ICOs or Initial Coin Offerings can be capped or uncapped. Capped ICOs run until a certain amount of funds is collected, while uncapped ICOs run for a set period that can range from weeks to multiple months.
What is a Hard Cap?
Hard Cap indicates the maximum amount of funds that a project needs for successful development. It’s an absolutely best-case scenario for a project. Usually, the Hard Cap is set relatively high, and most ICOs come short of reaching it. However, cases exist when a Hard Cap is reached in the first minutes of an ICO. After reaching a Hard Cap the fund gathering stops, regardless of how much time remained for an ICO to go on. In case of hitting a Hard Cap before an ICO deadline, tokens may be distributed early. Sometimes a project collects more funds than a specified Hard Cap and does not return the excess to the investors, which is generally a sign that the founders are unhonest.
What is a Soft Cap?
Soft Cap is the minimum amount of funds that a team believes is necessary for the successful development of a project. If the Soft Cap is reached during an ICO, it will be considered successful. However, if the Soft Cap is not reached before the end date of an ICO, all funds should be returned to investors. There are cases, however, when a team continued to work on a project and kept the funds regardless of a Soft Cap not being reached.