Token Distribution

Due to the nature of the industry there are several types of token and it is not unusual for them to be referred to interchangeably. We have highlight 3 main types.

Token distribution best practices

An ICO is used to raise funds and distribute new tokens/coins to investors. Distribution almost always happens after the Public Sale portion of the ICO is concluded. There are no laws governing the way in which an ICO must distribute its tokens. Instead, what could be called “best practices” have been established among ICO companies, and token distribution usually follows these patterns.

Wallet options for distribution

Typically, tokens are distributed one of two ways: 1) to a private wallet, and 2) to a wallet built into a new blockchain technology platform.

In the first case, a user will download a wallet built for the coin/token sold at the ICO. This will be done before the user sends in money to buy from the ICO. The wallet is typically designed by the ICO company, as a place to store and save their coins. In other cases, an existing multi-currency wallet may support the new token, and users can simply download or create an account with that wallet. MyEtherWallet supports all ERC20 tokens, so it is often used as a destination wallet for Ethereum ICOs.

Myetherwallet

In other cases, the new coins/tokens will be released within a new blockchain technology built by the company behind the ICO. This technology may be available as soon as the ICO is concluded, already available before the ICO, or available at some future time. When the technology finally launches, the user will access their account and find their ICO tokens waiting in a personal wallet inside. Sometimes, “placeholder” tokens are sent to investors after an ICO concludes. These will be exchanged for the real tokens when the platform launches.

 

Example distribution allocation

ICOs almost never sell 100% of their total coin supply to investors. Some will be reserved to fund the project; some will be held for slow future distribution; some will go to partners and leadership; some will be paid out as bounty for contributions to the network. It’s important to understand how much of a coin’s supply is distributed at ICO, because large percentages withheld may dilute the price at some future time.

Token distribution quantity and destination is a complex topic, and every ICO is different. Investors should work to understand an ICO’s unique distribution model before investing.

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