Allocation is an allotment of tokens or equity, that may be earned, purchased, or set aside for a certain investor, team, group, organization, or other related entity.
For a crypto team in its whitepaper stages, the executive team or community may work on deciding what allocations of tokens should be divided up into different initiatives and departments, such as development, marketing, operational costs, and so on. If a team has a foundation or other entity that is in control of funds, it may also decide to create an allocation for a token treasury to be utilized as specified by the team or community.
Investors can also receive allocations in rounds of investments. For example, a team may sell allocations of a set “ticket size”, or maximum amount, to early investors in a private sale round. In this case, each of these individual investing parties would own an allocation out of the total amount offered on that particular round of sale. An individual entity may have the potential to hold allocations from multiple rounds of sale, which means they could eventually participate in different stages of an Initial Coin Offering (ICO) or token sale event, with a predefined allocation for each stage.
Team members working on a specific coin, protocol, or project may also receive part of a team allocation as a reward for their work. For instance, these allocations could be paid out all at once at a certain date – such as the date of a token generation event (TGE) – or spread out over time, following a predefined schedule.
In certain situations, the allocations are distributed over time as part of a block reward or over a vesting period or cliff.