What is an initial coin offering (ICO)?

An Initial Coin Offering (ICO) is a fundraising method used by cryptocurrency and blockchain-based projects to raise capital. It is similar to an Initial Public Offering (IPO) in traditional finance, but instead of offering shares to investors, ICOs offer digital tokens or coins.

During an ICO, a project or company creates and sells a specific number of tokens or coins to early investors or supporters in exchange for established cryptocurrencies such as Bitcoin or Ethereum. These tokens typically represent a form of utility within the project’s ecosystem or may have investment potential if the project succeeds.

ICO participants invest in the project by purchasing these tokens, often at a discounted price during the early stages. The funds raised through the ICO are then used to finance the development of the project, including technology development, marketing, and operational expenses.

ICOs gained significant popularity during the cryptocurrency boom of 2017, as they provided a way for blockchain startups to raise funds quickly and efficiently. However, due to regulatory concerns and the prevalence of scams and fraudulent projects, ICOs have faced increased scrutiny in many jurisdictions.

It’s important to note that ICOs are distinct from Initial Exchange Offerings (IEOs) and Security Token Offerings (STOs), which have different characteristics and regulatory considerations.