A token sale refers to the initial offering of a cryptocurrency token to a private pool of investors before it officially goes on the market.
What is a token sale?
A token sale is the initial stage of token offering before the cryptocurrency becomes publicly available for everyone to trade in. There are several types of token sales; however, probably the most popular of them is an initial coin offering (ICO). An initial coin offering allows early adopters and investors to purchase a new cryptocurrency token before going live on international exchanges. ICOs usually require the investors to perform specific actions, like lock up a portion of the tokens they receive.
Token sales are a very important mechanic in the early stages of all new cryptocurrencies. As the abundance of tokens on the market grows, token sales allow developers to introduce investors to their projects early on. Not only that, token sales are the most popular way for new projects to secure the funding they need to keep on developing their product.
As more and more altcoins make it to the market, token sales also serve as a tool for investors to weed out what cryptocurrencies they want to invest in. Throughout the duration of a token sale, developers spend a lot of time on marketing and educational sessions in order to introduce their product to a select pool of investors. Some cryptocurrency projects have also tried to use their token sales as a marketing tool by only inviting certain people to participate in the initial stages of investment.
Token sales are always detailed in the whitepapers of new projects, as they play an important role in the further valuation of the tokens. Information about the number of tokens dedicated to initial token sales can also provide insight into how much the project is willing to sell privately in order to raise enough funds to continue forward.
As token sales happen at the very early stages of development for cryptocurrency projects, they are a great way to judge whether a project will be successful or not. Because of that, in the early years of cryptocurrencies, especially in 2017 and 2018, there was a boom in token sales on the market. Investors became overwhelmed with the number of new tokens thrown at them, leading to a crisis on the market.
Nowadays, however, token sales serve as a good way to get a feel for a new token and possibly get the chance to become an early adopter and reap better rewards.