What Are Soft Cap and Hard Cap?

What Are Soft Cap and Hard Cap?

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Soft Cap and Hard Cap refer to two important concepts related to fundraising through Initial Coin Offerings (ICOs) or Token Sales. These two terms describe the minimum and maximum amount of funds a project aims to raise during its crowdfunding campaign.

How Do They Work?

A Soft Cap is the minimum amount of funds a project needs to raise to consider its fundraising campaign successful. It is a target set by the project team to ensure that they have enough resources to develop and launch the project. If the Soft Cap is not reached, the project may not proceed as planned, and investors may receive their funds back.

A Hard Cap is the maximum amount of funds a project aims to raise during its fundraising campaign. Once the Hard Cap is reached, the ICO or Token Sale is closed, and no more funds can be raised. The Hard Cap is set to limit the funds the project team can collect, preventing the project from becoming overfunded.

Soft Caps and Hard Caps are important for the project team and investors. The Soft Cap provides the project team with a minimum target to aim for, ensuring they have enough funds to carry out their project. It also assures investors that the project has minimum support and can proceed as planned. On the other hand, the Hard Cap protects investors from over-investing in a project that may be overfunded and unable to deliver on its promises.

When a project sets a Soft Cap, it usually indicates that they have done some preliminary work and have estimated the minimum amount of funds needed to deliver the project. If the Soft Cap is not reached, investors can receive their funds back, and the project may not proceed. This ensures that investors are not stuck with an underfunded project that cannot deliver on its promises.

On the other hand, when a project sets a Hard Cap, it indicates that they have estimated the maximum amount of funds needed to deliver the project. If the Hard Cap is reached, the project team can use the additional funds to develop the project further or allocate them to other areas of the project. However, if the project becomes overfunded, it may lead to a decrease in the value of the token or coin, as investors may feel that they have overpaid for their investment.


Soft Caps and Hard Caps are important for the project team and investors during an ICO or Token Sale. The Soft Cap provides a minimum target for the project team to aim for and assures investors that the project has a minimum amount of support. The Hard Cap protects investors from over-investing in a project that may be overfunded and ensures that the project team has estimated the maximum amount of funds needed to deliver the project.

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A project team can manage investor expectations by setting soft and Hard Cap and ensuring they have enough resources to deliver their project while avoiding overfunding.

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