Four years after Bitcoin went live in 2009 with a mining reward of 50 bitcoins, J.R Willet launched the internet’s first initial coin offering (ICO), for Mastercoin (now called Omni). The project is noted for its white paper, which proposed a way to improve ICO UX.
This modification allowed for higher level protocols for contractions and new currencies. ICOs would no longer have to create a new blockchain, new protocols, or new rules.
Willet coined the term “ICO” in 2012 and launched the first initial coin offering in 2013 with the launch of Omni. A bounty system was set up with a prize share of 180 BTC (bitcoins) and was paid out to five developers. This greatly improved Mastercoin’s accessibility, resulting in:
- The development of a distributed exchange
- UX improvements to the official Mastercoin website.
The ICO floodgates opened soon after, with over 200 ICOs crowd sales in 2017 and over $5 billion USD raised. Coinbase reports that the first 3 months of 2018 ICOs has raised over $6 billion, at a fraction of the volume of competing ICOs (59% of 2017 total sum).
Blockchain applications are starting to reshape the financial ecosystem, with ICOs putting more power in the hands of entrepreneurs. However, economic disruptions bring a high level of uncertainty, and not all decision-makers are ready to take on the new challenges that come with ICOs.
In this guide, we discuss the basics of ICOs, as well as UX and design strategies for ICO companies to break adoption barriers.
What is an ICO?
Bitcoin Magazine describes an Initial Coin Offering (ICO) as a “fundraising mechanism in which new projects sell their underlying crypto tokens”. Sometimes blockchain companies refer to call this process a Token Generation Event (TGE). Companies initiate ICO with the intent of raising cryptocurrency to develop a cryptocurrency blockchain app while rewarding early investors with free tokens for their support.
ICOs are not to be confused with Initial Public Offerings (IPO), which enable shareholding to be publicly distributed through underwriters, or investment banks when a company goes public with selling their stocks. The main differentiator between the two is that IPOs offer rewards in the form of profit dividends by shareholding, and ICOs offer their crypto tokens as a form in return for investments in the project.
Stages of an ICO
An ICO isn’t a static entity or a fixed process that proves successful for every type of blockchain coin release. The blockchain project that hopes to raise funds via pre-sale token purchases progresses through a life cycle of stages.
Each stage provides an opportunity to add new value while revealing risks while giving investors insight into the performance of the initial coin offering. An intuitive ICO user experience (UX) depends on clearly educating potential investors on how ICOs work, what they gain (or risk) by investing in your project and by providing transparency into the health of the initial coin offering and project status.
The main components of an ICO are:
These stages can be broken down further into pre-announcement actions, market research, and offer preparation.
A token white paper is usually drafted while the team is established, design or development partnerships are formed, and the scope of funds necessary to make the raise successful is determined.
ICO Offer Preparation consists of:
- Market Research
- Coin Value Proposition
- Technical Specifications
- Use Cases
- Pre-ICO Preliminary Investments
- ICO Conditions for Investments
- Development Roadmap
- Financial Projects
- Team and Advisory Board
Issues with ICOs
A July 2018 Bloomberg report on CryptoAsset Market Coverage Initiation demonstrates that while half of all crypto assets are either classified as security or utility tokens, 90% of value is in coins, while tokens have a 4x velocity when compared to coins. Digging deeper, the report reveals that out of the $8 Billion USD raised, $6.6 Billion USD funded successful ICOs, with approximately 1/10th of all ICO fundraising going to scams. To soothe alarmists, it’s important to note that $1.2 Billion lost to fraudulent projects went to three ICO fraud projects that are facing SEC regulatory action.
Similar to IPOs that offer bonds and shares, blockchain projects go through ICO also request fundraising from investors.
Two major hurdles that block ICO fundraising efforts are:
- Establishing credibility
- Working with potential government regulation
Investors want to know exactly what they’re putting their money into and when they will receive ROI. If a project isn’t trusted or if it potentially won’t comply with SEC regulations, an investor will be hesitant to fund it.
Transparency in developmental timelines and funding allocation is one way for ICO companies to ensure they stay aligned with their original goals while also keeping investors in the loop.
Public timelines are another solution, so long as the ICO is confident it can keep up with the project’s goals and expectations.
Because blockchain is still a new technology, the legalities surrounding ICOs are blurry. The U.S. Securities and Exchange Commission (SEC) has yet to fully define the framework for ICOs to be considered security offerings, which can lead to lawsuits if an alleged security offering isn’t properly registered. ICO companies will want to seek legal consultation to avoid potential legal issues.
Creating an ICO UX with an Agency
We touched on credibility as a major pain point for ICOs. Lack of credibility can come in the form of unprofessional branding or products without a true value proposition. Design agencies are fantastic resources for ICO companies looking to boost the performance of their product.
Developing an ICO Project
Entrepreneurs looking to create an ICO project solely for the sake of following the crypto craze will fall flat. ICOs must demonstrate a clear value that will intrigue potential users and investors. Few investors will want to invest in an Ethereum clone unless there are significant improvements to the original.
There are several ways that working with an agency can help develop a successful ICO UX:
- Creating a strong first impression
- Defining value propositions
- Progressing through the ICO roadmap
Development is the meat and potatoes of an ICO, so it’s important to get it right the first time around. Creating a strong ICO UX is necessary for companies looking to progress through the stages into finalization.
Some components of an ICO that can benefit from a partnership with an agency with strong experience in blockchain design are:
- Wireframes and UI
- Branding and Copy
- Subscription and Contact Forms
- ICO Roadmap
- Team bios and about us
- Press releases and In-the-News
- Product Description
- Social Media Links
- Project Assets
- Display of White Paper
- Partners and Affiliations
- ICO Progress Updates
ICO Blockchain Project
- User Interface
- User Experience
- Front-end Design
Front end design blends programming, visual aesthetic, and crafting a pleasurable experience for users interacting with the blockchain platform, tool, application, or wallet. Hi-fi wireframes, user research, and structuring of onboarding, behavior, and critical paths to the value your blockchain product provides.
Agencies that specialize in development only are familiar with taking concepts and turning them into highly technical products that meet the requirements for release. They also can identify areas for innovation based on past proven models of success. Innovation studios, like Jakt, combine an expertise in the technical aspects of digital product and blockchain development with design expertise focused on solving problems in UX and Usability in order to create or improve UI and UX for beautiful experiences that run on a blockchain.
It never hurts to bring in new perspectives with a design-for-blockchain experience, especially when committing to an ICO.
Marketing an ICO Project
Crowdsourced fundraising does not hinge entirely on the disruption value of a project or the accolades of the founding team. Language and design elements potential investors first encounter when exploring your project can play a deciding factor in acquiring and retaining potential investor’s attention and project loyalty.
Think about it from an investor’s perspective- who are you more likely to trust?
- Company A: an ICO with inconsistent messaging, basic website, and an unclear value proposition of the product offering
- Company B: an ICO with a well-constructed marketing website, solid branding, consistent messaging, impactful visualizations, and frequent updates from the development team?
Our bet is that you chose Company B. You know the true value of your ICO, and partnering with an agency can allow you to translate what you inherently value about your project into a website and marketing campaign that provides the visibility and reputation your ICO needs to succeed.
Marketing an ICO is a tough job, especially as more blockchain projects are starting to saturate the space. The initial novelty of ICOs is beginning to wear off, and an ICO needs to stand out to gain attention.
- Competitor Evaluation
- Ethnographic Research
- ICO Marketing Website
- Advertising Strategy
- Token Sales System
ICO marketing campaigns depend on reputation and visibility. It is unfortunate to stumble across ICOs that fail because their marketing efforts fall short.
Marketer Dr. Jeffrey Lant’s Rule of Seven states that buyers need to see a product at least seven times before committing to a purchase. Partnering with an agency helps ICOs continually reach the right audiences through branding, marketing website design, and advertising strategies.
These processes involve:
- Email subscriptions
- SEO strategies
- Bounty campaigns
- Event planning and promotion
- Press releases
An ICO can reach investors, but it won’t generate interest or convert awareness into investment unless the initial coin offering can convey a clear opportunity to either make a return on investment. What’s more, the ICO UX must be top-notch. Investors will steer clear from ICOS with poor functionality and unapproachable layouts.
Agencies know when an ICO needs to scrap the jargon and when it’s appropriate to be more technical. They also have experience building ICO UX strategies to deliver high-quality products.
Partnering with an agency creates an ICO UX that has:
- Strong design and consistent branding
- An informative and appealing marketing website
- Advertising campaigns that garner excitement
The above qualities create a sense of professionalism. Investors and users can’t trust that an ICO UX will be intuitive if its front end resources are a mess. Luckily, agencies specialize in branding and messaging techniques to compliment the ICO UX.
Examples of ICOs
Wondering what makes an ICO UX successful? Below are examples of ICOs that deliver a great UX and made smart, targetted marketing decisions.
Ethereum is a distributed computing platform that makes use of smart contracts to automate processes. When in ICO, it appealed to investors and techies alike because it was one of the first of its kind.
Ethereum clearly conveyed the value of investment in the smart contract and protocol blockchain. It also delivered an intuitive ICO UX by following principals of design. The first 12 hours of the pre-sale of the Ethereum token, Ether, raised 3,700 bitcoins in 42 days.
Storj is a blockchain-based encrypted cloud storage solution. While similar solutions had already graced the decentralized stage, people gravitated towards Storj because of its simplicity and ease-of-use. Investors and users appreciated the simple ICO UX amidst a crowd of clunky blockchain apps.
Next Steps for Companies in ICO
Companies considering an ICO want to push their product over the finish line as quickly as possible. Because agencies can provide well-rounded support, a partnership is the smartest route for ICO companies looking to get the most value out of a budget.
An agency has the resources to create a strong ICO UX with:
- Developmental support
- Branding and design
- Marketing strategy
- Investment reporting
Blockchain is a complex technology with high technical barriers. Apps running on blockchain require more work than regular apps on the development side. Onboarding is a typical issue that blockchain apps face due to those usability issues baring adoption.
ICO UX relating to project visibility, positioning project value, branding, and promotion need to be exceptional. Agencies ensure that blockchain ICO websites and front-end interfaces don’t just meet technical requirements, but also look beautiful and feel good to use (or invest money in).
If you’re looking to develop a blockchain app, want to strengthen your ICO brand, or need help planning out an intuitive ICO UX strategy, reach out to our team of advisors, designers, and developers.