For ICOs how much should the crypto coin creators hold on to? More or less than 50%?

Answered at Nov 16, 2024

Token Allocation in ICOs

When launching an Initial Coin Offering (ICO), determining how much of the token supply the creators should retain is crucial. This decision impacts investor confidence, project sustainability, and market dynamics.

Ideal Token Retention

Less than 50% is advisable. Retaining more than 50% of the tokens can be seen as a red flag. It suggests potential greed and raises concerns about the project's intentions (Cryptopotato). A balanced approach aligns the token distribution with the project's roadmap, ensuring that each phase or milestone receives adequate funding.

Case Studies

  • Solana (SOL): Allocated 37% of its total supply to investors across four rounds of token sales. This strategy supported network development and maintained investor interest (Maxya).

  • Coin 98 (C98): Offered only 5% of their total supply to investors. This limited allocation can create scarcity, potentially driving up demand and price post-ICO (Maxya).

Distribution Strategy

Token distribution should be transparent and strategic. A well-planned distribution links tokens to project milestones, ensuring funds are available when needed. This approach builds trust with investors and aligns with long-term project goals.

  • Team Allocation: Typically, no more than 4% of the total supply should be allocated per team member. This prevents any single individual from having too much control, which could lead to market manipulation (Maxya).

  • Vesting Periods: Implementing vesting schedules for early investors can prevent immediate sell-offs, stabilizing the token price post-launch. A vesting period of 2 weeks to 3 months is common (Maxya).

Market Sentiment and Valuation

Market conditions influence ICO success. During bullish periods, projects might set high valuations despite having minimal product development. This speculative environment can lead to oversubscription, but it also risks overvaluation (Maxya).

Conclusion

For ICOs, creators should aim to hold less than 50% of the token supply. This strategy fosters trust, aligns with project goals, and mitigates risks associated with market manipulation. By carefully planning token distribution and implementing vesting schedules, projects can enhance their credibility and attract more investors.