Token Warrants are financial instruments, typically issued by a blockchain project or company, that grant the holder the right, but not the obligation, to purchase a specific number of new tokens at a predetermined price (strike price) within a specified timeframe.
Mechanism
Token warrants are often issued as part of a funding round or a strategic partnership, providing future investors or contributors with an option to acquire tokens at a set valuation. When exercised, the warrant issuer creates and delivers new tokens to the holder in exchange for payment at the strike price. The smart contract for the warrant manages the exercise conditions and token minting process.
Methodology
The strategic application of token warrants serves as a flexible capital raising tool and an incentive mechanism in the crypto space. It allows projects to defer token distribution, align interests with long-term stakeholders, and provide a structured way for investors to participate in future token appreciation while managing initial capital commitments. This methodology balances immediate capital needs with future growth potential.
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