Allotment Definition
In the context of cryptocurrency and blockchain, allotment refers to the distribution of tokens to investors during an Initial Coin Offering (ICO) or token sale event. This distribution can be in pre-determined portions which is usually based on the investment made by each participant.
Allotment Key Points
- Allotment is a process in which the tokens or coins from an ICO are assigned and distributed to the investors.
- This term is also frequently used in equity markets, to describe the allocation of shares during an Initial Public Offering (IPO).
- The number of tokens an investor receives is based on the percentage of the total investment made to the ICO.
- This process is an integral part of the entire ICO event, ensuring fair distribution among participants.
What is Allotment?
The term “allotment” primarily relates to the way in which participants receive their tokens after investing in an ICO. Just as how shares are allotted to investors during an Initial Public Offering (IPO) in traditional financial markets, in the crypto space, tokens are allotted based on the amount of capital each investor has contributed.
Who Uses Allotment?
Firstly, the entities who organize the token sale or ICO use the allotment process to divide and distribute their tokens among all investors. On the other hand, the investors who participate in these token sales receive the tokens based on the system of allotment.
Where is Allotment Used?
Allotment is a critical mechanism used in token sales or ICOs, which primarily takes place on blockchain platforms. These events are typically organized and run by new blockchain projects or existing ones seeking to raise funds for expansion or a new venture.
When is Allotment Done?
Once an ICO event has ended and the project has successfully raised the targeted funds, the distribution or allotment of tokens to investors takes place. The timeframe could vary depending on the terms and conditions set by the project’s team.
Why is Allotment Important?
Allotment is crucial as it facilitates the fair distribution of tokens to investors, ensuring each participant receives an amount that corresponds to their contribution. This process encourages wider participation in ICOs, as investors have the assurance of fair and proportional receipt of tokens.
How is Allotment Performed?
The allotment process begins once the ICO ends. All investments made are verified and the total investment pool is computed. Based on the individual investment proportion, tokens are then distributed to each investor’s cryptocurrency wallet. This process is mostly automated, thanks to the smart contracts used in most blockchain platforms.
