ICO (Initial Coin Offering) is a type of crowdfunding event in which a new cryptocurrency project raises capital by selling its new digital coins or tokens to early investors in exchange for other cryptocurrencies or fiat-currency.

The IPO of the Crypto World

An ICO is often compared to a traditional Initial Public Offering (IPO), where a company raises money by selling its shares to the public for the first time. However, unlike an IPO, an ICO does not give investors an ownership stake in the company. Instead, investors receive the project's native tokens, which may be used to access a future service or as a form of governance.

The ICO model was a popular way for new blockchain projects to raise money quickly and bypass traditional venture capital funding. To launch an ICO, a project typically releases a whitepaper that outlines its technology, business plan, and goals. Investors then send ETH, BTC, or other cryptocurrency to a smart-contract, and the new tokens are distributed to their wallets.

The Rise and Fall of ICOs

The ICO boom of 2017 brought a massive influx of capital into the crypto space. However, due to a lack of regulation, many ICOs were scams, leading to significant losses for investors. This led to increased regulatory scrutiny and a decline in their popularity.

The ICO model has since evolved into more regulated and secure forms of crowdfunding, such as an Initial Exchange Offering (IEO) or an Initial DEX Offering (IDO). While an ICO can still be a viable way to raise funds, investors are now much more cautious and look for projects that have been vetted by a reputable platform.