Attention Crypto Companies: Here’s How To Properly Market An ICO
Bitcoin has launched cryptocurrency markets into the public spotlight. In the past year, the value of a Bitcoin has skyrocketed from around $1000 to an incredible high of $5000. To put things into perspective about how unprecedented and unpredictable this rise was, firms and individuals were speculating earlier in the year that Bitcoin might actually “dramatically dip” from $1000 to somewhere near half its value due to a fork.
The point here is that there is a significant amount of public attention on cryptocurrency markets at this current point in time, making an ideal window of opportunity for those looking to stick their heads into cryptomarkets. According to Blockchain, one of the biggest and most secure wallets for Bitcoin, there is an aggregate number of 277,423 Bitcoin transactions performed within 24 hours. Furthermore, both market capitalizations show exponential growth while USD exchanges show huge trade volumes.
The numbers speak for themselves, for Bitcoin alone, there are about 3.2 transactions per second, if we divide the total number of transactions over the 24 hour period by the number of seconds. Furthermore, Bitcoin just represents one aspect of the cryptocurrency market. Alternatives such as Litecoin, Ethereum, and Monero have all gained significant traction over the past few years, underscoring the feasibility of investing in the creation of a cryptocurrency through ICO funding.
But the implementation of cryptocurrency like Bitcoin is technically sophisticated, so expertise is a significant barrier to entry. Credibility is also a difficult road to maneuver, as it took several years before Bitcoin could start to shed its associations with shady drug transactions and other illicit activities. Finally, because of the volatile market conditions, these currencies are prone to market fixation along with security breaches.
To properly market an ICO, you’ll need to have these three points – expertise, credibility, and security – clearly mapped out in your business plan. You’ll also need to invest a decent amount of energy into the education of your customer as part of a marketing and trust-building strategy. Let’s take a closer look at some of the intricacies of the cryptocurrency market and ICO funding.
Education: The Anatomy of an ICO
Framing and positioning your ICO campaign from an educational perspective should constitute a priority for your cryptocurrency debut. The majority of the public is familiar with what an IPO is because the terms of ownership stake in a company are less abstract and more intuitive. People understand why paying a company for a fractional ownership stake can have benefits for them and how that qualifies as a form of investment – the ICI reports that 55 million US households have investments in mutual funds.
While Bitcoin and other cryptocurrencies have certainly become more popular as well, most people do not understand the particulars of the subject and are really just amazed at the astronomical increase in value rather than the cryptocurrency itself. We can actually characterize and account for this pattern of behavior and adjust our own marketing and framing techniques to fit by emphasizing education.
If we consider cryptocurrencies to be part of the larger category of emerging technologies, then this pattern of interest follows the idea of Gartner’s published research on the “Hype Cycle”. This hype cycle’s distinct phases of interest can help us better understand our potential investors. There are several parts to the cycle: the innovation trigger, the peak of inflated expectations, disillusionment, and productivity.
It’s possible to argue that cryptocurrencies have two hype cycles occurring in parallel. One concerns the general concept of cryptocurrencies and the other relates to the promise of one particular cryptocurrency. For example, we can say that cryptocurrencies, in general, are experiencing a period of enlightenment where people both the phases of inflated expectations and disillusionment have passed, and now we are primarily left with people who are making genuine attempts to understand.
However, at the same time, there are hype cycles that individual cryptocurrencies generate because of the unique implementation of each cryptocurrency and due to variation in the credibility and the level of acceptance for separate cryptocurrencies. So, taking the hype cycle into account when you frame your ICO will be integral to a successful venture.
The next challenge to education is making sure people actually understand what an ICO is. An ICO stands for “Initial Coin Offering” and it is distinct from token selling. Trowbridge Sidoti LLP, a firm dealing with the analysis and reporting of cryptocurrency investments, notes that ICOs actually resemble IPOs in their exchange of ownership for funding: “The ‘coin’ in an ICO is a symbol of ownership interest in an enterprise—a digital stock certificate…”
In contrast, token selling involves giving investors earlier access to newer features that are to be implemented for the public at a later date rather than an ownership stake in the actual cryptocurrency project. The end of August 2017 saw a combined 89 ICO coin sales worth $1.1 billion in total, as reported by Bloomberg. This value eclipses the ICOs of the previous year, 2016, by about an order of magnitude.
While ICOs seem to be rising tremendously in popularity as a whole, it is important to make sure that your consumers have a healthy understanding of the meaning behind investing in a coin project and what they stand to gain as a means of controlling for risk. The immense popularity of ICOs and cryptocurrencies as of 2017 implies a greater degree of speculation, which aligns with the hype lifecycle of inflated expectations. Of course, your company will want to control the degree of speculation by responsibly informing its investors of the impact of their financial decisions.
As an example of why this step of education is significant, consider that the SEC has already started to step in when it comes to regulating ICOs. Coindesk reports that US Securities Laws may apply to token sales and that increased regulation may be in store for ICOs, with final determinations made on a case-by-case basis. The involvement of the government indicates that ICOs have achieved a comfortable scale, but it also highlights the requirement for risk-mitigation to prevent people from being scammed or misled.
So, the first thing you need to do is make sure the people engineering the technical aspects of your cryptocurrency are trustworthy and qualified. Expertise and education give rise to perceived legitimacy, and that’s the next topic we’re going to cover.
There is a vibrant community of Bitcoin enthusiasts that are familiar with the explicit implementation of the cryptocurrency and the details of what makes it tick. The technical documentation of a cryptocurrency is the foundation of its reputation and the credibility it will have going forward. For instance, Bitcoin’s blockchain might be considered its primary and pioneering innovation point because of how it meant that all payments could be traced to a work contribution made by a computer even if the clients were anonymous.
The SHA-256 implementation along with the comprehensive and exhaustive guides that Bitcoin sponsors explaining how its blockchain operates is an essential part of how Bitcoin attracts people and gets them invested in the learning about the currency and participating. By offering free information on the essential ways that transactions are made and verified, Bitcoin is able to raise the level of trust that their customers have through transparency. This is why technical expertise acts as a foundation for the concept of any cryptocurrency and by extension, any ICO.
To give you an idea of the complex and strong connection of technical documentation to the reputation of a currency, we can just look at how currencies with different implementation and mining methods attempt to either collaborate with or discredit each other in an attempt to gain a greater market share. A great example of how technical debates factor into the reputation of a cryptocurrency can be seen in the brief feud between Monero and Zcash.
Again, for your cryptocurrency to have marketable features, it needs to contribute something new, and Monero and Zcash were attempting to do in the privacy of their transactions. Steemit notes in a report that Monero provides anonymity through a ring signature system while Zcash is built on an entirely separate encryption system that emphasizes the full anonymity of transactions by only allowing the time of the transaction to be publicly available on its blockchain.
So how’s this technical implementation of anonymity relate to the reputation of both of these cryptocurrencies? Published as a study in arXiv, Miller et al. reported to have discovered two notable “weaknesses” in the technical implementation of features – the mixing sampling strategy – that secure Monero’s anonymity. If these claims were true, it had the potential to damage the appeal of anonymous transactions that functions as a central selling point of the cryptocurrency.
In an extensive and well-thought-out rebuttal, the Monero community actually published their own findings and contested some of the results of Miller and his colleagues. The community accepted some of the original paper’s findings but drew a clear line with perceived inaccuracies.
Surprisingly, this unofficial evaluation is very detailed and thorough, even going so far as to report that Andrew Miller, one of the primary authors of the paper, had a significant history and involvement with Zcash. This unspecified conflict of interest is a huge concern made clear by the sleuthing of the Monero community and helped to repudiate attempts to discredit the technical implementation of anonymity for transactions made with Monero.
In summary, technical expertise is the foundation for your cryptocurrency’s development and for marketing your ICO because (1) your coin needs to add new innovations if it is to capture a significant market share in the future and (2) your coin needs the support of a community in order to preserve its reputation, improve its existing methods, and to expand. The success of your ICO depends in part on the amount of planning and attention you devote during the inception and nascent stages of developing a cryptocurrency.
Aim to recruit people with a great amount of existing experience with developing and implementing the features of cryptocurrencies in the past, and sow the seeds for a community by having an official page that tracks the development of your coin so that others can understand, comment, and contribute to it. With a large enough community and with experts guiding the progress of your cryptocurrency, your coin will naturally lend itself to a better reputation and increased credibility.
Building Credibility and Reputation as a Newly Minted Cryptocurrency
The value of cryptocurrencies is literal representations of their owner’s confidence in the currency itself. Imagine if the inherent value of the dollar was pegged not to the authority and credibility of the U.S. government, but to the idea of a “dollar” itself. That’s while Bitcoin’s value is so volatile and sensitive to major events like security breaches.
Perhaps the best illustration of the association between a cryptocurrency’s credibility and its value manifests an early case concerning the security of Bitcoin. Towards the beginning of the 2010s, Bitcoin was experiencing a massive increase and inflation in value once it had become popularized, ballooning to almost $1000 at one point. While it pales in comparison to the price of a Bitcoin today, $1000 was a landmark value that showed people had a great amount of faith in the currency.
Then, Mt. Gox, a firm that handled about 70% of all Bitcoins in circulation at the time, was struck with a massive scandal in the middle of 2011. Due to a security breach, an astounding 850,000 Bitcoins, valued at around $450 million, vanished into thin air. Immediately, the value of Bitcoins plummeted faster than Icarus falling into the ocean from the enormous sell-off and loss of confidence in the security of the currency.
In short, people weren’t going to hold their money in Bitcoin if one of the biggest and most well-known brokers of the currency could just be robbed of the majority of its coins at any given time. There are key components to every cryptocurrency that justify its market value such as the degree of anonymity offered or the robustness of exchanges and wallets for that cryptocurrency.
Right now, the popular climate around Bitcoin and cryptocurrencies, in general, puts your business at an interesting crossroads with regard to the types of strategies it can select to build its credibility and reputation. You can go for a strategy that focuses on optimizing existing blockchain technologies or you can try to navigate new territory by creating a new implementation that promises more efficient payoffs between things such as the anonymity and efficiency of transactions.
Because of the relatively transparent and open source nature of cryptocurrencies, it’s actually possible for laypeople to create their own vanity coins using documentation like Bitclone (though this particular one is a bit decrepit). But if you’re looking to properly market an ICO, then you need to bring something new to the game with your currency. You need to either do something existing in a more efficient way or try to innovate a new feature for cryptocurrency that distinguishes it significantly from its competitors.
If you look at any of the major cryptocurrencies (those with a significant market cap), then you’ll usually find a good number of vocal supporters for the benefits of that coin and why they’ve chosen to invest in that particular cryptocurrency out of all the others. As a good example, one cryptocurrency that’s experiencing growth is Litecoin. The growing popularity of Litecoin is predicated on its speed and low transaction fees, which allows for its greater everyday usage.
While it is functioning as a complementary cryptocurrency to Bitcoin, Litecoin optimizes the features that certain users may find to be too bulky when it comes to Bitcoin’s implementation. Furthermore, there are updates on the horizon for new features that play into Litecoin’s pitch for convenience such as the atomic swap which allows for two different cryptocurrencies to be instantly exchanged. Some speculate that the increased feasibility of this feature has led to the recent, major price increase of Litecoin to $62 last month.
The relevance to marketing that we can scavenge from these cases is that the popularity of a cryptocurrency and the value assigned to it will depend on the inherent features of that currency. The markets usually reward stability when it comes to currencies issued by a government because the value of a currency lies in a government’s ability to pay back a debt.
Meanwhile, the market rewards innovation and efficiency when it comes to cryptocurrencies because of the technical basis of this currency system. In fact, one of the key features of most cryptocurrencies is the decentralization of the currency rather than its attribution to one particular entity.
Security of Your Cryptocurrency Transactions and ICO
Security has manifested as a major theme and determinant of a cryptocurrency’s worth several times during our discussion of what makes a cryptocurrency and its ICO marketable in the first place. By now, it should be apparent that no one wants to trade using a currency that doesn’t have sophisticated or far-reaching security measures in place. As any cryptocurrency’s value appreciates, the liability and risk for hacking attempts will increase proportionally.
Bitcoin hacking attempts are growing more advanced and more intelligent in their targeting every day, with the 2016 Bitfinex Security breach – which saw a loss of some $30 million – illustrating this trend. Increasingly, users are turning to methods such as two-factor authentication, multisignature, and cold storage in attempts to fully avert the consequences of hacking attempts.
This means that your cryptocurrency, as well as your ICO, must adapt to and offer the basic options of security that are accepted and practiced by the biggest cryptocurrency exchanges along with their respective wallets. For instance, if you were to launch an ICO but without offering a basic security strategy like two-factor authentication, then the success of your ICO would be limited since people would be more inclined to invest their money into coin projects that have greater security promises.
It’s important to remember that modern hackers are much more selective when it comes to who, when, and how they choose to hack, and that marking a date for your ICO means that you’re exposing yourself to a fair degree of risk already. Just consider the case of the cryptocurrency Enigma which was started by a group of MIT graduates. Right before their initial ICO, TechCrunch reported that hackers were able to successfully nab $500,000 through a combination of social engineering and technical methods.
Security breaches are deadly to smaller and newer cryptocurrencies because any budding confidence in that new coin will quickly transfer to some of the older alternatives if hackers manage to infiltrate into a key storage area or exchange and access a great number of coins. The perpetration of hacking attempts during or right before an ICO has a historical pattern as well – it impacts even the biggest cryptocurrencies. Ethereum lost $7 million on a CoinDesk ICO to a cryptocurrency heist according to Fortune, and another $8.4 million in the same month on the Veritaseum platform.
Given the heightened chance of hacking attempts during ICOs, your business should aim to anticipate and implement safeguards. Oftentimes, security measures are much more easily implemented than you might expect, as a lot of these major cryptocurrency losses during ICOs appear to be a result of oversights in the transaction process across multiple websites. After being hit with a $500,000 loss immediately prior to their ICO, Engima’s team came up with a few simple methods to avoid hacks by employing a multi-signature security check:
- Have a picture of the team initiating the ICO holding a piece of paper with the smart contract address on it.
- Have some sort of verified social proof, such as the confirmation public keys among involved parties using their Twitter account.
Taking these basic steps to secure your ICO by making sure there are no issues with oversight and being more discreet about the exact date of your ICO may allow you to reduce the risk of being targeted. As the number of ICOs increase and as investment markets for cryptocurrencies grow, you will want to ensure that you fulfill the tenets of expertise, credibility, and security to create the optimal conditions for your investors.