Eternity Law International — News — What is a Crowdsale

What is a Crowdsale

Published:
May 2, 2018

WHAT IS A CROWDSALE OR WHY DOES IT NEED FOR ICO COMPANY?

Crowdsale  – is a collective cooperation of people, which consists in unification of their money or other resources with the purpose of financing start-ups, projects, campaigns of other people or organizations that include to ICO.

In contrast to the traditional crowdfunding, сrowdsale does not pre-sell you a gadget or promises to put your name in the titers of the film. Instead, it sells something to you, often in a blurry formulation that grants you the right to use the services of the project – a token.

Over the past few years, crowdfunding has become a way of generating the money that are needed to reorganize ideas into reality. Sites such as Kickstarter and Indiegogo appeared as ways to attract funding sources in the form of donations. Nowadays, the crypto-currency world has generated tokens, as another form of fundraising.

WHAT IS A TOKEN?

A token is a digital code stored on your computer or mobile device.

Tokens are designed to enable you to participate in a project that will eventually be launched as a result of the crowdsdale. Depending on the service offered by the project, the token will serve as a kind of access to this service.

If, for instance, a project is an application that allows you to find travel partners without using a central website, you can use tokens to pay for travel.

Vice versa, if you own a vehicle and can give someone a lift, it can be paid by tokens.

Thus, tokens are a kind of currency for use within a particular online service.

As a rule, the crowdsale occurs before the project is officially launched.

It is designed to generate funds for project development, helping to pay for the work of software developers, to cover marketing costs and other things necessary to launch it.

It can also be used to assess interest in a particular project. If no one buys tokens, then the company developing the project may want to review its offer.

The most interesting thing is what happens to the tokens later. In many cases, they will be bought and sold on the cryptocurrency stock exchange, acquiring their own market value regardless of the project for which they are used.

This is another way to encourage early contributors. They can buy tokens because they believe in the potential of a particular online service. If the project becomes as successful as they think, then the tokens can increase in value, and eventually investors will get a big profit.

TOKEN LEGALITY

In the traditional investment world, there are rules that regulate who can invest in a young start-up company. Regulators also issue legal acts on the issue of financial securities, such as, for example, company shares.

However, should tokens be classified as securities and therefore regulated?

At the moment, the position on this issue is not clearly defined, and each case will be evaluated on its merits.

The unregulated tokens are one of the dangers in the concept of crowdsale, since there is as yet no legal responsibility in this area. A company can sell many tokens, and then collapse because of poor management, or simply disappear.

Nevertheless, thousands of projects continue to enter the ICO, successfully selling out their tokens, and crowdsale becomes one of the most popular instruments for attracting investments in a short time.

Eternity Law International specialists will help you quickly create an ICO project of any complexity, and will lead it from the beginning to the end of the required period of work. To learn more about the benefits of cooperation with the company, please contact us through the Contacts section.

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