If you were one of the early adopters of cryptocurrencies, you remember the booming ICO (Initial Coin Offering) era of 2017 or if you are new, you should read this article below. What is soft cap and hard cap in crypto and what is the difference between them. Let’s find out.
What is soft cap and hard cap in crypto?
Hard Cap
The hard cap in the cryptocurrency space is the maximum number of tokens that the project aims to sell to close early funding and continue to fully develop the technology. For example, if the team decides to set a hard cap of 20 million tokens and manages to sell that amount within a few hours of the ICO launch, the fundraiser should end regardless of ongoing interest.
Soft Cap
The soft cap is the minimum amount an Initial Coin Offering (ICO) needs to raise. If the ICO fails to raise that amount, it may be canceled and the collected funds returned to the participants.
What is the difference between them?
The hard cap is closely related to the roadmap of the base project. Teams should be clear about what they are raising funds for, as some projects have raised more than their funding goals because they don't have a hard cap.
Unlike the hard cap, the soft cap is not required as it is just an idea to raise funds for project development, and many teams have managed to raise funds without the need for a soft cap. However, crypto enthusiasts feel that this is a good practice to follow because it informs investors why the underlying project needs funds.
I hope this article will help you to learn What is soft cap and hard cap in crypto and what is the difference between them. Soft caps and hard caps ICOs are not just fundraising goals. They tell us a lot about the project, their team members and their vision. While investors can evaluate an ICO to discover the value of a project, there is a lot to cover including tokens and token supply, founders, actual use cases for the project, and more.
