Cryptocurrency is an ever-growing industry with so much potential. So it’s obvious that big investors are showing interest in this golden opportunity. Developing new cryptocurrencies and launching them into the market is a common way to generate big bucks from the crypto industry.
However, developing new cryptocurrencies and launching them in the market is not child’s play. You need to establish properly with enough resources and investment capabilities. Managing the resources and certain elements of such high-scale projects is never easy. Especially when you’re planning to step into the cryptocurrency market with something new to offer!
What is Soft Cap and Hard Cap
New startups and companies who decide to enter the crypto market with an attractive project need a fixed amount of initial capital. Public crowdfunding is the best way to gather such huge capital.
Therefore, the crowdfunding process is an essential part of any project. Whenever startups or new companies announce an Initial coin offering ( ICO ) event, they need to follow the necessary procedure to make sure everything goes well.
Generally, companies or startups have everything pre-planned. In case the company is trying to scam the investors with false claims and unethical purposes, they won’t share necessary details or provide a complete plan from the start to the ending phase of the project.
What is a Softcap?
After analyzing the overall investment required for the initial coin offering project, the companies need to decide on a minimum threshold for public disclosure. Because they have to mention this information in the necessary documents such as whitepaper that is essential for building trust with potential consumers.
Softcap is the amount that decides whether your ICO event becomes successful or not. Because if a startup fails to accumulate the minimum amount of funding decides by them, their ICO event is considered a failure in the market.
The soft cap is the total amount that decides whether your project will be continued or not. It is used to keep your project alive. In case the project turns out to be a failure the investors will receive a refund for their respective investments.
What is a Hardcap?
Hard caps are completely the opposite of soft caps. Hard caps play an important role in ICO events. As they are helpful in indicating the max potential of your project and brand presence.
Just like the soft cap amount you also need to mention the hard cap amount in the whitepaper. Which indicates the highest amount of investment your initial coin offering event is willing to accept from the investors.
However, you need to be specific about deciding the hard cap amount. Because if you set it too high there is a high possibility of receiving more than what you have expected! As a result that extra fundings will remain in your wallet unused for a long time.
On the other hand, you can not keep the hard cap amount very low. Because you can run out of funds even before the project is completed in case you keep it too low. So finalizing an optimum amount of hard cap is essential to avoid any investors or project management-related issues.
Initial coin offering events are launching with a fixed amount of time frame usually. So the startups need to decide the total amount of expense for the ICO event. Including the various expenses such as management, staff members, documentation, marketing costs, wages, and several other expenses that are necessary to launch a project successfully.
Deciding on the soft cap and hard cap amount for their ICO event is an important decision. So if you are looking forward to investing in an ICO event or holding an ICO event yourself, these two terms are very important in either case.