Most ICOs are comprised of a core project team which is responsible for leading the project. However, very often, an ICO will also incorporate an advisory board whose members, whilst not having an active role in the project’s execution, will nonetheless provide legal, technical and industry guidance where needed.
In practice, advisory boards are assembled by large-scale ICOs to on-board known industry faces as project figureheads with established reputations in order to reassure potential investors of both the credibility and viability of the project.
The lack of a strong advisory board, whilst not necessarily a concern in and of itself, generally indicates a higher level of project risk.
Bitcoin is the original blockchain cryptocurrency, released by Satoshi Nakamoto in 2009. It is also commonly referred to by its acronym, BTC. Many ICOs accept contributions in BTC.
A decentralised database, or distributed ledger, that is composed of a series of blocks of data that have been chained together chronologically. Each block generally stores a list (of transactions, for example) that have been verified by a consensus mechanism among network participants before the data
itself is committed to the Blockchain.
Publicly consultable record of all transactions related to a given crypto-currency. A blockchain explorer generally lists every single historical transaction related to the currency.
For platforms like Ethereum, for example, which also host smart contracts, the blockchain explorer generally provides information relating to the results that arise on the back of transactions that have been enacted through smart contracts.
Most ICOs offer early investors discounts or bonus rates for taking part in the sale. For example, an ICO that is planning to emit token XYZ may advertise its token for general sale at a rate of 1 ETH = 100 XYZ. To entice early investors, it may offer a 5% bonus rate (i.e. 1 ETH = 105 XYZ) instead.
You may generally find that more promising, or at least more in-demand, ICOs tend to offer smaller or no bonuses at all.
COIN BURN / TOKEN BURN
The entity or community behind an ICO may seek to destroy a certain quantity of tokens on a permanent basis.
Frequently referred to as ‘coin burn’, the process is commonly witnessed at the end of an ICO sale period when unsold tokens are destroyed in order to limit supply of the token, thus increasing the inherent value of the token for those who have engaged in a purchase.
Coin burn can also be performed in the post-ICO period as a mechanism to manage future value.
COIN VALUE / TOKEN VALUE
Some crytocurrencies are explicitly designed to be a store of wealth. Examples include Bitcoin, Monero, and Dash. Like any traditional store of value such as the US dollar or gold, the ability of a digital coin to assume value is determined by mass psychology – do people generally perceive the coin to be of value?
Most ICOs, however, aim to emit a token with inherent functional value in relation to the product or service that it is tied to. An analysis of this inherent value is generally the most important aspect in determining the attractiveness of an ICO investment.
You may also come across the term coin utility or token utility which refers to the same concept.
The method or protocol by which the participating nodes in a Blockchain Network arrive at a consensus for validating transactions or other commits onto the Blockchain. These nodes may also be referred to as miners. The most common consensus algorithms currently employed by most of current Blockchain networks are Proof-of-Work (POW), Proof-of-Stake (POS) or Delegated Proof-of-Stake (DPOS).
DECENTRALISED APPLICATION (DAPP)
Generally speaking, any application – generally web-based or mobile application-based – that leverages Blockchain technology. Most Dapps connect to one of a small subset of nodes that sit on the Blockchain network.
Often these nodes are managed by the Dapp development team itself. Connections between the node(s) and the Dapp are performed in order to store/fetch data or execute other processes for the Dapp.
Some coins can be described as ‘deflationary’ meaning that their number in circulation decreases over time. This may be intended or unintended depending on the nature of the coin and of the context in which it circulates. A deflationary coin is generally expected to increase in value over time if its supply diminishes whilst demand is at least maintained.
The date that tokens will be distributed to individuals who have invested into an ICO.
Where applicable, the rate at which an ICO issues its coin to market. Generally tokens are released in one single issue. However, some ICOs do emit coin in stages.
Many tokens describe themselves as ERC20-compliant. In practice, this means that they are offshoots of the Ether (ETH) token and can be managed and stored by the most popular Ethereum wallets in circulation.
It is generally believed that ERC20-compliant tokens will carry further advantages in relation to future cryptocurrency platforms and decentralised applications. Read our article on the subject to delve deeper.
You can also read an excellent technical approach to the subject that can be found found here.
By convention, the acronym assigned to the Ether cryptocurrency.
Currently the world’s second largest cryptocurrency by market capitalisation. Unlike Bitcoin, however, Ether was not conceived as a medium for the general exchange of value although it does also fulfil that function.
A programmable blockchain technology from which most ICOs currently derive their token. Arguably the key feature of Etherium is that it streamlines the ability for businesses and other organisations to offer Smart Contracts.
A decentralised online marketplace where individuals can trade ECR20-compliant tokens. Currently, EtherDelta serves as a proxy, peer-to-peer exchange for tokens which have not yet been on-boarded to one or more of the major exchanges.
Access to the EtherDelta market place requires use of MetaMask, which is currently available as a plug-in for the Chrome browser only.
Cryptocurrencies – or tokens – generally fall into one of two categories. Either they can operate as a simple store of value such as a dollar bill, for example, or they have a functional value.
Bitcoin is an example of a cryptocurrency that is designed to be a simple store of value. Ether, on the other hand, is an example of a token that carries functional value. Ether is required to “fuel” the computational processing power required for the execution of smart contracts on the Ethereum network. You can read our article here for a more complete discussion of the concept.
A token exchange is an online platform where tokens can be purchased and sold. By and large, cryptocurrency exchanges currently only accept payment for tokens in either Bitcoin or Ethereum. Some exchanges, however, do allow you to purchase Cryptocurrencies directly on their site – although these generally implement stringent KYC procedures when on-boarding new clients.
An amount paid to the Ethereum network by the sender of a transaction for the purposes of paying miners for the processing power that they will dedicate to executing that same transaction and subsequently committing it (if validated) to the Ethereum BlockChain.
The transaction itself could represent a simple transfer of some Ether to another Ethereum address, or it may represent a Smart Contract which generally requires a much great lever of processing power – and therefore gas – to execute the transaction.
If the transaction sender does not provide the minimum amount of gas specified by the Ethereum network for processing a transaction, the transaction is simply ignored and removed by the network.
If the transaction sender specifies more than the minimum required amount gas for enacting transaction, but not enough in order to pay for the entire gas consumption required for completing the transaction, the gas price paid by the sender is collected by the miner but the transaction itself is stored on the blockchain as a failed transaction with none of the state changes that the transaction had attempted to enact.
If a transaction sender over-spends on gas for the transaction, the miner will pocket only the fee from the transaction corresponding to the gas price consumed and refund the difference to the sender.
Common acronym within the crypto-currency universe serving as an abbreviation for the term Hold On for Dear Life: a reference to the corresponding strategy in traditional finance referred to as Buy-and-Hold (purchasing an asset and holding onto it over the long-term in the hope that it will increase significantly in value over time).
The Dear Life component of the acronym is a reference to the generally volatile nature of the crypto markets.
Most ICOs create a token of which there is only a finite supply. This number is known as the token hard-cap. A token hard-cap is generally seen as reassuring as it implies limited supply which in turn implies the potential for increasing token price in the context of increasing demand.
Bitcoin is hard-capped at around 21 million coins which will have been minted by around 2040. Ether, on the other hand, is not hard-capped since newly minted Ether is created and released into the network at a fixed rate.
See also Soft-cap.
ICO / ICO SALE
An Initial Coin Offering (ICO) – a crowdfunding mechanism whereby the general public contributes funds to a startup in return for a number of tokens that are integral to the startup’s business model. ICOs are currently unregulated and therefore require careful consideration before making an investment.
For the more traditional investor, the ICO process can be likened to its counterpart within traditional finance, an IPO (Initial Public Offering). An IPO is the process whereby a company issues shares in its stock on a public exchange in order to raise further capital for its operations.
However, there is a fundamental difference an ICO and an IPO. IPOs endow the investor with part ownership in the company and (often, though not always) an entitlement to a share in its revenues (dividends). ICOs generally grant neither although there are many exceptions to the rule.
KYC (or Know Your Client) generally refers to a jurisdictional requirement for a business to request formal documents from its clients to confirm their identity and domicile where requested.
In an ICO context, KYC procedures may be initiated by the ICO itself in order to ensure that it is able to comply with jurisdictional demands for transparency. For example, some ICOs operate in a jurisdiction which requires KYC procedures to confirm that they are excluding US citizens – who are currently banned under US Federal Law from investing in ICOs.
The total value of a coin. This is the theoretical amount that is required to buy up all of the existing coin. It is normally quoted in BTC or US Dollar and normally refers to coin in circulation (i.e. not reserved).
The market capitalisation (or market cap) of XYZ coin which has a current value of $10 and of which there are 1,000,000 in circulation is 10 * 1,000,000 == $10,000,000.
The maximum amount of currency that an ICO will allow an individual to invest. Normally there is no advertised limit although more popular ICOs generally impose some kind of limit in order to allow maximal participation.
Facilitating maximal participation is generally seen as good practice as a larger spread of investors minimises the risk large investors being able to execute significant coin dumps which can introduce price distortions.
Projects that implement maximum contributions generally to do so to minimise price volatility when the token becomes available on the exchange. See also Minimum Contribution.
Currently a Chrome-based plugin that primarily performs two specific functions:
- Serves as a web-based Ethereum Wallet
- Serves as a web hook that connects your Ethereum account to any Ethereum-based decentralised application that may eventually need to transact with your account
In general, Blockchain technologies are driven by miners who are tasked with managing transactions that have been sent to the network.
Miners collect fees for validating transactions and then subsequently committing these validated transactions to permanent record on the blockchain.
A miner competes with other miners on the network for the rewards that arise from collecting and validating transactions. These rewards arise on the back of a miner’s ability to solve a cryptographic puzzle before other miners.
The difficulty of the puzzle is generally determined by the network itself. The miner’s rewards derive from the fees attached to the transactions themselves and, possibly, other rewards as defined by the network’s own protocol (usually in the form of newly created coin).
The minimum investment that an ICO will accept in exchange for tokens. You will most commonly see 0.1 Etherium as the minimum contribution amount. Some ICOs impose a higher entry barrier (10 ETH). See also Maximum Contribution.
MINIMUM VIABLE PRODUCT (MVP)
A product – usually in its initial-release form – with a set of features and functionalities to support a business model in its early stages. An ICO with a MVP that has been released prior to the ICO sale itself can generally be taken as a positive sign in relation to the feasibility and credibility of the ICO project itself.
Be extremely careful when connecting to this website as there are multiple copy-cat impostor sites using almost identical domain names. Always check for the following URL and accompanying certificate when viewing MyEtherWallet:
Connecting to a copycat site, you risk betraying your password / private key and thus losing your Ether. When you first connect to the genuine MyEtherWallet site, it is best then to store it as a favourite in your browser and to connect subsequently to this address via your saved link.
PRE-ICO / PRE-SALE
An initial round of fundraising where coins/tokens are offered to the public. Typically, only a small percentage of tokens are available at this stage.
Investing during pre-ICO comes with certain advantages such as bonuses/discounts for early adopters. Taking part at pre-ICO stage does imply a higher risk as you are generally investing in a project before it has gained any kind of initial traction. Additional due diligence is therefore advised.
A project timeline that marks out the stages of development for an ICO. Generally, this should include major milestones such as the MVP (Minimum Viable Project) release date, specific product development iterations and the target date of the eventual listing of the token on major exchanges.
A contract enacted in code which is designed to perform a specific set of actions when a specific set of criteria have been fulfilled. In an ICO context, smart contracts are often invoked to ship tokens to an investor’s wallet in exchange for funds (usually paid in Ether) received from the investor. Smart contracts generally also define much of the business logic behind an ICO.
The minimum value of capital that a company needs to raise during a pre-ICO or ICO. The softcap is commonly measured in USD, Bitcoin, Etherium or in the quantity of its coin it needs to sell.
See also Hard-cap.
An object-oriented language designed specifically for the purpose of creating Smart Contracts. Whilst Solidity is implemented on numerous Blockchain technologies, it is generally know for its association with the Ethereum platform where the majority of Smart Contracts are currently implemented.
An online, Blockchain-based social network where content writers are rewarded with Steem cryptocurrency for popular content and where readers are rewarded for curating content. Steemit incorporates a large cryptocurrency community, amongst others, which discusses and exchanges ideas on cryptocurrency matters and trends.
The team behind any technology is of paramount importance to the success of any given project, and therefore the potential future value of an ICO investment. How many team members are there? How experienced are they in what they do? What track record do they have? Do they have a successful track record in similar ventures?
A wallet is a program or platform from which you can view or spend your crypto-currency holdings. Each crypto-currency will generally require its own wallet, although there are now wallet products which allow you to store several of the leading crypto-currencies simultaneously.
Wallets can be local (meaning installed as a local program on your computer) or web-based (meaning the wallet is hosted by a website that you visit). For security reasons, it is generally advised to go with local wallets.
In order for your wallet to receive funds, you will need to provide your wallet address. This address occasionally goes by the name of public key. A public key generally corresponds to a private key (and/or password) which is used to access your wallet account.
Your private key and/or password need to be properly secured and backed up. Losing your private key will result in your losing access to the account.
Colloquial ICO jargon for a large investor. Lots of whales investing in an ICO is generally a positive sign. You may also come across the terms minnow (small investor) and dolphin (medium-size investor).
The official document that generally explains both the business model technology behind an ICO and an overview of its technical implementation.
A good white-paper is well-written, and presents in detail how its token fits into the business model, and how and why the token carries inherent functional value. A good white-paper should also contain – or at least link to – a clear project road map.
When analysing the prospects of success for any ICO, an analysis of the white-paper is generally considered to be the first step and a fundamental one.