The purpose of this article is to reflect on various aspects of increasing price crowdsales, give an overview on similarities and differences between this type of crowdsale and flat rate crowdsale, and ultimately, help you decide which type is better for your cause.
So, let us start with the similarities...
As explained in Flat Rate Crowdsale article, a cap (or hard cap) represents the maximum amount of Ethereum raised. Once the cap is reached at any time during the crowdsale lifetime, the crowdsale is considered to be successful and finished.
Crowdsale goal (or soft cap) is the amount of Ethereum, that, if reached by the end of the crowdsale, renders the crowdsale successful. Unlike the cap, if the goal is met during the crowdsale lifetime, the crowdsale continues. If, at the end of the crowdsale, the goal is reached or exceeded, the crowdsale is considered to be successful. Otherwise, the crowdsale is failed.
Crowdsale cap must be higher or equal to crowdsale goal.
This means that the tokens are not pre-created, but minted with every individual purchase. With TokenMint crowdsales, the only party that is allowed to mint coins is the crowdsale contract itself.
Refundable feature protects the investors in case of the failed crowdsale. After the failed crowdsale,
investors can receive a refund of their "stake" in Ether by calling the crowdsale contracts
IMPORTANT: it is investors responsibility to claim their Ether back, after the failed crowdsale.
TokenMints Flat Rate and Increasing Price crowdsales both implement the
post-delivery feature. This feature freezes all of the funds during the crowdsale lifespan. After the
crowdsale has finished (regardless of its success) it is necessary to call its
method. Once the crowdsale is finalized, the investors can claim their tokens or Ethereum refunds
(depending on the crowdsale success).
Post-delivery feature is introduced to prevent token price manipulation during the crowdsale lifespan.
Now that we have covered the similarities between the two types of crowdsales, let us dive into one major difference.
Flat Rate crowdsale has fixed token price during the crowdsale lifespan. Opposite to that, with Increasing Price crowdsale (as the name suggests) the price of the token grows linearly during the crowdsale lifespan.
Crowdsale creation parameters that determine the price of the token are initial rate and final rate. They both dictate the amount of tokens that can be bought for 1 ETH, and are inversely proportional to the price of the token, meaning that the initial rate must be greater than final rate. As already mentioned, the price grows linearly, but in discrete intervals that match the duration of each block.
To better understand this, let us take a look at the specific example depicted in the diagram below:
In this example, the starting time of the crowdsale corresponds to the block n, and end time to the block n+6. Initial rate is 5, meaning that the initial price is 0.2 ETH (1/5 ETH). Final rate is 1, meaning that the final price is 1 ETH (1/1 ETH).
The red line describes effective price distribution during time, and the dotted line depicts its linear nature.
One of the advantages of Increasing price crowdsale over the Flat Rate one is that it creates buying pressure (due to the price increase) and makes the investors want to get boarded early on.
Create your own Increasing Price crowdsale using TokenMint app.
If you've completed this tutorial, we recommend you follow up with these tutorials: