What is an ICO: how crypto projects raise millions of dollars introduction to ICOs

For a crypto startup to launch successfully, securing sufficient funding is crucial. In the early stages, blockchain projects require significant resources, including smart contract development, tokenomics design, and security audits. In a market environment marked by volatility* and increasing regulatory pressure, the crypto sector faces substantial challenges in securing capital.

One of the ways to raise funds is through an ICO (Initial Coin Offering), a form of crowdfunding*, in which crypto projects issue digital assets on the blockchain to attract investment.

An ICO (Initial Coin Offering) is a method of raising capital by issuing tokens on a blockchain. An ICO is a type of token sale in which investors purchase tokens at the earliest stages of a crypto project—often at a price lower than what the tokens will later trade for on exchanges. Over time, these tokens are intended to be used within the project, and investors expect their value to appreciate.

Token sales come in two forms: private and public. These two types differ in the method of token distribution and the audience allowed to participate.

Private token sales are conducted for a limited group of investors—typically large institutional investors, venture firms, or select individuals who have established trust with the project. At this stage, a crypto project may offer tokens at a lower price compared to future public rounds. Private token sales usually occur before the project is ready for a public launch and are often used to build initial liquidity and secure major backers.

Participation in private rounds often includes lock-up obligations, meaning investors cannot sell their tokens for a set period. This mechanism helps maintain token price stability during the early stages.

A public token sale occurs after a project has successfully raised funds in private rounds. At this stage, tokens become available to a broad audience, including retail investors. The token price in a public sale is typically higher than in private rounds due to increased demand and wider market access.

Public token sales often serve as the culmination of a project’s marketing efforts, helping to generate broad interest, attract mass investors, and ensure liquidity once the token is listed on exchanges.

An ICO enables a project to raise funds quickly, but it carries risks. Because ICOs do not require the return of funds if the project fails, investors risk losing their entire investment. It is known that more than 60% of crypto projects become “dead” or lose investor interest after their ICO

To understand how ICOs work in practice, it is essential to examine their core stages:

1. Concept Development. At this stage, the project team develops the core idea, which is usually documented in a technical document known as a White Paper.

2. Investor Attraction. The project team launches a marketing campaign to capture attention through media, social networks, and other channels even before the token sale begins.

3. Token Sale. The token sale itself may be divided into multiple phases. It typically starts with a pre-sale (Pre-Sale or Pre-ICO), where tokens are offered at a discounted price. Then comes the main public sale, during which tokens are provided to a broad audience.

After the token sale, the project may launch its core product, which could be a blockchain or a standalone application. However, in some cases—such as meme coins—the project may not have a functioning product at the time of the sale.

To purchase tokens during an ICO, investors typically use the native cryptocurrencies of the blockchain on which the ICO is conducted (e.g., ETH, BNB, SOL). In some cases, stablecoins like USDT or USDC are used.

Unlike other fundraising models, an ICO allows a project to sell tokens without external approval. This gives the team flexibility in setting token prices, making ICOs one of the simplest and fastest ways to raise capital. However, this level of freedom also opens the door to significant fraud risks.

Statistics show that around 30% of ICO projects conducted between 2013 and 2019 were scams. This led regulators to tighten oversight of the ICO sector. In countries such as China and South Korea, token sales have been banned, and many online platforms—including Baidu, Tencent, Snapchat, and Yandex—have prohibited ICO advertising.

One of the most successful ICO examples is Ethereum, which became the leading altcoin and ranks second in market capitalization after Bitcoin. As of September 2025, Ethereum’s market capitalization is close to half a trillion USD.

Ethereum was the world’s first project to launch a public token sale, raising $18 million for $0.40 per token. Since then, Ethereum’s price has increased by more than 10,000×, reaching $4,100 and nearly $5,000 at its peak.

Although hundreds of other ICO projects raised more money, none have replicated Ethereum’s long-term success. In 2017, ICOs saw a massive boom, with total fundraising reaching $6.1 billion.

Although ICOs were the first form of token-based fundraising, several alternative models later emerged, each with distinct features.

Initial Exchange Offering (IEO) —а token sale conducted on a centralized exchange. Unlike a traditional ICO, a project must pass exchange due diligence, and participants often need to undergo identity verification (KYC).

Initial DEX Offering (IDO) —а token sale conducted on decentralized exchanges (DEX). After the sale, a liquidity pool is created, allowing immediate trading of the tokens on the DEX.

Security Token Offering (STO) —а token sale in which the tokens are classified as securities, such as tokenized shares. STOs comply with strict regulatory frameworks.

Initial Twitter Offering (ITO) —а token sale performed via the social network X (formerly Twitter) using the Mask Network protocol, enabling token launches directly within the platform.