Over the years, there have been multiple iterations of companies or projects issuing their own token. In all cases, this occurs through a token offering, although the distribution model can differ a bit.
What Exactly Is a Token Offering?
A token offering is a very interesting concept, but can be a bit confusing especially if you are new to blockchain. Token offerings have become a growing trend in the financial services industry. This is primarily thanks to the help of blockchain and cryptocurrency technology. A token offering is a virtual form of investment. At the moment, it is primarily used by startups to raise capital for future development or business affairs.
What makes a token offering appealing to companies is the use of blockchain technology. The technology introduces an extra layer of transparency. In addition, they are able to code the transactional protocol into a blockchain-based contract. These contracts are known as smart contracts. Once funds are allocated, those that relieved those funds will automatically receive tokens on a prorated basis via the predetermined settings. A very convenient business model, approachable by anyone with a basic knowledge of finance. In terms of the technological aspect, applications like the Levolution platform handles it all for you.
What Are the Different Forms of Token Offerings?
The basic Initial Token Offering (ITO) model is the most approachable one. ITOs make use of publicly available technology to help startups raise extra capital with relative ease. The code written in the smart contract takes care of all administrative aspects, including verifying deposits and issued tokens. Perhaps the largest benefit of the ITO is that there are no middlemen involved. Everything can be settled between the token issuer and token purchasers directly.
An Initial Exchange Offering (IEO) extends the basic ITO model by involving the help of exchanges and trading platforms. An IEO makes it simple to attract potential investors, as any user of that exchange can contribute funds to the token sale in question. Additionally, the participating trading platform will often list the token for trading shortly after the token offering. In turn, this creates potential extra liquidity of the token.
Another prominent model is the STO, or security token offering. This model can be embraced by startups and smaller companies, but requires a much stronger focus on regulatory and legislative aspects of the token offering. Especially in the United States, STOs are subject to strict regulation, which explains why there aren’t too many projects exploring this opportunity as of yet.
What Is the Difference Between a Token Offering and an ICO?
In essence, ITO’s and Initial Coin Offerings (ICO) serve the same purpose which is to serve as a mechanism to help companies raise funds. Though they have this in common, there are significant differences that make one far more superior than the other, and those differences begin with their utility.
To launch an ICO campaign, a company usually creates a whitepaper that outlines the premise of the project, the need the project aims to fulfill, the amount of money that has to be raised to fulfill that need, etc. During the campaign, those that support the project itself, purchase virtual coins with fiat or other digital currencies. Generally, the utility of an Initial Coin Offering (ICO) doesn’t extend beyond it serving as a medium of exchange. As seen during the ICO craze in 2017, this created a market for scammers to develop fraudulent campaigns, with no legitimacy behind their ICO projects.
Although a lot of money has changed hands during the ICO craze of 2017 and early 2018, the business model has virtually lost all its traction. It is also worth mentioning that those who invest in ICOs often do so for speculative purposes. On the contrary, buyers of an initial token offering are interested in the business model of the company itself.
As previously stated, a token offering generally has far more use cases than an ICO. Particularly, these tokens can be used to access certain blockchain-based services. That said, token offering projects have to serve a legitimate purpose in the long-run. Otherwise, the token unit itself may not have any value to traders or potential project supporters. In addition, there are various legal compliances, and tokens are verified by compliance tests.
What Is the Difference Between a Token Offering and an IPO?
For those who are familiar with the IPO model, it is obvious this concept applies to stocks of a company being issued to the public. Prior to doing so, these companies need to go through a strict regulatory procedure, as certain requirements will need to be met. The IPO shares are also traded on real-world stock exchanges, rather than strictly online. Being able to buy company equity can be appealing to the right type of investor.
With a token offering, investors can tap into multi-purpose products. In some cases, the token offering may represent company shares, albeit that is an exception rather than the norm. New products and/or services rolled out by the company can be acquired and/or used via these tokens succeeding the token offering. These permission-based assets often represent access to privileges or features within the company’s community or ecosystem.
What are the Advantages of a Token Offering?
Considering how any company providing specific goods and services can explore this option, it is a potential replacement for the current loyalty points systems in place. Customers often tend to forget their loyalty points, instead of maximizing their potential.
It is also a viable option to introduce membership tiers, issue permissible access to content on a platform, or serve as an identity-based authentication system. Using a token offering doesn’t instill the appeal of “currency”, offering companies a lot of leeway in terms of what they want to achieve with these tokens.
There are several use cases of a token, and this is what makes token offerings so special. It grants you an easier route to receive funding for your project.
For token buyers, a token offering is also more legitimate, These tokens are directly correlated to existing services and products offered by the parent company.
Examples and Interesting Use Cases of Token Offerings
Primarily due to their inferior and illegitimate technology, many token offering platforms have come and gone. Among the few token offering incubators that exist, the Levolution platform has held its ground as a keystone application within the blockchain ecosystem.
Levolution is a one-stop-shop for entrepreneurs with the idea of launching their own token offering, even for the less technical ones. Through Levolution’s transformative token offering platform, everyone with an idea can turn it into a reality. Moreover, the platform drastically cuts costs inherent to such an offering. On the Levolution platform, campaigns can be run from start to finish. The platform offers the ability for business leaders to create, launch, market, and optimize their token offerings all in one place.
Two other token offering projects that have made their case as trustworthy applications within this space are Socios and Mintable.
Socios is a recent example of token offerings affecting the sports industry. The company enhances the bond between fans and their favorite team. Owners of fan tokens can vote on team surveys or unlock exclusive rewards and discounts Multiple major teams have signed up already, including FC Barcelona, Team Heretics, and the Professional Fighters League.
Mintable is a viable platform in the ongoing tokenization effort. It is a good way to tokenize business coupons or discounts with ease, and putting them on a blockchain. Tokens can represent whatever the company wants, allowing for seemingly endless customizations. This will help strengthen brand loyalty and give customers very specific benefits.
Token offerings are a modern option for uplifting companies’ ability to secure funding. Moreover, the tokens themselves have many use cases such as loyalty points, discounts, and in-app purchases among other benefits. This is a modern era, and the tokenization of these benefits seems virtually inevitable at this point.
Levolution marries the latest blockchain technology with a groundbreaking token offering platform. Overall, our mission is to aid blockchain startup companies in breaking through various barriers to entry. We are able to do so by relying on social incubation and our team’s core internal competencies.
Through the Levolution platform, you are now able to leverage the value of token offerings, regardless of your experience. Levolution helps you build, develop, market, launch, and optimize your token offering project. Yes, every single step can be done on our platform.
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