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Blockchain Development

ICOs Vs Private Token Sales: How do They Work?

written by Nitin Garg | Feb 19, 2022
ICOs Vs Private Token Sales

Decentralization is a trending topic among the tech giants and world leaders. The motto of decentralization is giving power to the ordinary person for all of his actions by replacing systems, hectic rules, and extra charges. Hence, most people accept it. Cryptocurrency is leading the finance world around the globe due to its work based on a unique system known as blockchains. 

Cryptocurrencies are also called tokens and have been used among trading and digital currency to exchange goods and services without the involvement of banks. Initial Coin Offering and Private Token Sales are the essential aspects of the cryptocurrency world. ICO is a type of token sale where you buy a coin before it goes to the market for trading by performing specific actions. Due to the popularity of this method, people often compare ICO Vs Private Token Sales, but one side can be taken by fully understanding the meaning of these words. 

What is Initial Coin Offering (ICO)?

What is Initial Coin Offering (ICO)?

An Initial Coin Offering is the same as Initial Public Offering in industries in the cryptocurrency world. A firm seeking money for a new cryptocurrency development can raise their ICO, and interested investors can put their money as they get a stake in the company or project. Working on ICO development depends on the structure; there are three structures of an ICO: Static Supply and Static Price, Static Supply and Dynamic Price, Dynamic Price, and Static Supply. It is also common for buyers to buy ICO using other cryptocurrencies like Bitcoin and Ethereum. A white paper is released to increase the interest of investors, which carries the essential aspects of the project. 

Anyone with the knowledge of working with good tech can launch an ICO. Doing your homework is the best option before investing your money into any ICO due to deficient regulations. So, research is fundamental if you don’t want to lose your money exponentially. You can read the history of the company and the effectiveness of the project. 

What is a Private Token Sale?

Private Token Sale sells cryptocurrency tokens to a specific organization or person. This type of sales is generally kept private between the investor and the company.

Blockchain companies that hold private sales know which investors to attract to invest in their projects and get a good return on investment.

Private token sales become valuable for both investors and companies as investors receive cryptocurrency tokens at highly discounted prices means when the coins are released, the investors can get high returns. As private token sales have a wide range of advantages, they are also known for excluding average investors. Also, having a high portion of cryptocurrency in the hands of a few investors can lead to a high dump and pump in the cryptocurrency’s price.

A Comparison of Initial Coin Offerings (ICOs) and Private Token Sales

Initial Coin Offering and Private Token Sales are the same family members. In ICO, one can invest in the project before it is published in the market for trading, whereas in Private Token Sales, the investors are chosen by the company. The main difference is that in Private Token sales, the information investors receive is kept confidential.

Initial Coin OfferingPrivate Token Sales
1. Initial Coin Offering is the trending method in the cryptocurrency market for raising funds for a new project. The main idea is to offer crypto tokens to investors and sell them in exchange for cryptocurrency.
2. An ICO has a lot of advantages over regular investing in the crypto market, like a basket of opportunities for upcoming projects, no physical paperwork, the ability to create a community of project supporters, an extra incentive for innovation. 
3. The ICO market is growing exponentially due to its popularity and adaptability. In 2016 the market cap of ICO was 2102 Million USD, but in 2021 it was 23125 Million USD.
4. Buying a token in ICO is a simple process, and you can quickly become the owner of tokens by just following the simple steps. 
5. Raising funds through ICO is relatively easy for the company to get trusted investors in their project. 
6. Early investors can benefit from an ICO because there are good chances of raising its price when the token is launched.
1. Private Token Sales is not beneficial for ordinary investors as it is basically for targeted investors. It is a complex process as it includes multiple rounds of interviews and video calls to make sure the investors align with the project’s goal. 
2. Private Token Sales have their advantages like big bonuses and discounts as compared to crowd sales, high returns when the token is launched in the market. 
3. It is targeted by large investors and gets a good return on their investments. Private Token Sales are unique in themselves as the investors have genuine stakes in the company.
4. Owning a token in a Private Token Sale is like making a deal directly with the higher authorities of the company. 
5. You get significant discounts and bonuses in private token sales compared to presale and crowd sales.
6. There are more chances of buying the token as private sales companies focus on one or two large investors.

How Does an Initial Coin Offering (ICO) Work?

An ICO is a complicated process that requires in-depth knowledge of technology, finance, and tax laws. The main motto of ICOs is turning the decentralized systems of blockchain technology for capital raising. 

Following are the steps involved in the working process of an ICO:

  1. Identifying the Investment Targets: An ICO has the main idea of raising funds for the company. The company research for their targeted investors for a fundraising campaign and creates relevant material for investors’ reference. 
  2. Creating the Token with Unique Ideas: The tokens reflect an asset or utility in the blockchain. The tokens are tradable and volatile. Tokens are just the modification of existing cryptocurrencies. 
  3. Promotion Campaign: After making the token, companies usually focus on promotion campaigns to attract good investors. However, several large online platforms ban the advertising of ICOs.
  4. Initial Coin Offering: At this stage, the investors get the token. The offering may be structured and maybe in several rounds. A company can then use the process from the ICO to launch a new product or service; meanwhile, the investors can expect to use the acquired token to benefit from this product.

How Do Private Token Sales Work?

How Do Private Token Sales Work?

The private token sale is for fishing a large investor to fund the cryptocurrency project. Here are the steps involved in private token sales:

The private token sale is for fishing a large investor to fund the cryptocurrency project. Here are the steps involved in private token sales:

  • You Need to Register Yourself with Cryptocurrency Exchange: For participating in an ICO, Then need to have cryptocurrencies in your wallets like Ether or Bitcoin. You can not participate in ICO using fiat and buying a large amount of bitcoin. Finally You need to go through an online exchange and send your transferred money from the bank account with a cryptocurrency exchange. 
  • Exchange Fiat for Bitcoin or Ether: After the money is transferred into your cryptocurrency exchange account, now you have to exchange your EUR, USD, etc., for the cryptocurrency you want to buy. This is a quick process and takes less than a few seconds to minutes. 
  • Set Up your Wallet: Most of the token sales happen on the Ethereum network due to its smooth transactions and quick response from the servers. The most interactive and broadly accepted Ethereum wallets are MetaMask and MyEtherWallet.
  • Contact the Firm: You can directly contact the firm using LinkedIn, ask them for the tokens, and invest your money directly. You can also contact them using Email and ask them about the paperwork and benefits they offer.
  • Secure Your Token: After receiving your token in your MetaMask wallet or parity- address, make sure to transfer this cryptocurrency balance to a more secure wallet. You need to have some extra Ethereum balance in your wallet to pay for the transaction costs of sending money.

Where You Can Buy ICO?

ICOs are so popular among cryptocurrency enthusiasts that even if you read news online for a few minutes, you will know about an upcoming ICO. They are a new internet craze, and just like other trends, people are going crazy for ICOs. Here is a step-wise guided process to buy tokens during an ICO. There are many famous token sales platforms where you can buy tokens in a few clicks.

  • Register for an ICO: Before buying an ICO, you need to properly research the company and its history. You need to read all the papers related to the project and how long the funding campaign will go. You need to register for the ICO by visiting the companies website and fill all the forms and requirements of the project. 
  • Get Bitcoin or Ether and Transfer it into Your Wallet: To buy an ICO, you need one of the major cryptocurrencies, either Ethereum or Bitcoin, in your possession to participate in the ICO selling event. Bitcoin is like a universal cryptocurrency; cryptocurrency can accept bitcoin almost everywhere in the world. After buying the cryptocurrency, you have to put it into a secured wallet. 
  • Buy the ICO Token: Once you get registered for the ICO campaign and have the required funds available and ready, all you need to do is transfer this cryptocurrency to the campaign’s address. 
  • Participate in the ICO: The primary goal for any ICO campaign is to get your money, so they keep the process as simple as possible.

Where You can Buy Private Tokens?

Companies organize private token sales to get big investors to invest in their project instead of a crowd-sale where they have to wait for multiple investors. It is a straightforward process for the company and the investor. Here are some ways how you can participate in a private token sale.

  • Reading About the Project: The first step towards buying a private token is through research about the company. Read all the papers published by the company and find the unique point which makes the project special from others. 
  • Contact with the Company: You can contact the higher officials of the company using LinkedIn and other social media platforms. Have a meeting with them and finalize everything. 
  • Have a Fair Deal: You should make a deal that is beneficial for you and the company. If the project is attractive, buy it at a fair price and wait for its launch to get a significant discount. 

Private Token Sales or ICO: Which is Best for Me? 

Both of these are just the methods of companies to raise funds for their cryptocurrency projects; it depends on which method you want to go for buying an ICO. Suppose you have a large amount of capital and have deep knowledge about the project. In that case, you can go by private token sales, and if you are a regular investor interested in upcoming crypto projects, you can go by the ICO. From private token sales, companies focus on large investors to raise funds to save time and money on campaigning. With ICO, companies distribute their shares to multiple retail investors and keep the process simple to raise funds quickly. 

Conclusion

Private Token Sales and ICO are just methods of raising funds by organizations for their new cryptocurrency tokens. The company aims to collect capital through these campaigns by giving them attractive offers. It is similar to IPO in the industries, where an industry attracts investors by giving them shares in the project or company. It is a process of mutual growth between the company and the investors. Before investing in ICO, do the proper research on your own about the project and its future.

Nitin Garg

I am Nitin Garg Founder of BR Softech PVT LTD - an Award-winning, app, web & game development company. We are armed with 180+ geeks & 2753 clients worldwide, I have driven by the spirit of entrepreneurship and dream to build a billion-dollar-company.

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