We often see the words pre ICO and ICO during a new blockchain project launches. Sure, it is very easy to distinguish the two things together. Pre ICO means a token sale before the main crowdfunding campaign. But, now you might be asking. An Initial Coin Offering is also a token sale, right?
Why have a pre-sale before a sale? Now everything gets murky. Something that is so easy to understand is not so easy to understand anymore. Today, we will be dissecting the two token sales, down to their very cores. Now we will see what really makes the two token sales different from each other.
Good question. A pre-ICO is a way for the company to raise money for their blockchain project. This is a newer phenomenon that just showed up recently with the wave of the new campaigns. Think of this as somewhat like the California Gold Rush. What this token sale aims for is that the company allows a select few people to buy in before the official crowdsale begins. This raises not a lot of funds for them but this gives the whales an opportunity to stockpile the tokens that they are trying to sell.
So why a pre-sale?
This is usually done by companies to get angel investors. These angel investors do not constitute or may not even reach 10% of the suggested hard cap, but they provide a lot of operational costs for the company while they are still finishing up their white papers or their roadmaps. The money raised with the pre-sale is also usually used in building infrastructure.
So who can avail these and when do they happen?
Pre ICOs usually happen a month or two before the stated Initial Coin Offering but can sometimes happen just weeks before it. Not everyone can be an angel investor. It takes a special kind of person to be able to get in these circles.
First, you need to be approved by KYC or Know Your Customer. They do not just sell these opportunities just to anyone.
Second, the pre-sale usually has a minimum amount and a maximum amount. The usual minimum amount for these would be in the $10,000 range and the maximum amount usually gets capped at $1,000,000 per person.
What are the benefits I get when I join these?
There are a lot of benefits for early adopters like them. People who participate in the pre-ICO usually get a cheaper price per coin and also a higher bonus amount. Aside from that, they get additional perks or merchandise like how Centra gave their angel investors the Titanium card for free or Alpha access to the software or application the company is developing. The bonus percentage usually being offered in here is somewhere in the 50% or higher margin.
Companies hold an ICO for gathering mass investors to adopt their project costs. The money being gathered here will go towards the future development of the company, finishing up infrastructure and basically a working capital for the company. There is usually a set amount needed to be raised and it is called the hard cap.
So who can participate in it?
Anyone can participate in the Initial Coin Offering of a company. The only requirements for you to be able to join it is to create an account on their landing page, deposit any amount you might want to invest in their wallet address and just chill. There is usually no KYC required for participating in the crowdsale. As long as you follow the instructions and make a deposit, you can call yourself an investor.
When does it happen?
It usually happens in between of finishing their infrastructure and on the verge of starting the software or application development. At this point, they would be needing more funds to complete the said project, hence they launch a crowdsale to be able to gather investors.
The crowdsale also usually tends to stay longer, unlike the pre-sale which only lasts for a few days to a week. The usual length of a crowdsale is around 4 weeks, although I have seen some cases where it was cut short because the hard cap was reached like what happened with Electroneum. Electroneum’s sale only lasted 3 weeks as they have reached their hard cap of $40 million by then. In some other cases, it can be extended to somewhere around 5 weeks or 6 weeks if they do not raise enough money.
What are the benefits of joining? Why should I join one?
There are a lot of benefits when you join a crowdsale. First things first, you are supporting a project you believe in and by investing, they give you tokens or coins as an asset which you can sell later.
Second, you get bonuses as well when you join. The bonuses usually get lower every passing week and the price per coin increases every passing week too. It is best to buy in on the first week to get the cheapest price for the coins and also a good bonus percentage. Although it is a little bit lower than the pre-sale ones, you will still make a profit when the coin hits the exchanges.
Third, you get access to the private Beta or the closed Beta launch of the project. If it is an app, you usually get bonus rewards on there too for being an investor. Centra gave out Black and Blue cards for free for their early crowdsale investors and the regular cards for the ones who bought in later.
Those are the subtle differences between an ICO pre-sale and a crowdsale. Basically, there is a trade-off between them. If you want to join a pre Initial Coin Offering, you would need to divulge personal information by doing a KYC and also you would need to put up a higher amount of investment. With that though, you get lower prices and larger bonuses and more perks.
If joining an ICO, they are more lenient on your privacy as they do not need KYC and you can also just invest what you can invest. You also get bonuses, although smaller and have some access to the Beta release of the product. Both will still award you with tokens, and if looking at a profit standpoint, you would easily make the profit with these when the tokens hit the exchanges.
Next time a new blockchain launches, do not be surprised if you see these token sales happening as these are the lifelines of these companies to be able to get their projects off the ground and head towards the moon.