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How do I do a crowdsale with Coinprism?

Last Updated: Jan 23, 2015 08:14PM GMT
Colored coins are the perfect way to run a crowd sale, there is no intermediate currency so you are not tying your crypto-tokens to anything else than Bitcoin.

The crowd sale where YOU are in control:
The approach taken by Coinprism for crowd sales differs from alternative systems. With open assets and Coinprism, you don’t have to put your faith in a complex protocol for the crowd sale. The system is very simple and works in two phases.


How do I do a crowdsale?
  1. Create a Coinprism wallet
    Head to www.coinprism.com/signup and create a wallet. All you need is a username and a password. The email is optional. Make sure you write down your password in a safe place (on a non-digital medium, like a piece of paper, which can’t be hacked) because the password protects your key, and through that password, you are the only one who has access to that key. If the password is lost, the Bitcoins and the assets are lost.



    Make sure your password is long enough to ensure optimal security. Coinprism enforces 10 characters, but 20 characters make it extra-safe.
     
  2. Fund your Account
    Sign in onto your Coinprism account with your new credentials. You get onto the home page of your new wallet, which has an empty balance. The first step is to fund it with a small amount of Bitcoins. Select “Receive Bitcoins” on the right of the page. A Bitcoin address should appear.



    Send 0.001 BTC to that address from your non colored coins wallet (in this case Blockchain.info).



    Wait for a few minutes, and refresh the page from time to time. When the transaction is confirmed, your balance should update to reflect the 0.001 BTC:


     
  3. Create the asset
    Go to the “Addresses & Colors” tab, and click “New color”.
    On the next page, call the new address “Crowdsale address”, and type your password to confirm.You create a color address in Coinprism, and publish that address on your website or forums as the crowd sale address.



    The next page is where you get to define the information about your asset. Choose a full name and a ticker. The issuer name is the name of your company. The description should explain what your asset is, what gives it value, etc… Don’t hesitate to put all the necessary details. Note that you cause use the Markdown syntax for formatting (including headers, links, bold, etc…).



    In “Asset webpage URL”, put a link to a page on your website giving more information about the asset.
    Upload a logo and image for your asset, and finally choose a divisibility and asset type.
    Save when you are finished.
     
  4. Become a verified issuer
    This step is optional but recommended if you want your users to know that you are a verified issuer. In order to have a verified asset, you need to host the asset metadata file on your own website. For more details on how to do this, visit this article.
     
  5. Fund your issuance address
    Go to the “Send” tab. In the “To address” field, select your “Crowdsale address”.

    In the amount, type “0.000106” (the exact amount is important: 0.0001 BTC will be used to pay for the miners fees, and 0.000006 BTC will be used for coloring).



    Press send, and confirm the transaction on the next page by typing your password and pressing “Submit”.
     
  6. Link your crowdsale address with the asset information
    We are now ready to make the first asset issuance, whose purpose is to link on the Blockchain the asset metadata URL (defined in step 4) to the address.

    Go to the “Send” tab, and on the left, click on “Issue colored coins”.

    Make sure “From address” is set to “Crowdsale address”. In “To address”, select your “Main address”. In the amount, type 0. We are not actually issuing any colored coins, just making a dummy transactions linking the address to the asset.

    Leave the default fees.

    For “Metadata”, select “Provide a custom color definition URL”. A blank field should appear. Type in that field the address from step 4.



    Press “Issue coins”, and confirm the transaction by typing your password and pressing “Submit”.
     
  7. Start advertising your crowdsale
    You are now ready to accept payments (transactions in blue in the diagram above, this is phase 1).!

    Go to the “Addresses & Colors” tab and select your “Crowdsale address”. In the top left, make sure “Receive assets” is selected. Copy the address below (it should start with the character “a”).



    This address is where people need to send Bitcoins to purchase your asset. Showcase it on your website.

    Create some buzz to make sure people know about your project!
     
  8. Process the sales
    When people send you Bitcoins to this address, the Bitcoins will stay sitting on the address until you “process the sale”.

    To do this, head to the “Send” tab, and click “Crowd sale” on the left.

    Select your “Crowdsale address” for the Crowd Sale Address field. In “To address”, select the final destination of the money you raised. Your “Main address” is a good option. You can also use any kind of cold storage if you are dealing with large sums of money.

    In “Price per XXX”, type the price in BTC of one unit of your asset. Finally, submit the form. You will be presented with a summary of all the sales before your confirm. The asset will be created dynamically in the exact quantity needed. Change in BTC will be sent back to the buyer if there is any.




    Coinprism will look at all the transactions which have been sending bitcoins to the crowd sale address. For every single one of those transactions, it will create a new transaction that atomically sends the bitcoin proceeds to your storage address, create new crypto-tokens, and send them back to the buyer (transactions in green, this is phase 2, the “distribution”). The number of crypto-tokens issued will be automatically calculated by Coinprism, from the amount of bitcoins sent by the buyer and from the price you have set for your tokens.



    The result is a batch of transactions. Coinprism will let you review all of those transaction through a downloadable spreadsheet. All you have to do is confirm the transactions if you are happy with them. They will be signed client side using your password, and broadcasted to the Bitcoin network.

Some properties of that system:
  • If a buyer attempts a double spend, they won’t receive the tokens, since the phase 2 issuance transaction is spending the output of the initial phase 1 bitcoin transaction.
  • Every time you run a distribution batch through Coinprism, you get to set the price for your tokens, so that allows you to change the price of your tokens over time, as you like.
  • You can also stop the crowdsale at any time – you just stop doing distributions.
  • After phase 2, the crowd sale address is emptied, and the funds are moved to the storage address, so each sale can only be processed once.
  • As always, the system is completely decentralized as Coinprism doesn’t have the keys of any of your addresses.

The buyer should make sure to send the bitcoins from a color aware wallet, because the assets will be sent back to the same address. The process is very transparent and open, and the only output of that process is the batch of transactions, which you can review. There is no magic. This differs from the Counterparty and Mastercoin approach, where you have to put your faith in a black box protocol: you are subject to the fees imposed by the protocol, the matching logic, timings, rules and bugs.
 
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