Hard Cap And Soft Cap In ICO: What Conditions To Check Before Investments
Before starting the ICO its creators as usual set limits on the dates and amounts the planned fundraising.
Hard Cap And Soft Cap Concepts
To determine the stage of crowdsale success as a rule to use two terms: Hard Cap and Soft Cap. Soft Cap is the minimum amount necessary to implement the planned tasks of the blockchain project, and the Hard Cap is the maximum required to implement all goals.
So, if process of crowdsale is correct, the surplus Hard Cap, received after the finish of the round, is returned to investors. A striking example is the Brave browser, whose BAT token attracted $ 35 million in 30 seconds. Brave set a goal and successfully fulfilled it, - the project received the desired funding, and then was able to fully implement the plan.
There are also projects that ignore the need to establish limits on the collection of funds for the development of their project. "Unlimited" ICO attracts as much as the investors are willing to invest in a product. Among them, for example, Tezos, attracted $ 232 million. Currently, this is one of the largest ICO.
Advantages of unlimited ICO are that the team can get more means for realization a job while tokens of the project are received by bigger number of investors. Shortcomings that the cost of tokens can be much lower, than at start of the limited ICO.
So, Hard Cap and Soft Cap are goals for raising funds during the ICO rounds. Hard Cap is the absolute maximum that the team intends to attract, while Soft Cap, as a rule, is the minimum limit of raised funds. If the project was not able to collect the minimum amount of investment, then such a startup, as a rule, is not interesting for investors. The real example is BeautiQ token BTQ, in ICO which was collected only $ 59 but planned $ 576,000.
What To Pay Attention To?
For investors important that projects Soft Cap and Hard Cap had a basis. It involves justification of costs: staff costs, infrastructure, office fees, etc.
With regard to fundraising, first of all, we should pay attention to the amount of attracted investments during the ICO. Investment conditions describes in the project's whitepaper, therefore, it is this technical document that should be studied before investing.
Also whitepaper provides information about the goals and tasks of the team behind the ICO, which it plans to implement at the completion of the crowdsale.
The main attention should be paid to the idea a blockchain project, to the information about team, the mechanism of ICO, the scheme tokens distribution.
One of the key aspects of evaluating a blockchain startup is offering coins on the market. This is one of the factors determining the cryptocurrency market capitalization. Therefore it is important to understand how many coins will be extracted, and how. Usually, the mining of new cryptocurrency is a fairly easy process, and it is the low level of mining complexity that gives incentives to potential miners to show interest in it. As the demand for a coin increases, the reward for mining begins to decline, while the complexity, on the contrary, increases.
Recently, ICO has become a very popular type of fundraising for projects development. And this is not surprising, since this type of financing easily helps startups to raise investments, while investors can increase capital in a relatively short time.
To select ICO, interested persons in their participation prefer to search for them using ICO-trackers (www.icotracker.net, www.tokenmarket.net, etc.), rating agencies (www.icorating.com), or independently search for projects (the most time-consuming and unprofitable method).
These resources provide investors with detailed information on upcoming projects and help determine the choice. In addition, they often classify projects in accordance with risks.
Perhaps you will find that the best option for studying ICO is the whitepaper - and this is so. But specialized resources can provide large amounts of information about several ICOs, providing the right to choose when eliminating the need for monitoring ICO sites and with the most important and useful information about the project.
While the year 2017 was memorable for incredible amounts of investment in the ICO, collecting millions in a few minutes, in 2018 the situation has changed extremely. Today, investments in the ICO have reached 16 monthly lows, and the number of unpromising projects has increased dramatically. Now interested parties carefully study and analyze ICO-projects and only after investing in them. And this is correct, because only unique ideas can bring profit in the future, and also help the project realize all its tasks and promises to the community.