Token sales are most commonly referred to as an Initial Coin Offering (ICO), IEO, IDO, and various other acronyms. Put simply, an ICO is a method of fundraising similar to an initial public offering of securities. Instead of issuing stocks like in a traditional IPO, the token sale fundraising method utilizes blockchain technology to issue customized cryptocurrencies. Each method has its own special process associated with selling you equity. But, they all end with receiving freshly minted pre-mined tokens.
Seed Rounds
Seed Rounds are the very beginning of a protocol’s fundraising journey. These private pre-sales are exclusive to qualified licensed individuals and venture capital firms. These types of equity rounds are not something an average person can participate in, even if the regulations in your area allow it. They are exclusive because at this fundraising level you must be personally invited to participate. For that reason, this is usually the lowest price that a token is sold for, prior to a public offering.
Public Offerings
Public offerings are where the average investor can purchase tokens before they become available on exchanges. These public token sales offer an incredible opportunity for those who are able to participate in them. With a very specific number of tokens being offered during this stage, you’ll find it common practice for protocols to have some type of lottery to select participants. Once all the participants are selected and the lottery is closed, each one will be required to provide documents that verify their identity.
This whitelisting process is where investors will provide the cryptocurrency address they’ll be sending funds from and accepting their new tokens. Once the sale begins it’s a first come first served system, even if your address is whitelisted to participate. Being even a minute late to the token sale could risk arriving at a sold-out sale. This is because no single person is entitled to any specific distribution during these sales. Being whitelisted only allows you access to purchase a token. It does not guarantee there will be enough tokens for everyone who’s been whitelisted.
Must read: What are NFT Whitelists and how to get on them?
Public Sales
Public token sales commonly happen on exchanges. These include centralized exchanges “IEO”, decentralized exchanges “IDO”, and liquidity bootstrapping pools “LBP”. Exchanges can launch these new projects either directly, or indirectly.
Public Sales on Centralized Exchanges
On centralized exchanges, new projects are released through launchpads. This is where verified exchange users have the opportunity to participate. The great thing about these sales is that if you’ve already completed KYC for the exchange you don’t have to provide additional documents. The downside is that the whitelist for these sales becomes oversubscribed by a large margin, causing a token to sell out within seconds of the sale launching.
Public Sales on Decentralized Exchanges
Decentralized exchange offerings require that a user provide verification after being accepted to participate. These tend to have fewer available slots for participation, but offer each investor the ability to purchase more tokens than a centralized exchange offering. Decentralized exchanges also have liquidity bootstrapping pools “LBP” instead of a direct token sale. This decentralized token sale happens by setting up a two-token pool with a project and a collateral token. Participants purchase these new assets and their funds are put into one pool. Once the sale has ended, participants will receive tokens based on how much they added to the liquidity pool.
Geography Matters
These token sales used to be available to everyone no matter their geopolitical climate. Unfortunately, this is no longer the case and the majority of these sales have mandatory Know Your Customer processes that exclude citizens in the United States, Asia, Europe, India, and the Middle East. It’s extremely important that before you attempt to participate in any of the discussed token sales, you verify that you’re legally allowed and eligible to participate.
The Best Hosts for Token Sales
The most popular token sale venues which have consistently had the highest return on investment are Dao Maker and Polka Starter. These two services both require holding their tokens in order to have a chance to get into the sales. Honorable mention for a good return on investment is Copper.
In terms of centralized exchanges, Binance is the far and away leader in mega gains. They have consistently delivered the best token sales with coins that are now household names like Axie Infinity having been launched on Binance. You can get yourself a Binance account HERE. Honorable mention for a good return on investment is Coinlist.
Jesse is a passionate seeker of truth who enjoys educating others about Bitcoin.
As a free thinker and 2nd amendment advocate, Jesse believes each individual has the right to monetary freedom.
“The swarm is headed towards us” -Satoshi Nakamoto
