What is a Token Sale?

What is a token sale?

A token sale, sometimes called an Initial Coin Offering (ICO), is the first stage of a token offering, where a group of buyers become the first to reserve a portion of the project’s token supply. 

Function

Token sales may serve one or more of the following functions:

• A method for distributing tokens to a community of participants
• A way to align the interests of a community behind a new project
• A way to fund a project’s early development

Participation

Buying in a token sale typically entails registration or “whitelisting” via the project’s website. This often involves a Know-Your-Customer (KYC) procedure, where buyers are filtered to ensure the token sale complies with local regulations. Whitelisted buyers are eligible to purchase in the sale when it goes live and orders are typically accepted on a first-come, first-serve basis.

Method of Payment

Major cryptocurrencies such as Bitcoin, Ethereum, and U.S. dollar stablecoins like USDT and USDC are the most common methods of payment for token sales. In some cases, payment is accepted in local currencies like dollars or euros.

Use of Funds

Funds received in a token sale are often converted to U.S. dollar stablecoins and held in the project’s treasury. From there, the funds are used to pay project-related expenses such as compensation for developers, bounties for project-related tasks, marketing, and so on.

Performance

In many cases, participation in a token sale has been extremely lucrative.

Let’s look at some notable examples:

Want to know more about token sales?

Read this complete guide.