The investor needs an answer to how his/her hard earned money will increase by investing into your token. Why is it going to increase in value? If your ICO can’t answer this question, your token model might be in need of some fundamental re-planning.
The age of utility token for the sake of utility token is over
Utility tokens have been very popular since 2017, and ICO industry has seen significant growth in projects that have used Ethereum as platform for launching their utility token. When the market was bullish in the last 2017, many of the utility tokens increased multiple times in value once they hit the exchange, and long-term benefits for token holders were not regarded that important.
For value investors exploring crypto security tokens with dividends, or alternatively tokens with some kind of mechanism for price increase for example a token buyback program, are better long-term investments than utility tokens that have no element of passive income or mechanism for appreciation. Currently as the regulations are still developing in the ICO market, there is a growing needs for DAICOs, which are better for establishing trust between the investors and the project as they have various benefits in this regard compared to ICOs such as:
- DAICOs are managed transparently regarding their business operations.
- The finances of DAICOs can be audited by the public to follow how the proceeds are being put into use for benefit of the business.
- DAICOs offer proper protection against corruption and basically zero downtime.
What your potential ICO investors are looking for regarding value drivers
To structure your token model in an appealing way, consider adding one of the following value drivers in your token model:
- Dividends by holding the token
- Discounts on services
- Token buy back programs
- Monthly airdrops to token holders as rewards based on profits
What your potential ICO investors want to stay away from
If we look at token value drivers regarding what not to include, we have listed a few examples what your potential investors don’t want to see in your ICO marketing materials. The list for these common bad examples are:
- Statement that token price will increase as user demand grows, without explaining why or how they are planning to acquire users - ‘Build it and they will come’ type of thinking is not enough!
- Not explaining how token price will increase at all: this will leave your investors guessing and unable to decide should they invest in your ICO.
- Claiming that when the project is successful the token price will increase, even though they are not related (if no dividends or profit airdrops exist). If there is no clear connection between the token price and the success of the project, you should include some other value drivers in your token model.
Designing value drivers to your token model is an essential part of your ICO and the project after the fundraising rounds are completed. To succeed in your ICO and to make your token valuable in long-term, consider implementing proper value drivers and transparently bringing them up in front of your potential investors.