Why Legal Audits shouldn’t be underestimated for your IEO Project

 

IEO exchanges are more trustworthy than any other exchange program as the potential of projects is stated before the sale of tokens. When details are provided to the communities involved, the reputation of projects offering is safeguarded.

IEO is conducted on cryptocurrency exchange platforms where the process is administrated by the crypto exchange on the startup’s behalf that wants to raise funds from newly issued tokens. Token issuers have to pay a listing fee with sell percentage during IEO as the token sale is made on exchange platforms. When IEO is over, tokens are sold on the exchange platform in return. The exchange is mostly incentivized to initiate token marketing operations because cryptocurrency exchange charges a small percentage for the amount of token sold.

Legal audit and its importance in IEO

In every business, auditing plays an essential role, but no more than in ICO or IEO or STO. There are successful Initial Coin Offering companies said that they would bring in capital companies to order them so that we can get the element of legitimacy. With the help of auditing, the Initial Exchange Offering Services can serve as an important purpose in the most rating their commitment towards transparency in the market. There are several companies providing audit reporting services to the IEO by understanding their landscape and process.

Why Legal Audits shouldn't be underestimated for your IEO Project

• The IEO model is prone to fall under security regulations as the token grants access to a company’s product or service or means of payment. The hybrid model possesses the features of an investment instrument.
• The exchange acts as a broker and uses the platform to provide a market for entrepreneurs. The listing fee and commissions are offered on fundraising. The exchange uses the token immediately after IEO for secondary trading, speculation, and potential profit that attracts participation.
• The involved investors and companies belong to different parts of the world with different norms and different jurisdictions. Some countries allow fundraising events on platforms without even listing as a broker or shareholder.
• If a token is deemed transferable security, the issuer is requested to prospect the requirements in the jurisdiction in which the offer is conducted. In the European Union, the lowest amount for exemption from prospectus rules is EUR 1 million, which can differ in different jurisdictions.
• Local regulations of jurisdictions on the IEO platform regulate the onboarding of investors from different parts of the world. The financial elements are marketed to the public that triggers the regulatory approvals and licensing of the business. This is done keeping in mind the area and nature of business.

Auditing For An IEO Covers The Following Areas

Reviewing the structure of data protection governance working to ensure that the unit is in compliance with all the accurate regulations and data protection

• Also, the manual management of records along with the electronic management containing the personal information of the organization also gets covered
• Request regarding the sharing of the data, agreements with the third parties and the personal data
• The auditing process gets placed with the motive to ensure that adequate security has been held by the IEO to ensure adequate security.
• The financial records and distribution, along with verification of expenses and capital, are also covered under the legal audit for IEO Development Services.

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How Market Making Will Help You Gain Traction For Your ICO Token

 

Do you know why many successful ICO projects fail? The reason behind the failure is the lack of token liquidity. Even if you are successful in selling the tokens and raising funds, you need to make sure the tokens gain traction. And it can only happen if there is liquidity in the market for your tokens.

This doesn’t happen naturally as ICO tokens lack liquidity. You have to take some extra steps and put in extra effort to generate liquidity in order to gain traction for your token.

Most ICO project owners appoint market makers for this process. You can approach various companies for ICO Development Services. They will help you in selecting good market makers for your project.

Do you know who market makers are? If yes, you might know how important a role they play in creating liquidity in the market. If no, we can guide you. In this post, we will discuss about market making and show you how it will help you gain traction for your ICO token. So let’s begin.

What is Market Making?

Market making is a process in which the company hires market makers to create liquidity for their tokens in the crypto market. They create liquidity by trading the tokens in the market. They create a tight spread to increase liquidity. In this process, the market makers will buy a token at a lower price and sell at a slightly higher price to maintain spread. Spread = Ask price (selling price) – Bid price (buying price). The disparity betwixt the bid price and the asking price is the spread. Liquidity increases when the spread is tight, i.e., less difference. The market makers earn a profit on the spread.

Market makers are the ones who are involved in the market making process. There are many professional market makers who help to increase the token liquidity in the market. They will make a market for your token to perform. You can choose a good market maker for your ICO token. They usually charge fees for their service. Although they are involved in buying and selling tokens, they are not investors.

Example of Market Making:

Mr. A launched an ICO and appointed Market Makers B to create liquidity for the token. The current rate of the token is 50. Now the market maker B will quote a bid price of 45 and ask price of 55 for the same token. They will but the token for 45 and sell it for 55, thereby making a profit of 10. The spread will be 10. 

They will continue this way to increase the liquidity by the tight spread. When the spread is tight, the volume of trade will increase, creating more liquidity and making the token a hit in the market.

How is Market Making important to gain traction for the token?

Here we will show you how market-making helps to solve your ICO token’s liquidity issues and helps it to gain traction. Here are the benefits of market-making.

• Increased Liquidity:

As we have discussed above, the main advantage of market making is increased liquidity of token. If you appoint market makers, they will provide the token liquidity to the investors. This will help you gain more investors and increase more liquidity for your token in the market.

• Liquidity lures more investors:

When the spread is tight, there is a lesser risk. New investors are risk-averse; they will never invest in tokens with larger spreads. When the spread is tight, new investors will be attracted to the token. Your token will gain the attention of institutional investors. They are a sophisticated group of investors. These investors are healthy for your token. They will bring a certain reputation to your token.

• Liquidity cycle:

Once marketing making increases the liquidity for your token in the market, it will start a liquidity cycle. The token liquidity will bring more entries in the order book. This will further increase the liquidity for investors. Once the number of investors increases, the trading volume will increase. 

When there is a high trading volume, market makers will get involved for free. They make huge profits on trading volumes. This will help you negotiate with exchanges. You will get more power to launch another ICO project. So once the market makers start the liquidity cycle, the liquidity will remain in the market, even without paying the market makers.

• Token price increases:

When more and more people start investing in your token, the demand for your token will increase. And with higher demand, the price of the token will increase. It will increase the value of the token in the market. It will also increase the token trading volume. With an increase in volume, the profit will increase, which will further increase the demand for the token.

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What Are Smart Contracts And How It IS Related To Trading

 

Do you know what smart contracts are? If yes, you might know how it is being used in major sectors like Finance, Healthcare, Real Estate, Automobile, Supply Chain, and Management. Even the Government is planning to use it for elections. 

But it was first introduced in the crypto market. Do you know the technology behind crypto trading? The main technology is blockchain. But nowadays, trading platforms are using smart contracts to facilitate crypto trade. 

White label cryptocurrency exchange uses smart contracts to facilitate crypto trade. Do you know how ICO tokens are created and sold? It is done by using smart contracts. It is safe to say that smart contracts have become a very important part of the crypto market and crypto trading.

Many people still don’t have any idea about smart contracts. So in this post, we are going to help you understand what exactly smart contracts are. We are also going to discuss how it is reacted to trading in the crypto market.

Smart Contracts

In technical terms, it is a computer protocol. This protocol works like a contract. It is like a digital contract. Do you know how a contract works? In a contract, two parties agree to certain terms and conditions. Once these conditions are met, the contract is executed. 

Similarly, a smart contract is a computer program which works on the blockchain. Here the terms and conditions are written in codes. When the terms and conditions are fulfilled by both parties, the contract gets executed on its own. Once the contract is executed, it is updated across the blockchain network.

The idea was coined by Nick Szabo. He was a cryptographer. In 1994, he taught of using computer codes to write contracts and make it digital. However, it took 21 years for this idea to be implemented. In 2015, the first smart contract was developed. It was done by Vitalik Buterin. He is the founder of Ethereum. 

A smart contract basically can be understood with the help of these three terms.

• Agreement: It is an agreement between two parties. The agreement is in the form of a written code. It runs on the blockchain. These codes are stored in a public ledger, which everybody can see but cannot be changed.
• Processing: The blockchain network processes the transaction agreement. There is no third party or mediator involved. 
• Execution: Once the conditions of the contract are met, it gets executed automatically. There is no one to stop or intervene. 

If you still have doubts about smart contracts, this example will help you.

Example

You have conducted an ICO. The smart contract is made on Ethereum Blockchain. The smart contract will contain an agreement between you and the investors. Suppose you have 100,000 Tokens. Now, you want to raise 1,000,000 Ether, so you need to sell one token for 10 Ether. Now, you need to create a smart contract which will help you to transfer 1 Token for 10 Ether. The smart contract will look like,

“WHEN the investor pays 10 Ether to you, THEN he will get ownership of 1 token.”

As per the smart contract, when you receive 10 Ether from an investor, he will automatically receive one token. You don’t need to go to any lawyer to create an agreement. With smart contracts, you can develop your own contract. The mechanism behind smart contracts is simple. Once the terms and conditions of the contracts are met, it gets executed.

Smart Contracts and Crypto Trading

Nowadays, people are starting to use smart contracts for every sector and industry. But smart contracts are mostly used in the crypto world. Most of the white label crypto exchange software is developed using the smart contract and blockchain technology. After blockchain technology, it is the second most adopted technology. Here, we will show you how smart contracts are related to crypto trading.

Crowdfunding: We all are aware of the crypto crowdfunding technique. If you want to raise money for your business, the simplest way to so is by using crypto crowdfunding techniques like ICO, IEO, and STO. To do this, you need to smart contracts. You can start your own project using the blockchain technology. 

Now in order to raise funds, you need to choose a blockchain platform. Let’s assume you are raising the money through the Ethereum Platform. So first, you need to create a token and then a smart contract to sell the token to raise money. 

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A detailed guide on how to plan a road map for ICO

 

An ICO or initial coin offering is a new cryptocurrency system which can help the entrepreneurs to raise fund in the market. With the help of an ICO, investor brings new cryptocurrencies to market but at high risk. The company uses it as a way to raise money in the form of new coins, app or services. Interested people can buy these coins from the company and can invest in the cryptocurrency issued by them. This can be considered as a token and have some utility in using them. This requires an initial coin offering platform to be formed for creating a new cryptocurrency for new business. 

These ICOs are used generally by those who want to start their new business and wishes to offer some goods or service related to the cryptocurrency but these tokens cannot be considered as stocks as both have many differences. For investing in an ICO, it requires purchasing of digital currency and having some basic knowledge of using these cryptocurrencies. For this, you can take the help of ICO development services provided by different companies which can help you to raise a fund with cryptocurrencies safely.

How to plan a road map for ICO

An initial coin offering road map is usually a graphical representation of the platform that needs to be created to issue a cryptocurrency for a new startup. It includes presenting the project goal and plans in the form of a timeline using a clear and transparent chart. Also, launching an ICO is not an easy task. It is very time consuming and thus ICO launching companies can provide you ICO launching services to plan a road map for you making it an easier task.

To plan a road map for an initial coin offering, the following are some steps which can be followed

Step 1: start it with an idea

To start a new project it is essential to come up with an idea, think over it and make sure whether your project needs an initial coin offering or not. If you are starting a project and want it to be successful, you must offer an ICO solution in the market that no one can ever provide. For this purpose, you require to have a complete understanding of the competitors and the target audience in the market. Moreover, if you are thinking to fund your startup with an ICO, you will require its token. Also to make your token value high, it must need to be integrated with the start-up in a useful way.

Step 2: Know about your competitors

It is very essential to know about your competition and competitors if you are starting your new business. This is because one can think your business similar to any other business already existing in the market. So if you want investors to invest in your company, you will require a cryptocurrency integrated with your startup in a meaningful way. Competing for the money of the investors can make you stand out from the crowd.

Step 3: find out the legal sides of the things

ICOs are nowadays the most regulated thing in the country. This is because of the frauds and spams associated with it. That is why it is still a doubtful thing whether initial coin offering is legal, regulated or subject to any future regulations. For this, it is essential to pay much attention to their legal terms and legal regulation. This issue can be resolved by hiring a lawyer which has much experience in cryptocurrency.

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Detailed Analysis And Information On Margin-Leverage Engine

Consider a trade between a gold jeweler and Mr. Amit. Amit has entered into a contract with gold jeweler where he agrees to buy 10Kgs of gold at Rs. 3000/- per gram after a period of 3 months. But due to the recent COVID-19 crisis, the value of the gold rose to a very high level. This resulted in the loss of the gold jeweler and profit for Amit. Had it been the case that the jeweler disagreed to respect the contract, it would have been followed with a long and grueling legal case. To prevent such cases, a concept of margin came into existence. 

What is Margin?

Margin is the collateral taken from the exchange from the trader when he enters into a leveraged derivative contract. But what does leverage mean? It is a feature that enables the trader to take a position that is much larger than his/her capital. Say, to buy 1 Bitcoin for $5,000, a trader with a capital of $500 can borrow $4500 in margin trading. In this situation, the leverage of the trader is 10x.

What are the types of Margin?

Crypto derivatives trading platform has below mentioned margins

Initial Margin: It is the minimum amount required to enter a new position as well as the minimum amount needed to keep that position from getting liquidated. The initial margin varies from the price of the contract and depends on the position size.

A trader buys 6,000 BTCUSD contracts at 10,000 USD with 25x leverage.

Initial Margin = Quantity of Contracts / (Order Price × Leverage)

= 6,000/(10,000×25) 

= 0.024 BTC

Maintenance Margin: It is the amount that will assist the trader to hold his/her positions. The moment the cash balance falls below the maintenance margin, the exchange will ask you to deposit more money or else it will trigger the liquidation. That means the exchange will force themselves to close the positions on their own.

A trader buys 6,000 BTCUSD contracts at 10,000 USD with 25x leverage.

The maintenance margin used for this position is:

Maintenance Margin = (Quantity of Contracts / Order Price) × Maintenance Margin Rate

= (6,000/10,000)×0.5% 

= 0.003 BTC

Initial Margin = 6,000/(10,000*25)

= 0.024 BTC

This means that this position may have an unrealized loss of up to 0.021 BTC (0.024 BTC – 0.003 BTC) before the occurrence of liquidation

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Launching an STO – A Comprehensive Guide

 

The blockchain is a core technique when it comes to supporting crypto assets like Bitcoin, Ether, security tokens and utility tokens. These crypto-assets have an enormous capacity to bring a complete transformation in the financial services marketplace. Many people are already familiar with utility tokens, and the security tokens are relatively novel concept. In this post, we shall elucidate the launching process of an STO.

A token, when subjected to federal security regulations, is known as a security token. Such tokens can derive its valuation from other external and tradable assets. Some of the examples of security tokens are equity tokens, debt tokens, utility and asset-backed tokens.

How to Launch Security Token Offering?

The STO Launching Process can be bifurcated into the following stages:

1. Preparation
2. Pre-STO
3. STO for investors
4. Post-STO

Stage 1: Preparation

1. Coming up with an idea for the security token and consulting a legal advisor and deciding the modus operandi for the token to gain value. The token’s value can be determined through the three principles:

• Role
• Purpose
• Feature

Every role defined for the token has a specified purpose against which the features can be apprehended depending on the need of the business.

2. The regulations to be followed in the process of creating a security token. For the token to be considered as a security token, it must qualify the Howey Test determined by the US Supreme Court. Howey test can be segmented as 3 independent criteria that must be fulfilled for creating a security token. They are:

• An investment of capital
• In the identical enterprise
• With the expectation of profits from the struggles of others.

If not, then the token will be deemed as a utility token. The regulations for the security token in diverse for every country. The issuer will have to adhere to the legislation of the respective countries in which he plans to issue the tokens.

3. The next step is selecting the correct security token platform. Security tokens require unique infrastructure and a new approach. It is a cumbersome process; therefore, you need to have a piece of thorough knowledge about the security issuance platforms. 

Given below is the list of the top security token platforms to launch an STO.

• Polymath
• Harbor
• Securitize
• Securrency
• Swarm

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Things to be Included in a Project Road map

 It can be said without a hint of doubt that cryptocurrency has been receiving a lot of market attention these days. Cryptocurrency is a phenomenon, especially with an unexpected subsequent crackdown on the ventures and crypto exchanges in the domain. It has been duly observed that many companies have begun to fathom the probabilities of their applications in multiple sectors. 

Finally, Blockchain technology has started gaining the recognition it rightly deserves. Due to this, having a cryptocurrency based project is gaining popularity amongst many companies. Many companies today dream of creating such cryptocurrency-based projects and accumulate offerings from the public for the execution of the project. They wish to create an Initial Coin Offering (ICO), Initial Exchange Offering (IEO), or Security Token Offering (STO).

Several ICOs failed over a period of time, not because they were scams, some had excellent plans and visions. These projects succumbed as many critical aspects of the ICOs were overlooked. However, many agencies provide ICO software development and ico development services to promise a smooth transition through the process.

Launching STOs (Security Token Offerings) is slightly complicated. You require a substantial understanding of the legislation dictating STOs with proper and equipped employees to manage assent with the Security Exchange Commission (SEC). Designing a smart-contract model for a security token requires much scrutiny; otherwise, the authority debunks it. SEC has criteria that must be comprehended and requisites for each security token. You must examine these rules very thoroughly and ensure to learn them. This knowledge will assist you in understanding what skill sets you are watching for in a developer and your legal team. STO Development Services and STO Consulting Services can be availed for better working of the project.

For IEOs (Initial Exchange Offerings), the accumulation of funds is done by a crypto exchange. This can be very easy as you do not require to establish a crowd sale website. In addition, the exchange that will offer the IEO will carry due diligence on your project and team members. This is done to protect the reliability of the exchange. Launching an IEO is almost the equivalent of launching an ICO, the important distinction being the method of acquisition of funds, which is through a crypto exchange in IEO’s situation. You need to watch out for a fitting exchange to launch your IEO. You might contemplate using multiple exchanges or utilizing a mix of IEO and ICO. Many agencies nowadays provide ieo development services and IEO Launch services to the issuers so that they can concentrate on the core operations.

Process for ICO Launchpad

Step 1: Pre-ICO Validation

Every project begins with an idea; it needs to be validated and converted into a plan for it to be implemented. To ensure that the plan succeeds it must have a proper ICO Planning, knowledge of token model and economy, custom business model, initial project audit, analysis of product validation, a perfect pitch deck and Social Community Build-up for investors, market analysis and setting up of a team.

Step 2: Legal Audit

No one wants to be engrossed in legal matters, especially with the changing dynamics of the market. A legal audit is a must to review the Corporate Structure and Governance. Also, to draft the necessary documents and follow the compliances diligently.

Step 3: ICO Marketing

Marketing is essential in helping the product reach its target audience. It will help the ICO campaign reach to the masses. Comprehensive marketing would incorporate a Roadmap & Marketing Strategy. It will be necessary for tapping Brand, Web, and Social Media Expertise, Bounty Programs, Airdrops, Digital Marketing, Community Management, and Roadshows so that all the mediums of marketing are covered.

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