This article on how to build trust and transparency into your ICO and blockchain project is part of our “How to Launch an Initial Coin Offering” comprehensive guide. If you are interested in understanding all the necessary aspects involved in launching an ICO, we recommend you download the guide here.
One ironic aspect of blockchain is that although it is often referred to as a “trustless” technology, the central element that holds the ecosystem together is transparency and trust. This is why it is so important that your project helps individuals mitigate the inherent uncertainties that a blockchain project brings by integrating these qualities throughout the entire ICO process (before, during, and after).
Credibility will play a significant role in the success of your project’s ICO and become even more critical after the ICO has come to an end. Remember that after your project has raised money, you will have a long list of promises you need to deliver on.
While ICO contributors may have limited options to what they can do if you don’t deliver, you should never neglect them. Quite the opposite, if you are looking for long-term success, the smartest thing to do is to keep them happy and informed. Not having to continually deal with anxious and uncertain token holders will allow you to work better and with less pressure.
Like in any traditional startup, transparency management is always about communication. Be as honest, open, and available as possible, and always remember that the token holders and members of your community will determine the real success or failure of your project.
To help you understand what and how to communicate, we’ve put together a list of four areas you should concentrate on. This list does not cover all the aspects of a good communication strategy, but it’s a solid starting point.
1. How are the funds being used?
This might be the most critical aspect of being transparent with your community. You need to state clearly what the allocation of the sale proceeds will be used for in as much detail as possible. Although companies that conduct an ICO are not obliged to do so (unlike public companies), it is one of the best ways to demonstrate responsibility and seriousness. Also, by providing the community with a tool to hold your project responsible, contributors will feel a greater sense of confidence and trust.
How you choose to present this information and at what level of detail is ultimately up to you. Some projects may show their financial information as part of a general report, while others might present regular details of company expenditures and transactions. You should also consider your jurisdiction’s regulations as to what information needs to be disclosed.
2. What is the state of the product?
Some projects have raised money with a running product, others with a basic MVP (Minimum Viable Product), and others without any written code at all. Eventually, the time to sell your vision comes to an end, and it’s time to begin presenting a real product.
The roadmap that you presented to your community should have a set of milestones, and relevant product releases to guide you through. Keeping yourself accountable for these milestones, and meeting due dates will help maintain your community’s trust and confidence. It will also keep your team’s morale high.
The best way to communicate the status of your product is to have some of your community members become beta testers. Alternatively, if you are not at that stage yet, you could also share posts, screenshots, videos and public code repositories.
3. Keeping the community engaged
Networks and communities are everything so making them feel enthusiastic, and part of the journey will keep them engaged, drive them to contribute actively and even attract more users.
When sharing prototypes, screenshots or ideas, for example, try to foster debates and ask for feedback. This will illustrate that you are taking the needs of the users into consideration.
Instant messaging apps such as RocketChat, Discourse, Telegram, etc. are the best ways to foster this but any of your tools can provide valuable feedback.
4. Token value speculative questions
No matter what you do to prevent your token sale from becoming a get-rich-quick scheme, you will find that there will be speculators and immediate profit seekers amongst your community of token holders.
You will receive a lot of questions about the valuation of your token, the exchanges you will get listed on, and other speculative inquiries. Our recommendation is to answer these in the best possible way but without adding fuel to the speculation. State that this is a long-term project, refer to your roadmap, highlight your accomplishments, and emphasize how you have been consistent with everything you have promised before the ICO.
Be polite but at the same time don’t let them push you around or set the value of your project based on a token valuation. You can always invite participants to sell their tokens. Unfortunately, many projects don’t put enough emphasis on transparency and communication.
While this doesn’t mean they are illegitimate, they are undermining their credibility and wasting an opportunity to build a larger and more healthy community. They don’t realize that greater accountability leads to more confidence and trust for all parties involved.
A more secure, transparent, and trustworthy industry will instill more confidence and bring new players who will help the blockchain space evolve. At the same time, it will ensure that transparent, legitimate projects attract more attention than non-legitimate ones.
As the blockchain ecosystem goes through a maturing phase, scammy projects, uncertainty and mistrust will continue. The best way to make your project stand out and help the blockchain space evolve is to build the trust of your community, supporters, and users. This can only get accomplished by engaging in regular and honest communication.
Here are three key points to remember –
1. Trust and transparency are the most important assets for all projects. Losing the trust of your community can hurt (or kill) your project at any stage.
2. Basic recommendations to build and maintain your project’s credibility include being transparent with the use of your funds, sharing regular product development and company updates, and properly managing the token supply (to avoid manipulation of price).
3. All projects can face difficult circumstances with their community. When challenges arise, stay calm, be transparent and communicate effectively.
For more details on each of the steps and more in-depth explanations download our “How to Launch an Initial Coin Offering” comprehensive guide. And if you are looking to launch an ICO and need some help check out our service TokenDeck.
If you have any questions or would like to connect you can find me on Twitter or email me at [email protected] I’m always interested in meeting people working, learning, or involved with the blockchain space.
Disclaimer This document does not constitute legal or investment advice nor should be taken as such. You should not rely on it and if seeking to do an ICO or any other related activity you should seek separate professional counsel. It is for informational purposes only. Views do not represent the views of my employer, investors, or partners. Furthermore, the blockchain industry and technology is undergoing constant development so this post is intended as a guide at the current moment of publication and the issues and topics, and therefore the guidance, covered are vulnerable to change and development. The reader should bear this in mind when reading.
Also published on Medium.