ICOs: ICO Token Sales
ICO token sales are a way for blockchain projects to raise money by selling tokens. Understanding token distribution, sale mechanisms, and risks is key.
Initial Coin Offering (ICO) Token Sales: How do these actually work?
Introduction
ICO token sales are a way for blockchain projects to sell tokens to raise money. This section explains how token sales work, including how tokens are distributed and sold, and what you should consider if you're thinking about participating.
Token Distribution
Total Token Supply
The project team decides how many tokens to create. This number affects how valuable the tokens are.
Token Allocation
- ICO Allocation: Some tokens are set aside for sale during the ICO.
- Reserved Tokens: Tokens may be kept for future use, like development or partnerships.
- Community Airdrops: Some tokens are given away to build a community around the project.
Sale Mechanisms
Fixed Price Sales
Tokens are sold at a set price. You send cryptocurrency to buy tokens at that price.
Dutch Auctions
The token price starts high and goes down over time. You buy tokens when the price is right for you.
Interactive Coin Offerings (ICOs)
The token price changes based on how many people want to buy. This tries to make sure everyone gets a fair price.
Considerations and Implications
Token Pricing
The price of tokens is important. It needs to be attractive to buyers but also raise enough money for the project.
Vesting and Lock-up Periods
Some tokens are locked for a while before you can use them. This helps keep people interested in the project for the long term.
Investor Participation
- Whitelisting: You may need to sign up to buy tokens.
- Contribution Limits: To make sure more people can buy, there might be a limit on how much you can buy.
- KYC/AML Compliance: You might need to provide identification to buy tokens to prevent illegal activities.
Conclusion
ICO token sales help blockchain projects raise money. Understanding how tokens are distributed, sold, and what to consider before buying is important for newcomers. By learning from examples and understanding the process, you can make informed decisions about participating in token sales.
This article takes inspiration from a lesson found in 15.S12 at MIT.