What Is a Token Launch? – Everything You Need to Know

A token launch is where a project creates and releases its tokens to the cryptocurrency market. While the terms TGE, ICO, and token launch can be used interchangeably, TGEs are often utility token launches, and ICOs are commonly security token launches.

A token launch is more than just the generation of a new token. There are complex technical aspects involved in launching token-based or blockchain projects. In addition, developers need to heavily market the token, such as with airdropping campaigns, to build support and awareness, gain users, and generate funds to ensure the project’s future.

Since the ICO boom, which replaced traditional capital raising or crowdfunding strategies, token launches have evolved and can take several routes. A token launch strategy is usually defined by the token’s purpose. For example, a meme coin token sale focuses on selling the meme token. In contrast, Ethereum’s massive ICO of 2014 raised awareness and funding for the development of the blockchain network that now hosts thousands of ERC-20 tokens and applications.

Initial Coin Offering (ICO)

ICOs emerged as a way for crypto and blockchain projects to raise capital by selling tokens. There have been thousands of ICOs, and around 80% of those that took place in 2017 emerged as scams. That said, successful ICOs include the launches of Ethereum, NEO, EOS, Cardano, and Polkadot.

Initial Exchange Offering (IEO) 

Alternatives to the ICO have grown in popularity in recent years, including initial exchange offerings (IEOs) and launchpad token launches. These token launches take place on a trusted third-party website or a crypto exchange that performs a level of due diligence before listing and promoting a token launch. The Binance Launchpad, for instance, is a platform to launch IEOs in a secure environment, which provides projects with exposure to millions of Binance users. Launchpad projects can receive support from Binance experts and must provide access to the token sale must-haves like the whitepaper, website and research report. Launchpad tokens go on to be listed on the Binance exchange for trading.

Security Token Offering (STO)

Security token offerings (STOs) are like ICOs, but the tokens are considered securities and, as such, are subject to regulation. Security tokens represent ownership of tangible or intangible assets such as equity in a company, real estate or art.

Initial DEX Offering (IDO)

An initial DEX offering is like an IEO, but the token is listed on a decentralized exchange (DEX), and is either approved by the DEX community or doesn’t have to go through an approval process at all. IDOs are usually for fundraising, to distribute tokens or to build liquidity.

An actual token launch will depend on the project and purpose, the team’s goals and its efforts to make the project successful. The steps can be grouped into pre-launch, marketing, launch and post-launch. However, in reality, there may be many more steps, especially for more technical projects.

Pre-Launch Preparations 

A token pre-launch will consist of detailed planning and technical development work. The project will need to build its website, whitepaper, tokenomics, and token sale terms, and ensure compliance with relevant laws and regulations.

Marketing and Community Building 

Extensive marketing and community building are essential for a successful token launch. After all, investors won’t buy if they’re not aware of the launch, the token, or the project’s benefits. A strong, real community backing is often the key to a credible token launch.

Launch Day

Preparations and marketing will continue through launch day, which is the first real test of a token. Some of the most successful ICOs and token sales raised significant capital in the first few days of the token launch.

Post-Launch Activities

Post-launch, the project will need to deliver on its promises to encourage investors to buy the token and welcome them into the project’s community so they can continue to support it. In the case of utility tokens, applications, and services, the project will want to see investors participating in the platform.

Early Access

Token launches provide investors with an early opportunity to purchase heavily anticipated new tokens. In the case of utility tokens, investors might want to take advantage of the utility offered such as participating in governance and earning rewards or using the token to access the project platform or service. In the case of security tokens, investors may want a first chance to own the asset in the hope the tokens will accumulate in value.

Supporting a Project

Token launches are an investment opportunity as well as an opportunity to support the development of a project and become more involved. Owning the token may allow an investor to participate in network validation or governance, facilitate the network, or even vote in project decisions.

Scams and Weak Projects

There are still many illicit actors in the crypto space which means that token launches and token sales can still be scams or weak projects designed to make the creators a quick buck, without any real benefit to an investor. Tokens can plummet in value immediately after a sale, or the project can simply be pulled or vanish from the market.

Lack of Regulation

Crypto regulation is still evolving and is often either inconsistent or non-existent, leaving investors with no recourse if something goes wrong. Scam projects and illicit actors can easily enter the market and appear to be credible projects.

Market Volatility

Cryptocurrency prices are inherently volatile. Even if a project is credible and has long-term potential, token values can still go up and down in response to market factors and influences.

Technology

As well as scams, there are technological risks. For example, if smart contracts are built incorrectly or have vulnerabilities, the project or exchange is hacked. A token’s value not only depends on the market but also on the success of the project with which it’s connected.

Researching the Project

Token launches and token sales are incredibly risky for investors who must conduct thorough research and due diligence. Research starts with a good knowledge of different types of cryptocurrencies and tokens as well as an understanding of their risks. It also involves an evaluation of the project, including the whitepaper, team, tokenomics, compliance, technical strength and community. Investors should always understand their own risk tolerance and never invest more than they can afford to lose.

Setting Up a Wallet 

Anyone wishing to buy tokens in a token launch from the project’s website, launchpad or the exchange or DEX, will be required to open a crypto wallet if they do not already have one.

Purchasing Tokens 

After thorough research, token purchases can be completed with ease, by following the project or exchange instructions. Investors may need to purchase another cryptocurrency to exchange for the new token.

Today, a token launch can vary in its approach based on the project goals and the recipient audience, leaving investors with several paths to purchase new tokens. With regulation still lacking, there are still many scams, illicit actors, or simply projects that won’t succeed. Our CoinHint analysts would advise investors to always conduct in-depth research, be aware of the risks, and know their own risk tolerance.