What is a Pre-Sale?
Pre-sale, also known as a private sale or pre-ICO, is a fundraising method used by cryptocurrency and blockchain-based startups to raise capital for their projects before they launch a public Initial Coin Offering (ICO). In a pre-sale, a limited number of tokens or coins are sold at a discounted price to a select group of investors, typically high net worth individuals, venture capitalists, and institutional investors.
The purpose of a pre-sale is to provide early funding for a cryptocurrency project and to generate buzz and interest around the project ahead of the public ICO. Pre-sale participants are often given priority in the ICO and may receive bonuses or discounts on their investment, which can make pre-sales a more attractive investment opportunity for those looking to get in on the ground floor of a new cryptocurrency project.
Pre-sales typically have a minimum investment threshold, and the tokens or coins sold in the pre-sale are usually subject to certain restrictions, such as lock-up periods or transfer restrictions, until the public ICO takes place. This helps to ensure that pre-sale participants are committed to the success of the project and prevents them from quickly selling off their tokens and disrupting the market.
One of the benefits of pre-sales is that they provide a way for cryptocurrency and blockchain-based startups to raise capital without having to go through the time and expense of a public ICO. This can help to speed up the development process and bring new projects to market more quickly.
However, pre-sales can also have some drawbacks. They can be subject to scams or fraudulent schemes, and investors may not have the same level of information or protections that they would in a public ICO. Additionally, pre-sales are often only open to a select group of investors, which can make them less accessible to the general public and can result in a concentration of ownership among a small group of individuals.
Simplified Example
A pre-sale is like getting a special invitation to buy a toy before it goes on sale to everyone else.
Imagine your favorite toy store is about to release a new toy, but before it goes on sale to everyone, the store sends out special invitations to a select group of people. These special people get to buy the toy before anyone else and at a discounted price.
In the same way, in a pre-sale for a new product or service, a select group of people get the opportunity to buy it before it's available to the general public, and often at a discounted price.
It's like getting the first pick of a brand new toy, which can be exciting and give you a chance to get a good deal. Just like with any purchase, it's important to carefully consider the product or service and make sure it's something you really want before buying it during a pre-sale.
History of the Term Pre-Sale
The term "pre-sale" within the realm of cryptocurrency gained prominence around the mid-2010s during the initial coin offering (ICO) boom. It refers to the practice of offering digital tokens or coins to select investors or a restricted group before the public ICO or token sale. This strategy aimed to attract early investors, typically offering tokens at a lower price, sometimes coupled with bonuses or incentives. Notable instances of pre-sales include projects like Mastercoin in 2013, Ethereum in 2014, and various other cryptocurrencies that followed. These pre-sales were instrumental in funding the development of new blockchain projects but often sparked debates regarding fairness, as some argued it provided advantages to a select few and potentially excluded broader community participation in the initial stages of a project. Despite criticisms, pre-sales remained a common practice within the ICO landscape, influencing subsequent fundraising models within the cryptocurrency space.
Examples
Telegram Open Network (TON): Telegram Open Network (TON) is a blockchain platform that utilized a pre-sale to raise funds for its development. In 2018, Telegram conducted a pre-sale of its Gram token, offering early investors the opportunity to purchase tokens at a discounted price before its public launch. The pre-sale was highly successful, raising over $1.7 billion from a select group of investors. The pre-sale allowed Telegram to secure funding for the development of its platform and provided early investors with the opportunity to purchase tokens at a discounted price.
Filecoin: Filecoin is a decentralized data storage platform that utilized a pre-sale to raise funds for its development. In 2017, Filecoin conducted a pre-sale of its token, offering early investors the opportunity to purchase tokens at a discounted price before its public launch. The pre-sale was highly successful, raising over $200 million from a select group of investors. The pre-sale allowed Filecoin to secure funding for the development of its platform and provided early investors with the opportunity to purchase tokens at a discounted price.
The DAO: The DAO (Decentralized Autonomous Organization) is a decentralized investment fund that utilized a pre-sale to raise funds for its development. In 2016, The DAO conducted a pre-sale of its token, offering early investors the opportunity to purchase tokens at a discounted price before its public launch. The pre-sale was highly successful, raising over $150 million from a select group of investors. The pre-sale allowed The DAO to secure funding for the development of its platform and provided early investors with the opportunity to purchase tokens at a discounted price. The DAO was one of the first decentralized investment funds and paved the way for the development of other decentralized investment funds that utilize a pre-sale model.