It is the second article from our series about Initial offerings. Read about IEO, IDO, and IGO next.
In total: ICO (Initial Coin Offering) is a crowd sale of tokens of a dApp or crypto-related project in the early development stage. Developers get money to release the product, and investors get tokens that might rise in price eventually. Tokens bought on an ICO do not grant any rules to govern the project if it is not specified.
Rise, Fall, and Resurrection of ICOs
The first successful ICO was Ethereum blockchain crowdfunding. In 2014 Vitalik Buterin and his team raised $18M to fund their research and development. Ethereum (ETH) price used to be $0,31 on ICO, while now it costs $1,100.
After the Ethereum case, the ICO format became famous as a crowdfunding tool for different crypto projects, from simple dApps to blockchain protocols. EOS raised $4,2B, Filecoin — $257M, and Tezos — $232M.
Some researchers believe that people buying Bitcoin and Ethereum to pour them into different kinds of ICOs caused the famous bull run of 2017. That bull run ended with many crowdfunded projects that failed to deliver results. Disappointed investors sold their tokens, and the market crashed.
But in 2021-2022, crowdfunding via ICO became popular again because projects started asking for less money and offering actual products without promising 100x in the first year. Still, very successful ICOs like Tamadoge (TAMA) raised $19M in Q3 2022. TAMA’s price rose from $0,03 to $0,15 in a few weeks.
How ICO Differs From IPO, IEO, and STO
ICO is just a token sale from a project’s website. Often there is no third party to do an evaluation and due diligence, and the tokens they sell might have limited use cases, if not meme coins at all.
IPO (Initial Public Offering) sounds familiar to those who are used to stock markets, but there is a difference. ICO is needed to fund a project in an early stage, while IPO is usually done by established businesses to get more money and scale further.
IEOs (Initial Exchange Offering) is hosted on centralized exchanges instead of separate platforms. But the main difference is that the exchange is responsible for due diligence and listing, so there are fewer chances to buy scam tokens there.
STO (Security Token Offering) is something between ICO and IPO. The company sells tokenized stocks, so there are more regulations, but token holders get more rights to govern the company and share its profits.
How to participate in ICO
First, you need to find an ICO. You can do it by searching “ICO 2022” or by checking some specialized websites:
- ICO Drops — there are lists of active, upcoming, and ended ICOs with the number of funds they raised. By looking at data, an investor might consider the popularity and perspectives of particular projects;
- CoinMarketCap — the most famous crypto market tracker, has a calendar with active, upcoming, and ended ICOs;
- Cryptorank — the most detailed list of ICOs with their ROI, ATH ROI, and other interesting stats.
After choosing the project, follow the link and buy tokens as the instruction on the ICO page says. Some projects offer their tokens on launchpads, some on their own websites, so there is no general guide to participate in ICO.