What is Token Sale?
Token Sale is the event through which blockchain startups are raising capital by offering tokens in exchange of cryptocurrencies and legal tender.
Token sale is the event where blockchain startups or crypto startups raise capital by issuing a series of tokens and selling them to early adopters in exchange of legal tender or cryptocurrency.
It is similar to an IPO (Initial Public Offering) with main difference being that most of the Token Sale happens for projects before they have reached maturity or sometimes even before they have been introduced to the market. However, just like in stock market, investors in Token Sale expect the value of their tokens to increase over time as the project becomes mature and starts building value or due to the trading activity.
The other difference between Token Sale and IPO is that IPOs raise money in Fiat Currency (USD, CAD, EUR, INR etc) whereas Token Sales depend on cryptocurrency to raise funds as the fundraising happens on the blockchain.
Token Crowdsales also help startups raise awareness about the product and builds a community of people who are invested or hold the tokens, as the success of the startup leads to a gain for the investors or token holders.
How are Token Sales different from IPOs?
There are significant differences between a Token Sale and an IPO. The investors in a Token Sale are usually early enthusiasts and not professional investors. Token Sales are also not regulated or registered legally by government organization therefore you trust the platform itself while participating in a Token Sale.
Also, IPOs represent the stake in a company though it is not always true for token sale. As a security tokens are the ones that represent stake or debt of a company on the other hand utility tokens represent the license to use the software.