Crypto glossary
ICO (initial coin offering)
An ICO, or initial coin offering, is a fundraising method in which a project sells newly created tokens to the public, usually before its product exists.
In an ICO, buyers send established cryptocurrencies such as ETH or BTC to the project and receive its new tokens in return, often issued under the ERC-20 standard. Ethereum itself raised funds this way in 2014, and the model exploded in 2017 and early 2018, when hundreds of projects raised billions of dollars with little more than a white paper.
Many of those projects never delivered a working product, and a significant number turned out to be outright scams. Regulators responded: the US SEC took the view that many ICO tokens were unregistered securities and brought enforcement actions against issuers.
Public token sales still exist under other names, such as IEOs run on exchanges or launchpad sales. In the European Union, MiCA now requires a published white paper and imposes rules on public offers of most crypto-assets.
Example
A startup offers 40% of its 1 billion new tokens at $0.05 each, raising $20 million in ETH. Investors receive tokens immediately, while the team's share is locked under a three-year vesting schedule.
Related terms
Latest articles on ICO
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