Crowdsale is the main stage of an ICO and the main fundraising event where a company sells a portion of issued tokens in exchange for the cryptocurrency, such as Bitcoin or Ethereum and gathers funds for the development of the project.
Differences from a Pre-ICO and Private Sale
As opposed to a Pre-ICO or a Private Sale, crowdsale is the primary fundraising event during which the company sells its tokens to collect enough capital for successful development of the project.
Anyone is able to participate in the Crowdsale and become an investor in the project, unlike Private Sale where only selected investors are able to participate. Certain ICOs feature an additional Whitelist stage in which case only those investors who have signed up for the whitelist are about to take part in the main Crowdsale
Usually, Crowdsale takes place after a successful Pre-ICO or Pre-Sale which was set to collect funds for the marketing of the main Crowdsale. Because it is considered less risky, usually the tokens are sold at a higher price or with a smaller bonus.
How to participate in a crowdsale
Usually, anyone is able to participate in a Crowdsale by merely creating an account on the companies website and sending a certain amount of cryptocurrency to a provided public address. In exchange, the company associates a specific number of tokens with the investor’s account. Those coins are then issued to a personal wallet that the investor specifies or to a wallet that the company creates for the investor. In the event, if the Crowdsale ends unsuccessfully, all invested cryptocurrency should be returned to the backers.
Crowdsale is considered successful if the project manages to collect enough capital for further development, which is measured by reaching or not reaching a soft-cap.
Investors participate in Crowdsales with the hope that as the company grows and releases products, it’s tokens will rise in value, hence providing profit for the investor who can then sell them at a much higher price than at which they were bought. However, it should be noted that even though select tokens showed excessive growth post-ICO, most of the tokens decrease in value after the Crowdsale ends. Therefore, Crowdsale investments are considered extremely risky.