Eternity Law International News Issue of cryptocurrencies (tokens)

Issue of cryptocurrencies (tokens)

March 30, 2021

ICOCryptocurrency startups and developers are regularly faced with the challenge of issuing a cryptocurrency. In addition, we need to ensure the initial placement and withdrawal of the cryptocurrency to the exchange. In the opinion of many, this is a very simple matter, and all that is required is only the experience of the programmers. In fact, most of the issued cryptocurrencies are doomed to failure in advance – the funds spent on their creation will not pay off. The development of a successful cryptocurrency project requires the participation of a team of specialists of different profiles.

Stages of project implementation

  • Development of White paper and the concept of the project itself. The creation of a new cryptocurrency begins with the fact that specialists carefully work out its concept. The white paper contains a detailed description of your idea, designed to convince investors of the potential continuous growth in demand for tokens or coins. This document takes the longest to prepare and is subject to scrupulous checking.
  • Financial and legal aspects of cryptocurrency. The formation of the legal basis of the crypto coin is one of the most important stages of development, since in the future it will help to avoid all sorts of problems with regulatory bodies, in particular, prosecution of the SEC or initiation of a criminal case.
  • Technological side of cryptocurrency. At this stage, the development of technological infrastructure, a wallet for coins, an engine, a personal account and a promo site takes place. Here, first, it is necessary to decide the following: will the coin have its own blockchain or will it be based on the blockchain of some well-known coin, for example, Ethereum.
  • Initial placement of cryptocurrency, ICO, IEO. At this stage, the initial presentation and offer of tokens or coins to investors takes place. Initially, ICO means the development of an account for potential investors and the costs of marketing campaigns to attract them. This is the creation of a blog on the site and the development of social channels, in particular, well-known social platforms – Facebook, Telegram and others. The amount of fees depends precisely on the skillful use of marketing. Bounty campaigns also contribute to the successful development and listing of cryptocurrencies.
  • Market making and withdrawal of cryptocurrency to the exchange. One of the main engines for the successful promotion of your cryptocurrency is the presence of 2 or 3 exchanges. Initially, trades may be rather sluggish, or they may not exist at all. Then the company turns to a market maker.

Financial and legal aspects of cryptocurrency issuance

Countriesэ financial regulators seeking to streamline the cryptocurrency space have created their own regulations that classify cryptocurrency assets – the US Securities and Exchange Commission, the UK Financial Conduct Authority, and the Swiss financial market oversight agency. Although there are some discrepancies in the terminology of these guides, they distinguish 3 types of cryptocurrency:

  1. Exchange tokens (FCA)/Payment tokens (FINMA) / Coins (SEC). In most spaces, they are called coins, coins, or payment tokens. These are cryptocurrencies in the classical sense, having their own blockchain. Some countries have already recognized them as means of payment, while others quote them only as digital assets; however, nowhere are they classified as securities. The issue of coins also does not need to be registered. This type does not provide for the receipt of income or the rights of the holders of shares, but is intended for payments.
  2. Utility tokens. You can hear about them as service or utility tokens. They are tokens that provide access to an application or service. Often they are only active within the framework of the crypto project that issued them. Utility tokens are similar to the virtual currency used in social networks or games. They differ from the latter in that the price for them is set by supply and demand in the market, and not by the issuer.
  3. Security tokens (SEC, FCA)/Asset tokens (FINMA). They are called asset tokens, stock tokens, or investment tokens. The owner of this cryptocurrency can apply for participation in the management of profits or for its distribution. This type of token has the property of securities, and most Western countries rate the unregistered issue of shares and their sale as a serious financial crime. Registration of the issue of this type of tokens is a rather troublesome and long process.

SEC regulations for crypto owners

If you issue tokens in the United States or intended for their market, you should be ready for the fact that you will come under the control and regulation of the Securities and Exchange Commission. Over the past year, more than one company has been embroiled in litigation with the SEC. A well-formed concept and knowledge of the specifics of each jurisdiction will protect you from future troubles.

Cryptocurrency issuance mechanism

Coin – a cryptocurrency based on its own blockchain.

A coin or coin is a cryptocurrency that is created from scratch and has its own blockchain, or it can be developed based on a fork of an already active cryptocurrency, for example, Ethereum or the popular Bitcoin. In order to support your own protocol, you need nodes. Sometimes there is another term – altcoin, that is, an alternative coin. Any coin other than Bitcoin has this name until 2011, which is the only cryptocurrency based on blockchain technology.

In order to create a cryptocurrency, our developers take the source code, make the appropriate changes to it, and compile it. The standard process for developing a cryptocurrency is usually the following:

  • compilation of Linux/Windows wallet and coin kernel;
  • implementation of the deployment of two primary nodes;
  • creation of a mining pool and block explorer;
  • compilation of a mobile wallet for Android or iOS.

Service or investment token.

The token stands out in that it does not have its own blockchain and nodes, but is based on the blockchain of an existing cryptocurrency. In most cases, tokens are created on the Ethereum blockchain. Although the tokens are intended to be used as a local currency or as a means of access to applications or services, the first investors buy up tokens for subsequent resale. Creating your own token requires the formation of a smart contract and its installation on the blockchain.

You should pay attention to such an important feature of tokens on Ethereum as the network commission, which costs a certain amount of ether and is charged for any transactions, including the transfer of tokens from one wallet to another. Therefore, to make a transfer, the sender must have both unique tokens and ETH coins in the wallet, which is not very convenient.

Development of cryptocurrency website

You will need to create a cryptocurrency website, which will concisely provide information about your project, intended for investors. As a rule, this is a one-page structure, easy to read and not overloaded with unnecessary information. The main language of the site is English, however, in addition to it, you can translate into about 5 of the most common languages ​​in the world. Usually the following is posted on the site:

  • White paper and general information about the project.
  • A team of specialists involved in the development of the project. The amount of funds that you manage to collect directly depends on the professionalism of the development team. Usually, 4-6 key specialists are indicated.
  • Presence on social platforms. At a minimum, you need a blog on the site, accounts in Telegram, Facebook and other networks.
  • Personal account and wallets. It is good for any cryptocurrency to have an online, mobile and desktop wallet.
  • Exchanges. The site provides a list of open markets and exchanges where this cryptocurrency is available for purchase.

ICO of cryptocurrencies

Initial Coin Offering is the initial presentation of tokens or coins to investors. In other words, it is the release of a certain number of tokens or coins in an attempt to convince potential investors to buy them for more liquid funds – ether or bitcoins – at the rate set by the creators.

Brining cryptocurrency to the exchange

After the release of the cryptocurrency is carried out and part of it is sold through your website, it is necessary to attract new investors and traders in order to spread the novelty among the audience and provide people with the opportunity to trade your cryptocurrency among themselves. This requires a listing on the exchange. Before placing your cryptocurrency, you will need to go through the following procedures:

  • withdraw the coin to various communication channels like Twitter and Facebook. The coin must have a community;
  • you have to pay a certain fee for listing, and it varies depending on how well-known the exchange is. The cost can range from 1 to 500 thousand dollars from little-known and well-known exchanges, respectively.
  • the project must have a technical team that can handle the integration.

Initial public offering – IEO

Since 2019, the market has been dominated by the Initial Exchange Offering model. ICO and listing remained, however, a certain alternative model has appeared for those who create cryptocurrency and launch it on the market. IEO is a hybrid of listing and ICO. This is a token sale that is not carried out directly on the exchange. All you need to do is enter into a partnership with a suitable crypto exchange. This model has many of the following advantages:

  • it is possible not to post the investor cabinet on the project website;
  • the crypto exchange has a formed user base, which accepts all its offers loyally;
  • investors and traders want to have time to buy a new crypto coin, which has already been tested by the exchange;
  • the crypto exchange is trying in every possible way to promote its cryptocurrencies by placing announcements, which will speed up the process of entering the market and catalyze sales.

In addition to IEO and ICO, a number of other solutions were created that contribute to the spread of cryptocurrencies, in particular, Initial Airdrop Offering (IAO), Initial Miner Offering (IMO), Security Token Offering (STO) and others.

Our experts are ready to help you create your own cryptocurrency and bring it to the market. We guarantee you a quality product, professional support throughout the entire cryptocurrency promotion procedure and a successful result. For advice, please contact us.

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