Everything you need to know about hardcap and softcap in ICO projects /STO or token in simple words We want to explain what the words HardCap and SoftCap mean in ICO projects. Now let's get to the point:.
What is a CAP in an ICO?
The objective of each ICO project is to attract a certain amount of funds necessary for the implementation of the tasks. However, not all or not always projects know exactly how much money they need to successfully reach the finish line. Therefore, all ICO projects can be divided into limited and unlimited.
The lack of a maximum structure can lead to an oversupply of tokens in the market as a result of the underestimated cost, which will impede the normal development of the project. The presence of a fundraising framework indicates that the team clearly understands how much money they need to start the project and how many projects must be in the ecosystem for its normal functioning.
What is HardCap?
HardCap on ICO websites, is the maximum amount of funds developers must have to create and promote their project. Often, based on the required size of HardCap, the team allows the sale of a certain number of tokens for sale during the crowdsale. If, for any reason, the amount of funds raised exceeds the HardCap mark, all excess funds received must be returned.
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What is SoftCap?
SoftCap is the minimum amount of funds developers need to raise to create their own product. If during the token crowdsale, the project does not reach the SoftCap mark, the funds already received will be returned to depositors.
SoftCap and HardCap as a tool
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The presence of software and hard caps in the ICO is an excellent tool to analyze the quality and focus on the results of the project developers. In fact, any team must understand how much money they need to achieve their goals and how many tokens the ecosystem needs for its normal functioning. So when raising funds, any serious team should understand how much money they need to create and launch a product.
If, for any of the reasons, during the ICO, the team does not indicate the minimum and maximum amount of funds needed, it is an occasion to reflect on the seriousness of its intentions.
When choosing projects for investment, pay attention to these small but very important details.