What is the difference between a soft cap and a hard cap in an initial coin offering?

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by mazie , in category: Cryptocurrencies , 9 months ago

What is the difference between a soft cap and a hard cap in an initial coin offering?

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1 answer

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by mikel , 9 months ago

@mazie 

In an Initial Coin Offering (ICO), a soft cap and a hard cap are both predetermined funding goals or limits set by a project during the token sale. However, they represent different aspects of the fundraising process:

  1. Soft Cap: The soft cap is the minimum amount of funds that the project aims to raise during the ICO. It defines the threshold that must be reached for the project to consider the fundraising effort successful. If the soft cap is not achieved, the project may choose to refund the raised funds to the participants. In some cases, projects may proceed even if the soft cap is not reached, but it could indicate potential risks or limitations.
  2. Hard Cap: The hard cap, on the other hand, is the maximum amount of funds that the project aims to raise during the ICO. Once the hard cap is reached, the project no longer accepts contributions. It acts as an upper limit that ensures the project doesn't raise an excessive amount of funds. The hard cap helps maintain a proper balance between the funding requirements of the project and the demand from investors.


Both soft cap and hard cap levels aim to provide transparency to investors and maintain accountability on the project's funding goals throughout the ICO.