9 Token Distribution Methods
This post introduces Airdrops, ICO, Reverse ICO, IEO, IDO, DAICO, ETO, STO, and SAFT.
The 9 primary token distribution methods are:
1. Airdrops
An airdrop is a marketing activity by a new crypto project. A small amount of crypto is sent out for "free" to increase awareness. It's not entirely "free" as you may need to do some promotional work like retweeting a post, sharing a link with your network, etc. If you want to bypass this work, you can signup for automated services.
2. Initial Coin Offering (ICO)
In an ICO, investors fund a blockchain project in return for tokens which are expected to increase in value over time. The funding is based primarily on information provided by the project’s whitepaper, website, and social media accounts.
3. Reverse ICO
In a reverse ICO, an existing, established real-world business issues a token to decentralize its ecosystem, and raise funds.
4. Initial Exchange Offering (IEO)
An IEO is very similar to an ICO. The only difference is that the funding is based on a crypto exchange.
5. Initial DEX Offering (IDO)
In an IDO, the tokens are launched through a decentralized exchange (DEX)
6. DAICO
A DAICO combines the characteristics of a Decentralized Autonomous Organization (DAO) with that of an Initial Coin Offering (ICO).
A DAICO can make an ICO more secure by involving investors in the initial project development process. It enables token holders to vote for the refund of the contributed funds if they are not happy with the progress being made by developers.
7. Equity Token Offerings (ETOs)
In an ETO, the investors get pro-rata ownership in the company and dividend and voting rights.
8. Security Token Offerings (STOs)
An STO is a fundraising model in which the tokens being sold are classified as securities.
This means that the tokens are subject to securities laws and regulations, and must be registered with the appropriate regulatory authorities.
STOs are often used to raise funds for projects that are backed by real-world assets, such as real estate, commodities, or intellectual property, and the tokens represent ownership or investment interest in the underlying assets.
STOs are becoming increasingly popular as a way for companies to raise capital in a compliant and transparent manner, and are seen as a potential alternative to traditional forms of securities issuance, such as initial public offerings (IPOs).
9. Simple Agreement for Future Tokens (SAFT)
SAFT is a legal framework used in ICOs to ensure compliance with securities laws.
A SAFT is a contract between a company and an investor, in which the investor agrees to purchase tokens at a future date, once the tokens have been fully developed and are ready to be distributed.
The investor is typically required to pay a certain amount of money upfront, in exchange for the right to receive the tokens at a later date. The SAFT framework is designed to provide a clear and straightforward way for companies to raise funds through ICOs while complying with securities laws.
During the preparation of this work, the author used ChatGPT in order to make the post more engaging. After using ChatGPT, the author reviewed and edited the content as needed.