coin offering ico

What Is an Initial Coin Offering (ICO)?

An Initial Coin Offering (ICO) is a fundraising method where blockchain projects publicly sell new tokens to raise capital.

It’s similar to crowdfunding, but instead of receiving products, participants receive newly issued tokens. Typically, the project releases a whitepaper detailing the token’s use case, allocation plan, and vesting schedule (unlock timeline) before opening the sale to the public. Investors usually exchange stablecoins like USDT or native assets such as ETH for the project’s tokens. After the sale, these tokens may be listed and traded on exchanges.

Why Should You Understand ICOs?

Understanding ICOs is essential because participating early can offer access to tokens at lower prices and potential returns, but comes with significantly higher risks.

Early contributors may benefit from discounted prices and additional community incentives such as governance voting rights or discounted fees within the project’s ecosystem. However, ICOs often involve information asymmetry, undeveloped products, and regulatory uncertainty, leading to high token price volatility or even total loss. Knowing how ICOs work helps you evaluate whitepaper quality, fund allocation, and token unlock schedules, reducing the risk of impulsive participation.

How Does an ICO Work?

The standard process involves publishing materials → opening the sale → distributing tokens → enabling liquidity and trading.

Step 1: The project publishes a whitepaper and terms, specifying total token supply, allocation ratios for the team and investors, vesting schedules, fund usage, and roadmap. The whitepaper is the foundation for assessing a project’s credibility.

Step 2: Subscription rules are announced. The project website or smart contract outlines token pricing, minimum and maximum purchase limits, accepted assets (such as USDT/ETH), and the sale window. Some projects use lotteries or first-come-first-served mechanisms to manage participant numbers.

Step 3: Token distribution and vesting. Tokens purchased are transferred to your wallet or exchange account; vesting means tokens unlock gradually over time—such as monthly releases—to prevent mass sell-offs.

Step 4: Liquidity and trading. Projects may provide initial liquidity on decentralized exchanges (DEXes) or apply for listings on centralized exchanges. Liquidity quality impacts price volatility and slippage.

How Are ICOs Typically Conducted in Crypto?

ICOs can take place on project websites, smart contracts, or exchange launch platforms—each with distinct features.

On a website or via on-chain contracts, the project sets up its own sale page and contract address. Users connect their wallets, pay with USDT or ETH, and tokens are distributed per contract rules. This method offers flexibility and transparency but requires users to verify contract safety and address authenticity themselves.

On exchange launch platforms like Gate Startup, the platform conducts basic due diligence, requires KYC (identity verification), and allows users to subscribe with USDT according to set rules. After the sale, tokens are allocated proportionally and become tradable on the platform. This approach offers convenience and centralized information but still requires individual assessment of project quality.

In community-driven fundraising rounds, projects may conduct a small private sale followed by a limited public allocation to foster price discovery and community engagement. Public allocations often represent 5% to 10% of total supply; the rest goes to the team, ecosystem funds, and early supporters.

How Can You Reduce ICO Risks?

A prudent approach is to assess five aspects: materials, team, process, security, and fund management.

1. Review the whitepaper: Focus on whether the token has genuine utility, total supply and inflation mechanics, fairness of allocation and vesting schedules, and whether fund usage is milestone-based.

2. Verify team credibility and compliance: Check team backgrounds, code repositories, update history, legal opinions, and country of registration. Avoid sales that clearly violate local securities regulations.

3. Ensure fundraising process security: Only participate via official contract addresses and domains; prioritize audited contracts. Start with a small test transaction to confirm correct distribution.

4. Manage funds and unlocks carefully: Diversify your investment—don’t go all-in. Track token unlock schedules to avoid buying at local peaks or ignoring sell pressure around large unlock events.

5. Use platform safeguards: When participating via Gate Startup or similar platforms, read all subscription/distribution rules, vesting arrangements, refund/failure handling mechanisms in advance. Keep screenshots and transaction hashes for future reference.

What Are the Latest Trends and Data About ICOs?

This year, public ICOs remain scarce with most fundraising shifting toward regulated or platform-based channels.

Industry trackers show that public ICOs raised under $1 billion in the past year, with most projects raising between $3 million and $8 million each (as of Q3 2025; aggregate of platform and on-chain data). While methodologies vary across sources, total ICO volumes are well below previous cycle highs.

Throughout 2024, public ICOs raised an estimated $1–1.5 billion in total across several dozen events; in 2025 more capital has shifted towards exchange Launchpads and IEOs for improved compliance and user experience.

On the regulatory side, the EU’s MiCA framework enters phased implementation in 2024; by 2025 it enforces stricter requirements for whitepaper disclosures and marketing transparency. This pushes more projects toward regulated launch platforms and reduces purely self-hosted public ICOs.

From a user perspective, data from leading exchange launch platforms shows persistent oversubscription in 2025—individual rounds regularly attract tens of thousands of participants with tens of millions of USDT locked up. Low allocation rates (“low win rates” and “high oversubscription ratios”) are becoming the norm for platform-based sales.

What Is the Difference Between ICOs and IEOs?

An IEO (Initial Exchange Offering) is organized and reviewed by an exchange; an ICO is typically a self-initiated public fundraising event by the project itself.

IEOs involve subscription, distribution, and listing directly through an exchange platform that handles compliance checks, technical audits, fund custody, and distribution—offering a more standardized user experience. ICOs usually take place on project websites or smart contracts with risk evaluation left largely to participants themselves.

The main differences lie in platform involvement and audit depth, fund custody and listing certainty, fee structures, and community building pace. IEOs tend to get listed faster with more standardized processes but still carry risks; ICOs offer more freedom and earlier community participation but require thorough due diligence and stronger risk awareness.

Related Terms

• Initial Coin Offering: A fundraising method where projects issue new tokens in exchange for capital; investors receive project tokens.
• Tokenomics: The design of token distribution, circulation mechanisms, and incentives that determine long-term project value.
• Smart Contract: Program code that automatically executes on the blockchain without intermediaries.
• Gas Fees: Transaction fees required to execute operations or contracts on blockchain networks.
• Liquidity Pool: Pairs of tokens supplied by users to decentralized exchanges that facilitate asset swaps.

FAQ

What do you need to participate in an ICO?

To join an ICO you typically need a digital wallet, relevant cryptocurrencies (usually ETH or BTC), and identity verification documents. First, download a supported wallet app; purchase sufficient cryptocurrency for investment; then complete KYC verification on the project’s official site. It’s recommended to start with a small test transaction before making larger commitments.

How can you evaluate an ICO project?

Key factors include team background, technical whitepaper quality, reasonableness of fundraising targets, and fund usage plans. Check if the team is publicly disclosed, whether code is open source, and if reputable investors are backing the project. Monitor project updates on established platforms like Gate; don’t rely solely on marketing promises—look for real technical progress and feasibility.

When can ICO tokens be traded?

Token trading depends on the project’s listing schedule. Usually after an ICO concludes, it takes 1–3 months for blockchain deployment and exchange listing setup. During this period tokens are locked and non-tradable; once listed (e.g., on Gate), they can be bought or sold freely. Always review the token listing timeline before investing and be prepared for longer holding periods.

What do “soft cap” and “hard cap” mean in an ICO?

The soft cap is the minimum fundraising target needed for a project to launch; once reached, development proceeds. The hard cap is the maximum amount accepted—sales stop once it’s reached. Soft caps ensure enough capital for development; hard caps prevent overfunding that could dilute token value. If an ICO fails to hit its soft cap, investors are usually refunded—making these metrics critical for risk assessment.

Why are ICOs considered high-risk?

ICOs are high-risk primarily due to three factors: potential exit scams by teams, failure in technical development halting projects entirely, or steep price drops after listing. Additionally, early-stage projects often lack regulation and transparency—making scams common. Investors should conduct thorough research, limit investment size, prepare for losses mentally—and avoid gambling mindsets.

References & Further Reading

• https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp
• https://en.wikipedia.org/wiki/Initial_coin_offering
• https://www.nasaa.org/wp-content/uploads/2018/04/Advisory-ICOs-NASAA1.pdf
• https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/crypto-assets-guide/crypto_assets_guide/chapter_3_crypto/35_initial_coin.html