An Initial Token Offering (ITO) is a fundraising method used in the cryptocurrency and blockchain sector, similar to but distinct from Initial Coin Offerings (ICOs). While ICOs focus primarily on raising funds for new cryptocurrencies, ITOs center around offering tokens that provide intrinsic utility within a specific platform or ecosystem.
These utility-focused tokens can grant investors access to services, functions, or exclusive features, such as reduced trading fees on an exchange. Unlike ICOs, which are often used for crowdfunding, ITOs lean more towards tokenization. A key distinction in the crypto sector is between coins, which operate on their own independent blockchains (like Bitcoin and Ethereum), and tokens, which are built on existing blockchains, typically using standards like Ethereum’s ERC-20.
ITOs have gained prominence due to the tarnished reputation of ICOs, many of which were associated with scams or projects that failed shortly after launch. In contrast, ITOs tend to foster a closer relationship between users and service providers, where the token offers continued access to a service or function rather than just being a tradable asset. This model incentivizes creators to deliver and maintain the utility promised by the token, aligning the interests of developers and token holders.