Initial Coin Offering: What a Company Needs to Consider Before and After Conducting Its ICO
Lutz, Andreas (2019)
2019
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-201904175514
https://urn.fi/URN:NBN:fi:amk-201904175514
Tiivistelmä
Ever since the invention of Bitcoin in 2008, cryptocurrencies have grown in popularity, which has led to the creation of thousands of new cryptocurrencies. This thesis is commis-sioned by Blocktek University, a blockchain and cryptocurrency learning platform, and in-vestigates some of the most important factors a company needs to consider before and after it conducts an Initial Coin Offering (ICO). Legal factors are not taken into considera-tion and the technological aspect is kept to a minimum.
The study consists of a theory section and a research section. The theory section discusses traditional economic theories in order to formulate expectations towards the cryptocurrency market. Additionally, this section covers the basics of ICOs and stablecoins.
The research part investigates how the value of a token can be estimated for the ICO, the correlation between cryptocurrency utilisation and its value, and whether a company’s own token should be pegged to fiat money.
The study involved both qualitative methods in the form of a survey and various discus-sions, as well as quantitative methods in the form of analysing over 29’000 data entries.
Firstly, the research revealed that the best way to price a token for the ICO is to establish a fiat money funding target, price each token at an appealing fiat money value and convert that amount into the accepted cryptocurrencies. Secondly, there is in fact a correlation be-tween cryptocurrency price and its utilisation. This result allows a company to forecast its revenue better. Thirdly, a company’s own token should not be pegged to fiat money as there is not only substantial risk in doing so, but also maintaining the peg is difficult. Addi-tionally, it is not industry standard.
The outcome of this thesis provided the commissioning company with new insight and al-lowed it to offer better advising services. Furthermore, this thesis may serve as a guideline for companies looking to establish their own cryptocurrency.
The study consists of a theory section and a research section. The theory section discusses traditional economic theories in order to formulate expectations towards the cryptocurrency market. Additionally, this section covers the basics of ICOs and stablecoins.
The research part investigates how the value of a token can be estimated for the ICO, the correlation between cryptocurrency utilisation and its value, and whether a company’s own token should be pegged to fiat money.
The study involved both qualitative methods in the form of a survey and various discus-sions, as well as quantitative methods in the form of analysing over 29’000 data entries.
Firstly, the research revealed that the best way to price a token for the ICO is to establish a fiat money funding target, price each token at an appealing fiat money value and convert that amount into the accepted cryptocurrencies. Secondly, there is in fact a correlation be-tween cryptocurrency price and its utilisation. This result allows a company to forecast its revenue better. Thirdly, a company’s own token should not be pegged to fiat money as there is not only substantial risk in doing so, but also maintaining the peg is difficult. Addi-tionally, it is not industry standard.
The outcome of this thesis provided the commissioning company with new insight and al-lowed it to offer better advising services. Furthermore, this thesis may serve as a guideline for companies looking to establish their own cryptocurrency.