The cryptocurrency market size is expected to reach USD 1.6 billion in 2021 to
Crowdsale has popular use in Ethereum to raise funds and increase capital. In this smart contract solidity development tutorial, I will discuss how cryptocurrency crowdsale works and how you can create a crowdsale smart contract in the solidity programming language.
What is a Cryptocurrency Crowdsale?
Cryptocurrency crowdsale is a public offering that allows investors to purchase tokens using any digital asset, cryptocurrency, or non-fungible token (NFT). In Ethereum, investors buy tokens with ether.
The core purpose of crowdsale is to raise funds. In crypto crowd sales, tokens are sold at very low prices to attract more investors. It is a method to bring new digital assets into circulation or develop a new cryptocurrency business. Many initial coin offerings (ICOs), NFTs, or other digital assets use crowdsale to raise capital for development. Solidity smart contracts development for crowdsale offers base functionality but can be extended to provide additional custom features.
Properties of Crowdsale
Below are some important properties of crowdsales in cryptocurrency.
- Price and rate configuration
- Selling tokens at a fixed price
- The function of demand per price change
- Controlled access to purchase tokens
- Send tokens to participants
- KYC/AML checks
- Distribution of funds
- Setting the time frame (starting & ending of crowdsale)
Smart contracts offer highly configurable functioning of crowdsales with intelligent use of properties and their combinations. With this, you can create a custom crowdsale for your cryptocurrency.
Before diving deep, it is important to know some basics of the ERC-20 token and what role it plays in smart programming contracts for crowdsale.
What are ERC-20 Tokens?
Unlike Bitcoin, the Ethereum blockchain allows you to create your token or cryptocurrency that you can purchase with Ether. In 2017, approximately 57% ICOs were Ethereum-based ERC-20 tokens and only 30% were custom-built. ERC-20 defines the technical standards for fungible tokens that are created on Ethereum. This standard allows the interaction of various applications such as crypto exchanges and crypto wallets with ICO tokens. It allows different smart contracts-enabled tokens to be exchanged as digital assets, ownership, or cryptocurrency.
ERC-20 tokens can be distributed in different ways. One popular method is crowdsale or ICO used to raise capital for a project or a business. A crowdsale generates liquid capital for a company in the form of Ethereum blockchain currency, Ether. Investors pay for tokens and reserve an amount of ERC-20 tokens in the crowdsale.
So how does it work? Ethereum wallet keeps track of the Ether balance in your account. It also allows you to create your token without the need for any new blockchain. You can use a smart contract to create an Ethereum token and ERC-20 is a standard that specifies the guidelines of how a smart contract should work.
How Do Cryptocurrency Crowdsales Work?
Each cryptocurrency crowdsale behaves differently. However, as a potential learner, investor, or developer, here’s the basic flow:
-
Crowdsale goals are defined
Promoters must have clear goals and expectations from the crowdsale. Most of the time, a soft bracket is specified that shows the minimum amount that should be raised and similarly an estimate of the highest amount that crowdsale could produce. Based on initial prospects, promoters find it easy to proceed with planning.
- Ethereum blockchain account
To participate, investors must have an Ethereum blockchain account. The account stores Ether as well as ERC-20 tokens that investors can buy. The wallet address tracks the balance and transaction history in crowdsale. When an investor buys tokens from the crowdsale, basically they send Ether to the smart contract and then the smart contract carries out the transaction.
- Rules are created for tokens
Developers of cryptocurrency tokens and coins must establish guidelines for crowdsale through solidity smart contract development. A smart contract is a piece of code that runs on a blockchain-based system and initiates transactions. It sets the price of the token and criterion describes the behavior of crowdsale.
Crowdsale could also be restricted to some investors. They have white lists to ban people who are involved in any criminal activity. There is a reserved amount of tokens that could not be sold in crowdsale and are set aside for some companies, advisors, or founders.
- Phases of crowdsale
Crowdsale smart contract development services have different phases and stages such as pre-ICO, ICO, and ICO bonus. Each phase has its guidelines and points of time and behaves differently from each other.
- Crowdsale promotion
The next step is to promote your crypto crowdsale to potential investors. At this stage, multiple marketing strategies are required for various social media channels. Marketers employ many campaigns which sometimes involve sending free tokens as giveaways.
-
Selection of a platform
Choose the platform and launch the crowdsale. Participants will join crowdsale and invest in it most often using another cryptocurrency. However, many scams are reported against fake crowdsales. Therefore, it is important to verify the platform before going for it.
- End of crowdsale
An administrator finalizes the crowdsale and all the purchased tokens are distributed to the relevant accounts and the crowdsale overs officially.
Crowd Sale Smart Contract in Solidity Programming Language
Below is the smart contract solidity development code that allows investors to purchase tokens in an initial coin offering (ICO).
Congratulations! You have successfully developed a crowdsale smart contract solution in Ethereum. The code stores the admin account, stores token price, and the total number of tokens, and implements the sell event. It also implements the buy event with which investors can buy tokens from crowdsale, collects ether funds from crowd sale, and concludes it.
Conclusion
Crowdsale is an opportunity to buy tokens at a very low cost. With time, it becomes more valuable and is undoubtedly the best investment if it starts becoming popular. Moreover, it can create exciting trading opportunities for you. However, investing in new digital currency is risky, so evaluate crypto crowdsale thoroughly before taking any decision.