What is an ICO?
An ICO (Initial Coin Offering) is a token presale where a project sells a portion of its supply to early supporters in exchange for capital. It helps validate demand, fund development, and bootstrap a community before the token lists on an exchange.
Sale Types
- Private Sale → strategic, often early‑stage investors (larger discount, limited allocation).
- Public Sale → open to the broader community for participation and momentum.
Expert insight: Founders should typically run a private sale first to secure seed funding and strategic partners, then a public sale to expand community reach and distribution.
Soft Cap vs Hard Cap
- Soft Cap = minimum raise for viability. If not reached → refunds to investors (transparency and accountability).
- Hard Cap = maximum raise to prevent dilution and signal a clear financial plan.
Vesting vs Non‑Vesting
- Non‑Vesting → tokens delivered at once → high dump risk.
- Vesting → tokens released over time (e.g., 20% at TGE, the rest monthly).
Benefits: stabilizes price, shows seriousness, and protects investors.
Personal note: I’ve seen projects lose ~70% of market cap within 24h because they skipped vesting.
Overflow Method
If total contributions exceed the hard cap, investors receive proportional refunds. This improves fairness and prevents whales from taking the entire allocation.
Other Important Parameters
- Time limits → create urgency and protect investors (campaigns shouldn’t run indefinitely).
- Min buy / Max buy → ensure accessibility and fairness.
Whitelist
A whitelist lets you control who can participate in the sale. It protects investors and improves execution quality by gating access to verified wallets and staged cohorts.
- Eligibility & compliance: apply KYC/AML checks and jurisdiction filters before participation.
- Fair access: limit bots and scalpers, enforce per‑wallet caps, and allocate guaranteed spots.
- Staged participation: allow partners/VIPs first, then open for the broader community.
- Operational stability: smooth traffic spikes and reduce failed transactions for a better UX.
- Community building: reward early supporters and ambassadors with priority access.
Decentralization Principles
- Multisig for funds: route raised capital to a multisignature wallet (e.g., 2/3 or 3/5) for shared control and reduced key risk.
- Deterministic token receipt: define a clear formula so contributors know the exact tokens they receive.
tokensReceived = contributionAmount / tokenPrice if overflow_enabled: effectiveContribution = contributionAmount * (hardCap / totalContributions) tokensReceived = effectiveContribution / tokenPrice
- Auto-burn unsold tokens: after the sale, burn any remaining allocation to protect scarcity and price integrity.
- Auto-add liquidity: programmatically pair a portion of raised funds with tokens and add LP on a DEX, then optionally lock LP tokens.
Deploy the token first
Deploying the token contract before the sale increases transparency and reduces execution risk. It lets the community verify supply, ownership, and allocations on‑chain ahead of time.
- Transparency: publish the token address early so holders can inspect code, total supply, decimals, and admin roles (or renounced ownership where appropriate).
- Pre‑allocation: mint/allocate to verifiable wallets (team, treasury, LP, rewards) and disclose addresses publicly.
- Distribute & lock: set up vesting/timelock contracts to distribute investor tokens over time and lock team/treasury allocations.
- Operational readiness: prepare metadata, explorer verification, and DEX listing/LP plans prior to the sale.
- Risk reduction: avoid last‑minute contract changes and demonstrate good faith to the community.
Recommended Tokenomics for an IDO
- 10–15% → Public Sale
- 5–10% → Private Sale
- 20–30% → Liquidity & Rewards
- 20–25% → Team (with strict vesting)
- 20–30% → Treasury / Ecosystem Growth
Note: Distribution varies by project, but a balanced model avoids excessive centralization.
Common Mistakes I’ve Seen
- Lack of an audit‑ready smart contract → loss of trust.
- Unrealistic hard caps → looks like a scam or incompetence.
- Poor vesting design → immediate dump.
- Complicated UI/UX → investors abandon the flow.
- Low transparency on progress → community panic.