What does blockchain token sale mean? Introduction to the basic steps of token sale

Token sale is the Initial Coin Offering (ICO), which is the first stage of token sale and is a crowdfunding method for blockchain projects. Similar to an initial public offering (IPO) on the stock market, an ICO allows blockchain projects to raise funds by selling digital tokens to early backers before they go fully public. During an ICO, investors can use cryptocurrencies such as Bitcoin or Ethereum to purchase newly created tokens, which is the process of a token sale.

After the token issuance is completed, investors can trade on the cryptocurrency trading platform, and these tokens are also regarded as a new "cryptocurrency". The process of an ICO generally begins with preparations by the project designers, including the development of a white paper, a document that details the project, the technology involved, the terms of the offer, and fundraising goals.

Token Sale Forms and Basic Steps

ICOs come in many forms. For example, the team responsible for hosting an ICO will create a functional blockchain that they will continue to develop over the coming months and years. In this case, users can buy tokens, which will be sent to the user’s on-chain address.

If the blockchain has not been officially launched, the tokens will be issued in a mature blockchain (such as Ethereum). Once the new chain comes online, holders can exchange their original tokens for newly issued tokens on the chain.

The most common approach is to issue tokens on a smart contract-type chain. Again, these operations are mainly done on Ethereum. Today, many applications are following the ERC-20 token standard.

Token sales are often announced in advance, and operating rules will have relevant regulations. These may include an upcoming timeframe, implementation of a hard cap on the number of tokens to be sold, or both. At the same time, a whitelist may be launched, and participants must experience the interaction in advance.

What are the risks of ICO?

ICOs may offer high returns by issuing new tokens, which is extremely attractive. However, the value of various tokens is not equal. There is no guarantee of a positive return on investment (ROI) regardless of cryptocurrency investment.

Although new tokens may provide high returns and attract many investors, ICOs also have many risks:

• Information disclosure issues: The ICO’s white paper may not provide complete or Accurate information makes it difficult for investors to fully understand the true prospects and risks of the project. It is impossible to predict whether this project will be realized.
• Market Volatility and Speculation: The market for new tokens is extremely speculative and their prices may fluctuate significantly over a short period of time. This high volatility increases investment risk.
• Liquidity risk: The market has liquidity risk, and token holders cannot sell and cash out in time.
• Cross-border and regulatory risks: Since cryptocurrencies can be traded across borders, once the project company encounters problems or goes bankrupt, it may be difficult for investors to safeguard their rights and interests, especially if the laws and regulations are unclear. Additionally, ICOs are completely banned in China and South Korea.
• Possibility of fraud and scams: Since the regulatory system of the crypto market is not yet complete, ICOs are easy targets for fraud and scams. Investors may face problems such as opaque investment projects and dishonest management teams.

Therefore, potential investors should conduct in-depth project investigations and fundamental analysis, and carefully evaluate the feasibility of the project, team background, market demand, legal risks and other factors to better protect themselves investment.

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