How Token Distribution Works?

Token distribution is one of the most critical parts of any cryptocurrency project, defining how exactly tokens will be apportioned among different stakeholders. It will directly affect three major factors of any project: decentralization, user engagement, and long-term success.

First, tokens are generally distributed in events where either an ICO, IDO, or TGE is carried out. The event provides room for the community or early investors to purchase tokens, thus giving funds that are needed for the project. This event's distribution is normally stated on a whitepaper.

Usually, founders and team members get some tokens as payment for the work done and to incentivize further development. However, these tokens are very often subject to some kind of vesting period, in which it is not possible to sell them right away, reducing the risk of an immediate market dump.

Community incentives: Tokens may be issued to reward, stake, or even vote in governance. This will encourage the involvement of users in creating applications that ensure decentralized decision-making.

Tokens may be also reserved for partnerships and the development of ecosystems in order to contribute to fostering various forms of collaboration and reaching out to people around the world.

In other words, token distribution is a process of strategy and balance between investors, developers, and the community in the interest of project sustainability and to create a healthy and decentralized ecosystem.

Thanks

src

~ Nesaty