETH 2.0 update that is expected in the last quarter of 2020. However, things seem to be moving faster than expected after Ethereum’s founder tweeted about the success of the initial deployment of Ethereum’s layer 2 scaling strategy.

With the success of the initial deployment, what is remaining is only the refinement and complete deployment of the layer 2 scaling strategy.

What layer 2 scaling strategy means

After identifying that Ethereum blockchain has scalability issues, Vitalik Buterin identified strategies of improving the blockchain’s scalability. Those strategies included “sharding”, also referred to as the “layer 2 strategy” or HackMD or ETH2 shard chain simplification.

Initially, the Ethereum blockchain network was designed for every transaction to be processed by all the nodes before being declared successful. This ended up taking a huge amount of the networks activity that would be used for other things.

To free up the system, sharding will make it possible for transactions to go through without the need of being verified by all the nodes. Transactions involving token transfers will be done on the layer 2 protocol to free the rest of the system.

In the new strategy, the amount of shards is brought down to 64 from 1024 while the number of shards required per slot is increased to 64 from 16. Then for every beacon chain block, there shall be a published crosslink to allow for optimal workflow. Additionally, the EEs shall be simplified, smaller shard chain logic shall be needed and it will not be mandatory to pay transaction fees via decentralized exchanges.

 What the scalability overhaul means for users

Once the overhaul is complete, Ethereum users will enjoy transaction speeds of thousands of transactions per second. This will only make Ethereum better especially for DApp developers.

It will also be good news for Ethereum’s use cases which span across a wide range of fields ranging from supply chains, health, Initial Coin Offerings (ICOs), Initial Exchange Offering (IEOs), transportation, Structural health monitoring and finance among many more.

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.

 

Blockchain has become a booming industry and starting a blockchain startup would certainly be a great idea at the moment. Several blockchain projects ranging from crypto giants like Ethereum, Bitcoin, Stellar, CitiOS, and the like to smaller projects like Cosmos, Storj, Aragon, Augur and the like, have been started in the past years and they have registered tremendous growth. These projects serve as great indicators that blockchain technology adoption is on the rise and you can definitely grab the opportunity by starting your blockchain project/startup.

Nonetheless, for your blockchain project to pick, you will have to convince investors to invest in it. This is the hard part for most blockchain startups!

A good blockchain project is good, but it is not everything. The growth of blockchain projects is determined by how the public adopts it. You need investors to invest their money into the project! So how do you get the investors to recognize your blockchain project and invest in it? What do investors look for in a blockchain project? To attract investors to your blockchain startup, you have to tackle these questions. These questions should be addressed in the whitepaper, Press Releases (PRs) and other marketing strategies like social media platforms.

What investors look for

Below is a guide to some of the things that investors look at:

Clear problem statement and solution

This is the anchor of your blockchain startup and it cannot be over-emphasized enough. You have to clearly state the king of problem you intend to solve and how you intend to solve the problem.

Most importantly, this problem should be something that affects a large group of people to ensure large market growth. A niche problem focused on just a certain minority group of people will certainly attract a few customers, meaning its market growth will be limited.

Your solution to the problem must also be something workable. You should clearly show the investors that it is something that can be done.

Prove that you are better than any other solution in the market

If your projects stand out among your competitors, customers will prefer it to your competitors and that would translate to a higher chance of market growth.

Therefore you have to ensure that your solutions stand out. You also have to explain to the investors how it stands out.

Additionally, you have to take precautionary steps to ensure that your solutions remain ahead and that it is not replicated by other startups. Some of the best ways to do so are by applying for patents, copyrights and trademarks.

A competent team

A qualified team acts as proof to investors that the project will become a success. A project could look great on paper, but without the right team, it could remain just that. You need the right minds for the project to materialize.

That is why it is imperative to higher professionals for all the roles in your blockchain project. To show the investors that you got the best team, you should include the qualifications of each team member in his profile on your website and the whitepaper.

Growth potential

After, showing your potential investors what your startup does, what problem it intends to solve, how your project intends to solve the problem, and how your solution is better than other solutions currently in the market, you have to also show your investors how you shall reach the market and make money for them to also benefit if they invest with you.

Investors look for projects that have a stable marketplace that is full of consumers. Therefore, you will have to show them the group of people you are targeting as customers, how that market base will grow, and what will make them want to use your product. By doing so, you will prove to the investors that there is a potential stream of revenue that will ensure that their investments keep working for them.

Clear business model

Apart from solving a certain problem for the society, your blockchain startup should have a clear replicable business model that will instil confidence into the investors that your project will become a success.

Most importantly, your business model should be scalable and readily adaptive to ensure that it accommodates immerging markets.

Clearly Presented margins

It is always very important to realize that although investors decide to choose your blockchain project because they believe in it, they are also looking to make some extra money. Nobody would invest his/her money into something expecting zero returns.

One of the best way to prove to investors that your project is going to give them good returns is by clearly and professionally presenting the margins of your startup/project. Promising margins will certainly make investors interested in your blockchain project.

Blockchain technology is revolutionizing every aspect of our lives. Besides the impact of blockchain technology on Governments, financial institutions, and conglomerates, blockchain technology has also proved to be a game changer when it comes to the way small Fintech startups raise capital. Startups can now conduct Initial coin Offerings (ICOs) among other methods to raise funds for their projects.

However, for an ICO to be successful, the development team has to diligently choose the blockchain protocol upon which their project’s token will be built on. This is mainly because the functionality of the token will greatly be influenced by the chosen blockchain protocol.

Besides, there are other blockchain technology use cases that the startups can benefit from the blockchain protocol they choose to use. Some of the most profound use cases include asset management through asset digitization, decentralized finance, global trade & commerce, and payments.

Advantages of using blockchain technology

  1. Ability to streamline and automate executions. The use of smart contracts, for example, has made it possible for businesses to eliminate intermediaries and thus streamlining business processes and allowing real-time clearing and settlements.
  2. Increased security during transactions. The fact that the data stored on blockchain networks is immutable transactions tamper-proof and thus authentic.
  3. Ability to develop and deploy permissioned blockchain networks that have a shared business logic and customizable governance.
  4. Ability to digitize assets. This is what has made it possible for startups to conduct online crowd funding through methods such as ICOs.

Most used blockchain protocols for creating ICO tokens

1.    Ethereum

Ethereum is an open-source, public Blockchain distributed computing platform that features smart contract functionality. It was the first such blockchain platform to be developed and it has paved the way for the development of many other blockchain networks that are based on its blockchain architecture.

Ethereum was the first blockchain protocol to prove that blockchain was not only meant for the creation of cryptocurrencies for payments as its predecessor, Bitcoin.

Ethereum provides a platform for blockchain developers to develop decentralized applications. The decentralized applications developed on Ethereum are usually accessible from anywhere in the world. Also its ERC-20 token standard has earned itself a reputation when it comes to the development of cryptocurrency tokens. Actually, most of the altcoins use Ethereum’s ERC-20 token standard.

The token used for conducting transactions within the Ethereum network is called Ether (ETH) and it is normally generated by the platform as a reward for mining nodes the performed computations.

Some of the notable features of Ethereum apart from the smart contracts include the Ethereum Virtual Machine (EVM) that executes scripts through a network of public nodes throughout the world and Gas, which is its internal transaction pricing mechanism.

Ethereum use cases largely revolve around smart contracts and dApps.

Pros of Ethereum enterprise use cases
  • Ethereum supports the development of decentralized applications (dApps). Therefore business enterprises can use the platform to write customized blockchain codes that whose performance is oriented towards the specific business enterprise.
  • Ethereum has a very promising use case in decentralized finance (DeFi). Enterprises can use Ethereum’s smart contracts to issue or go for smart contract powered loans. Developers can also use the smart contracts to mint stable coins as in the case with the MakerDAO project. Smart contracts can also be used in creating decentralized exchanges.
  • Ethereum has proved to be of great use when it comes to tokenizing real-world assets. One of Ethereum’s use cases in line with this is the PolyMath, which has embarked on the creation of a revolutionizing platform for creating security tokens.
  • The decentralized nature of Ethereum and the decentralized applications developed on it make it impossible for hacking attacks.
  • Ethereum’s smart contracts have completely revolutionized the way transactions are made. Instead of writing paper agreements, the transaction agreements can now be recorded in a computer code. In so doing, it has eliminated the need for intermediaries, and parties can now transact directly.
Cons of Ethereum enterprise use cases
  • Though Ethereum’s smart contracts can be easily used in generating digital identities. It has proven to be extremely difficult for governments or regulatory authorities to check the authenticity of digital identities.
  • Ethereum was designed to work through the proof-of-work (PoW) consensus mechanism, which makes it less scalable compared to other blockchain networks. And although there are plans to switch the consensus mechanism from PoW to PoS, the process is not that easy.

2.      Stellar

Stellar is a decentralized open-source blockchain network that allows cross border transactions by converting the currencies to digital representations. The network uses a cryptocurrency token known as Stellar Lumen to facilitate transactions within the network.

Some of Stellar’s uses cases involve its integration into Vumi, an open-source messaging platform, enabling Vumi to use cellphone talk time as airtime. Stellar also was integrated into Oradian’s banking platform to enable the bank top to add microfinance institutions in Nigeria.

Stellar has also partnered with several banks including Deloitte, IBM, KlickEX to facilitate cross border transactions.

Pros of Stellar enterprise use cases
  • The stellar network makes cross border transactions cheaper since it eliminates the need for intermediaries. It only costs an average of 1/100,000 of a penny per transaction.
  • Stellar also makes the cross border transactions to be faster compared to the use of traditional means. Stellar can easily achieve 10,000 transactions per second with an average on-chain settlement time of 5 Seconds.
  • Digital currencies developed using Stellar can be traded on StellarX, which is Stellar’s decentralized exchange platform.
  • Stellar has smart contract functionality and users can be developed and executed smart contracts.
  • With Stellar, there are no limits. Businesses can transact any amount at any time to whatever location.
  • Stellar has the necessary documentation, tooling, and support to help enterprises get their project quickly.
Cons of Stellar enterprise use cases
  • All Stellar accounts are required to have a certain minimum balance of lumens.
  • Stellar’s smart contract is not as developed as those of Ethereum blockchain.

3.      Binance Smart Chain (BSC)

Binance smart chain (BSC) is a blockchain-based platform launched by Binance that shall enable developers to issue new cryptocurrencies as well as ICO coins. The platform supports smart contracts and decentralized applications (dApps).

The Binance smart chain shall run parallel to the current Binance Chain blockchain.

Binance smart chain gives Binance Company its blockchain rather than depending on Ethereum.

Pros of Binance smart chain enterprise use cases
  • Enterprises can easily create customized blockchain networks for use in their businesses.
  • Just like Ethereum, Binance smart chain has smart contract functionality which can be of great help in business transactions.
  • Binance smart chain enables developers to come up with their cryptocurrency tokens that can also be used for Initial Coin Offerings.
  • Binance smart chains also make it easier for the cryptocurrency coins developed to be listed on Binance exchange.
Cons of Binance smart chain enterprise use cases
  • The binance smart chain features a delegated proof-of-stake (DPoS) system of governance, which is prone to centralization. Centralization would stifle creativity among dApp developers.

4.      Tron

Tron protocol is a blockchain network that provides a decentralized virtual machine that can execute a program through the network of public nodes within the network. TRON TRX is the cryptocurrency token used within the Tron network.

There are several use cases for Tron, key among them being the ability to use TRX as a payment system. Websites like travala.com have incorporated TRX as a mode of payment already.

Another use case for Tron was the partnership with BitTorrent, enabling it to use a token called BTT, which is a Tron based digital coin.

TRX has also found lots of use in the world of online gaming.

Pros of Tron enterprise use cases
  • Transactions within the Tron network are free.
  • The transaction speed is relatively high since the system can conduct 2000 transactions per second.
  • It allows dApps developers to easily develop applications (dApps) that are custom made according to the requirements of the enterprise and deploy them.
  • The TPS is much more improved in Tron thus giving Tron a high throughput.
  • Tron also has high scalability and it gives developers a wider variety of ways to deploy their applications.
Cons of Tron enterprise use cases
  • Tron’s whitepaper suggests quite a lengthy development timeline that suggests that we may not be seeing the real application of TRON come to life soon. That leaves Tron users with only one choice of buying TRX and trading it on exchanges or using it as a payment option.

5.      Cardano

Cardano is an open-source decentralized public blockchain network that features smart contract functionality. It was built to improve the financial system.

Some of the renown Cardano use cases include the GRNET, released in 2018 for checking student diplomas, the New York Ledger Accelerator (SOSV) and Traxia, released in 2018 for converting invoices into smart contracts so that they can be sold as short-term assets,

Pros of Cardano enterprise use cases
  • It allows the use of smart contracts and provides blockchain developers with a network to develop and deploy dApps.
  • Cardano has proved to be flexible, secure, and scalable for enterprises. This is mainly due to the use of the Proof-of-Stake consensus mechanism.
  • Cardano integrates a wide range of digital coins without the use of an intermediary.
  • It also combines regulation and privacy.
  • It is one of the few blockchain networks that go through a third party audit, thus making it highly transparent.
  • Cardano blockchain network is made up of two layers, the Cardano settlement and ledger processing transactions layer and the Cardano computation layer that supports smart contracts and provides users with a platform for building DApps. This makes it less prone to the disruptions brought about by soft and hard forks.
  • There is a middle layer made up of side chains that connects the two main layers. This makes Cardano more scalable.
Cons of Cardano enterprise use cases
  • Cardano introduces its programming language called Plutus and developers could have a hard time trying to learn the new programming language to be able to develop dApps on the platform.

Fractional ownership through blockchain technology is the new haven for companies and startups looking to raise capital from investors in exchange for a stake in the companies/projects. Traditionally, companies and startups could only do so through the traditional shares market.

In the traditional shares market, shareholders have to undergo rigorous selling and buying procedures, which also involved lots of paperwork. Investors also have to invest the full minimum required amount to own at least one share of a company or startup.

But thanks to blockchain technology. Companies and startups can now digitize or tokenize assets and offer them as digitized securities also referred to as tokens, rather than as traditional shares. By doing so, people looking to own a stake in the companies/projects can now do so by purchasing the digitized securities, which are normally transferred through blockchain networks rather than through the traditional stock market platforms.

Fractional ownership

Fractional ownership refers to the ability of an investor to own a fraction of a company or startup asset. For this to happen, the asset must first be converted into a form that can be divided into fractions, which is normally possible through asset tokenization.

Traditional shares are normally offered as whole numbers without the possibility of breaking them into fractions. Therefore, investors can only purchase whole shares. For instance, an investor can purchase 1, 2, 3, 4, 5, etc. shares from a certain company, but cannot purchase 0.5, 0.3, 1.3, 1.5, etc. shares.

On the other hand, digitized assets are easily offered as fractions/decimals thus enabling fractional ownership.Investors can purchase 0.1, 0.5, 1.4, etc. digitized assets.

Contrary to the traditional shares market where investors are required to invest a minimum amount to purchase shares, security tokens can be offered as fractions or decimals, therefore, allowing fractional ownership.

Asset tokenization changes how asset ownership is managed and also automates the activities that come after investment.

Blockchain technology makes it possible to have instant, traceable and cryptographically secure distribution and transfer of the digitized assets (tokens) without the need for intermediary parties.

Besides, contrary to the traditional securities, tokens of the digitized assets are issued and settled on a blockchain network. Therefore, the transactions are instant and without the need of signing stock certificates. And this process is not time-bound; it can take place 24/7.

Advantages of using digitized assets (digital securities)

The digital assets can be offered through smart contracts or security token offerings (STOs), where the holders acquire fractional ownership of the company/project behind the tokens.

These digital securities can also be exchanged in secondary markets just like other cryptocurrencies. When an asset is digitized, shareholders can use smart contracts to promptly sell their securities on registered exchanges where there is high liquidity compared to the traditional shares market. This in return help in avoiding the long lockup period of capital that is witnessed in the traditional shares markets

The beauty of it is that companies and projects can basically tokenize any assets whenever the need arises.

Comparing traditional securities to digital securities

Traditional securities (shares) normally call for larger investments while digital securities (digitized assets) allow fractional ownership, which reduces the amount of the required investment.

Additionally, since traditional securities require large investments, access to significant funding can only be done by institutional investors while in digital securities, since there is fractional ownership, there is a large pool of investors which makes it easy to quickly access significant funding.

Secondly, in traditional securities, the capital is usually tied up, especially with private placements like the venture capitals. However, with the digital securities investors can sell the tokens at secondary markets where there is high liquidity.

Traditional securities are also too costly due to the high fee structures. But the digital securities have a low fee structure due to automation using blockchain technology.

 

Compared to other forms of crowdfunding, Initial Coin Offering (ICO) offers a more democratic approach. It gives tech startups and firms the ability to net-in a wide range of investors.

The beauty of it is that ICOs have no limitations on who should invest or how much one should invest. There are basically no regulations or laws that define how ICOs should be conducted. All the powers of the token sale are usually at the hands of the issuers and third parties, like ICO advisors, helping in the ICO.

By allowing any investor to invest any amount of money into the ICOs, the issuers are able to raise the required capital faster owing to the fact that investors flock to get a share of the ICO tokens.

However, the lack of a provision for regulations has also become a disadvantage to the ICOs. Crooks found the loophole and started airing fake ICOs targeting vulnerable investors. Compared to other fundraising methods like Security Token Offering (STO) and Initial Exchange Offering (IEO) that have provisions for regulations, ICOs simply had no provision for regulations.

Between 2016 and 2018, a collective of over $10 billion was raised by startups through ICOs. An example of a successful ICO was that of Ethereum (ETH). Ethereum issued ETH tokens whose value appreciated as the project rose to become the second-ranked cryptocurrency.

But Ponzi Schemes and doggy projects started using ICOs to defraud investors making investors more cautious. This cost ICOs greatly. In 2019, ICOs hardly raised $1 billion.

Finding genuine ICOs

Even with the current trend, tech-startups are still conducting ICOs. Therefore, it is still very possible for investors to find genuine ICOs.

However, due to the high cases of Ponzi schemes and scammers using ICOs, it has become increasingly difficult to identify a genuine ICO. It requires a thorough investigation into a project to verify if it is fake or something worth investing in. In this case, ICO advisory companies like Gravitas International comes in handy in helping to identify genuine ICOs.

ICO advisory companies have become the best platforms where investors can get genuine ICOs. The advisors play a key role in managing how startups run their ICOs and they are therefore able to identify if a project is a scam or legit. And no ICO advisory company can advertise and run a scam because that would place its reputation on the line.

The intervention by IEOs

In late 2018, Initial Exchange Offering (IEO) was invented to incorporate regulation in ICOs. An IEO is an ICO that is run on a cryptocurrency exchange. The exchange helps in verifying the projects, thus ensuring that investors (who are usually the exchanges’ users) are shielded from Ponzi schemes.

IEOs approach brought a sense of regulation to the chaotic market. It shifted the power of token sale from the hands of the issuers to exchanges which are regulated by regulatory authorities.

In 2019, over $3 billion was raised through IEOs and the trend seems to gather momentum in 2020.

Security Token Offering (STO) is slowly becoming a darling among technocrats, especially those involved in raising funds for blockchain projects. STOs are usually strictly regulated by federal regulations making them one of the best and most secure forms for raising funds. However, due to the strict regulations that the STO tokens must comply with, special standards are required to make them comply with the regulations.

The common ERC-20 standard is not sufficient for creating STO tokens. Therefore, companies and organizations had to come up with more advanced standards with an additional layer for regulations compliance. In addition to complying with the set regulations, the additional layer also helps in identifying who interact, purchase or even trade the STO token.

Available token standards for creating STO tokens

  1. ST-20

This security token standard was developed by a company known as Polymath. It is a smart contract that defines a set of rules, including who can interact with the security token and how they should interact.

Polymath, the company behind this standard, provides a set of pre-programmed regulatory modules that developers can use when creating a security token using the standard.

  1. R-Token

This standard uses a combination of three smart contracts, namely A, B, and C. The three smart contracts are interlinked in a way that they can associate. Smart contract A contains ERC-20 standards. Smart contract B contains the rules on who can interact with the STO token and how they should interact. Smart contract C dictates who can communicate with the token and how they should communicate.

  1. ERC-1404

This is a special standard, developed by Tokensoft. The standard enables tokens that are built using different standards, including R-Token and ST-20, to be interoperable with different cryptocurrency wallets and exchanges.

  1. ERC-1400

This standard was developed by ERC-20 and ST-20 developers. The standard is designed to incorporate gatekeeper access control, redemption semantics or issuance, error signaling, and differentiated ownership.

For non-fungible tokens, this standard is backward compatible with the ERC-777 standard.

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.

As a blockchain or fin-tech investor, you have to keep up with the pace of the ever-changing market and investment opportunities. Two years ago, ICOs had dominated the fin-tech industry, especially the blockchain/cryptocurrency space. Blockchain startups easily raise funds through ICOs as long as the whitepaper is convincing enough to prove that the underlying project is viable. For the startups, they benefit by raising the required capital while investors benefit by making profits from the sale of the tokens at a later stage or using the tokens in paying for services connected to the project.

However, since mid-2018, ICOs have gradually become less attractive to investors, especially due to scammers taking advantage of the lack of proper regulations on the ICOs. Instead, investors are now going for IEOs and STOs since they have some degree of safety compared to the ICOs.

However, IEOs seems to be stealing the show. Though IEOs are newer than the STOs, STOs are yet to pick in the industry probably due to their strict requirements.

But how do you go about investing in IEOs to ensure that you make the most profits? How can you be sure that the IEO is profitable or not?

Below are the number of things that you should consider as an investor before commit yourself in an IEO:

  1. Carry out thorough research about the IEO

You may wonder why the research and the project have already been Okayed by the exchange platform that has better experts than you. But remember, the Exchange does not look too much at the end result of the project. The exchange is only concerned with whether the project is genuine and whether its users will be attracted to the IEO token sale. The exchange is in business and it has to find something that will be well received by its customers. Therefore, it is paramount that you do in-depth research about the project itself to find out if it is a viable investment opportunity.

As you do the research, you could try to find answers to the following questions:

  • Does the project seem to attract the interest of the general public?
  • Is the project a new concept or just a copy-paste?
  • Who are the people behind the project offering the IEO?
  • How experienced are the members of the development team?
  • Is the exchange listing the IEO reputable?
  • Is the exchange secure?
  • Has the exchange been involved in any malpractices?
  • What is the history of the exchange in line with IEOs?

Always remember that the exchange is also looking for profits from the IEO token sale. Therefore, don’t just rush to buy the tokens, do a background check on the project first.

  1. Find out about the work that the development team has done so far

You have to look at what the team behind the project has done so far. You can’t just invest your money into a project that is not yet started; it might end up not starting at all. The software should be completed. You should be able to look at the program to verify if it will indeed be applicable.

You should invest in a project that has already started and the team can show some commitment to the project. This shows that the team behind the project is serious about the entire project.

Things like a whitepaper, well-designed websites, and the development team must be there.

  1. Research about the exchange that offers the IEO

Once you are convinced that the project behind the IEO is viable and looks to be profitable, you have to consider the platform where the IEO is launched. For security reasons, you have to look at the reputation of the exchange platform.

In addition, you have to consider the onboarding processing that the platform requires for you to participate in the IEO. Remember, different exchanges have different requirements for you to become an investor in an IEO. But most importantly, you have to be a registered member with the exchange for you to participate. You have to go through the entire registration process, including the KYC/AML process.

Since it may take some time depending on the exchange that you choose, it is important to do this some days before the actual IEO.

The common exchanges with IEO Launchpads are Binance, Huobi Global and Gate.io.

  1. Find out how the payments for the IEO are to be made

This is a very important factor. You cannot participate or invest in an IEO unless it allows you to buy tokens through a means that is accessible to you. Again, you have to consider the asset that the development team together with the exchange sets as the accepted currencies to buy the project tokens. Some of the most used currencies include Bitcoin (BTC), US Dollar (USD), Great British Pound (GBP) Euro and Ethereum (ETH).

You should also look at the processing time. How long does the processing take after making a purchase?

  1. Look at the tokenomics of the IEO

You have to closely examine how the tokens are distributed. You have to clearly understand the number of tokens available. You also have to see what percentage is assigned to what.

One of the things that you should carefully look at is the percentage of tokens given to the development team. If the development team is given the majority share of the tokens, then that is a red flag. Most of the tokens should go to the investors so as raise sufficient funds for the project.

You should also closely look at the distribution of the funds that are raised through the IEO. How does the development team intend to distribute the funds? The development team should not be the one taking the lion’s share of the funds. A good IEO distributes the majority of the funds to the project development.