Future of ICOs: Why Do Companies Want To Use ICOs Even in 2025?
Introduction
An ICO (Initial Coin Offering) is the earliest form of decentralised fundraising crypto startups used. Even Ethereum had an ICO in 2014 where it raised approx. $18 million from the sale of 60 million ether tokens priced at $0.31 each. Today, 1 ETH equals ~$3,200, a jump of 115,537% in 10 years!
Thousands of projects conducted ICOs in 2017-18, allowing retail investors to overtake accredited investors and VCs for the first time. While ICOs earned notoriety for being unregulated and prone to fraud, there's renewed interest in this fundraising method for 2025 as regulatory landscapes evolve.
What is an Initial Coin Offering (ICO)?
Pedro Solimano, in his Defiant article, puts the objective of ICOs into context: '𝑡ℎ𝑒 𝑠𝑖𝑚𝑝𝑙𝑒 𝑚𝑒𝑐ℎ𝑎𝑛𝑖𝑠𝑚 𝑤ℎ𝑒𝑟𝑒 𝑝𝑟𝑜𝑗𝑒𝑐𝑡𝑠 𝑠𝑜𝑙𝑑 𝑚𝑜𝑠𝑡 𝑜𝑓 𝑡ℎ𝑒𝑖𝑟 𝑛𝑎𝑡𝑖𝑣𝑒 𝑡𝑜𝑘𝑒𝑛 𝑠𝑢𝑝𝑝𝑙𝑦 𝑡𝑜 𝑎𝑛𝑦𝑜𝑛𝑒 𝑤𝑖𝑡ℎ 𝑎𝑛 𝑖𝑛𝑡𝑒𝑟𝑛𝑒𝑡 𝑐𝑜𝑛𝑛𝑒𝑐𝑡𝑖𝑜𝑛 𝑜𝑛 𝑒𝑞𝑢𝑎𝑙 𝑡𝑒𝑟𝑚𝑠, 𝑖𝑛 𝑒𝑥𝑐ℎ𝑎𝑛𝑔𝑒 𝑓𝑜𝑟 𝑐𝑟𝑦𝑝𝑡𝑜.'
An initial coin offering is a blockchain fundraising method where projects raise capital from investors in exchange for tokens. The capital raised can be used to develop a new blockchain application, service, or protocol.
ICOs distribute newly launched tokens on a blockchain to a large number of small investors through smart contracts that automate the entire process. During 2014-2020, investors could receive new tokens in exchange for Bitcoin and Ethereum. These tokens either reflected a stake in the project (security token) or could be used to access platform services (utility tokens).
While ICOs were the simplest form of token generation events, they later evolved into IEOs (Initial Exchange Offerings) and IDOs (Initial DEX Offerings). With shifting regulatory landscapes, particularly in the US, ICOs may see renewed interest in 2025.
Some of the most successful ICOs in the history of crypto include names as follows:
List of Most Successful ICOs in the Crypto History
History of ICOs
While Ethereum’s 2014 ICO was the most popular, it wasn’t the first. The first ICO was issued by Mastercoin on July 13, 2013. After Ethereum, DAO successfully raised $150 million in a matter of minutes but lost $50 million to a hack.
The ICO timeline can be divided into three phases:
Early ICO Period - 2014-2017
A small number of ICOs happened during this period. Ethereum, Filecoin, Polkadot, Bancor, EOS, Cardano, Tezos, Sirin Labs, Status, TenX, and Golem raised $5.2 billion.
Bubble Period - November 2017 - January 2018
Thousands of ICOs were launched in a short span and the crypto market capitalisation rose from $180 billion to $835 billion in two months.
Bear Market - February 2018
A huge number of ICOs had either failed or were scams. Many ICOs were under the regulatory radar and the bubble had burst. However, 5 years after the boom, most projects failed to keep their market caps higher than the funds they raised.
Examples:
Success Stories: Ethereum raised $18 million, and its market cap ballooned to $419 billion. Filecoin raised $257 million and is now a $2.6 billion blockchain ecosystem. Polkadot raised $934 million and has a market cap of $9.1 billion.
Failures: EOS was the biggest failure, with an ICo funding of $4 billion but a meagre $890 million market cap.
Source: Satis Research: ICO Fundraising through 2016-2018
Only 43 ICOs, or 9% of the total ICOs, created a native chain.
18% of the ICOs were related to the finance sector, 14% to the entertainment and media industry, 21% to high-tech services, and 31% were related to platform and smart contracts.
25% of the ICOs were held during the ICO bubble period.
44% of ICOs happened during the bear market.
How Does an Initial Coin Offering (ICO) Work?
An ICO offering doesn’t just involve the token launch. There are preliminary steps, such as choosing blockchain, whitepaper, tokenomics, regulatory compliance, etc., before the actual launch. Post-launch, token distribution, marketing, and project development remain crucial.
Key steps in the ICO Process
Key Steps in the ICO Process
Whitepaper
The whitepaper acts as a vision document and technical blueprint for the project. It outlines the objectives, technology, tokenomics, team, roadmap, and risks related to the project. The whitepaper should be written in a transparent and comprehensive manner to attract potential investors.
Token Creation
Most ICO tokens use smart contracts. Traditionally, they were built on Ethereum's ERC-20 standard, but newer chains like Solana, Sui, Base, and Binance Smart Chain are gaining traction. Tokens can be utility-based, representing platform use cases, or security-based, representing a stake in the project.
Number of Protocols Active on Different Blockchains | Source: DeFillama
Marketing
Crypto marketing focuses on community building through:
Tokens can be purchased using various cryptocurrencies, not just Bitcoin and Ethereum.
Project Development
Post-ICO funds must align with the roadmap outlined in the whitepaper. Regular community updates on development progress and platform benefits are essential for maintaining investor confidence.
Advantages and Risks of ICOs
ICOs were one of the earliest modes of cryptocurrency funding. ICOs were a rage until they met their downfall and seem to be surfacing once again in talks and discussions. They come with their share of boon and bane:
Advantages for Investors
Accessibility: If a project was conducting an ICO, it meant anyone from anywhere in the world could participate in the crypto crowdfunding process. The idea of ICO as fundraising on the blockchain meant transparency, zero restrictions on who can invest, and no barriers to entry.
Potential for high returns: A study finds that most ICOs are undervalued and have potential or high returns. Early investors benefit the most when a crypto project does well. During the early boom period, ICOs provided average initial returns as high as 110%. Also, protects offer tokens at discounted prices during the public/private sale of an ICO.
Diversification: While ICOs may be the easiest way for blockchain startup funding, they provide retail investors an opportunity to diversify their investments in ventures beyond traditional stocks and bonds.
For project founders, the benefits of ICOs include availability, a fast capital raising process, high liquidity, return on investment, and minimisation of capital raising costs.
Risks Involved
Regulatory Uncertainty: ICOs, though liberating, were the most unregulated crypto token launches. For instance, Telegram had to halt its $1.7 billion ICO after an SEC (Securities and Exchange Commission) lawsuit on unlawful selling of unregistered securities in 2019. There was no self-regulatory process in place. ICOs were either banned or came under the heavily regulated category of security offerings in many countries.
Scams: The 2017 ICO boom was a rough time when every scamster wanted to milk innocent investors to the last penny. A 2018 study conducted by Satis Research found that 80% of all ICOs were scams, 4% were failed projects, 3% went dead, and 15% saw success. Of still ongoing projects, 4% are dwindling, 3% are promising, and only 7% are successful.
Market Volatility: With no vesting schedules and crooked distribution models in place, the ICO token sales were highly susceptible to market volatility. Mostly, the ICO investors would dump their tokens soon after the launch to reap profits. This caused the prices to fall. Most projects couldn’t even sustain a market cap bigger than the funding they received.
Types of Initial Coin Offerings
There are several types of ICOs, but public token sales and private token offerings are the two broader categories we will talk about here:
Public ICOs: These ICOs allow participation from any and everyone who wants to invest. The barriers to entry are low, making public ICOs highly inclusive and accessible to a large number of retail investors. These ICOs may invite regulatory scrutiny and must comply with regulations such as KYC/AML in different jurisdictions.
Examples: Ethereum, Cardano, Tezos, EOS, etc.
Private ICOs: Private ICOs are exclusive and accessible only to a select group of accredited investors, such as high-net-worth individuals or institutions. Small investors cannot invest in such ICOs as usually there is a minimum investment required and usually the raised capital is large.
Example: Telegram raised $1.7 billion in a private ICO.
ICO Structure
A token/coin structure means the amount of funds you want to raise via the ICO and, for that, how many tokens you intend to distribute among investors. Once the coin structure is determined, the frame for the project is set and aligned.
Types of ICO Structures | Source: Investopedia
There can be several ways to determine the token structure:
Static Pool: This ICO token structure involves a fixed funding goal and a fixed amount of tokens for achieving the fundraising goal. When the number of tokens and the amount to be raised are fixed, the price per token also becomes fixed.
Dynamic Pool: There can be two types of settings in a dynamic pool token structure.
Static Supply and Dynamic Price: When the ICO structure has a fixed supply but dynamic price, the funding goal is fixed, but the number of tokens to be distributed remains flexible. The effective price of tokens will be a factor in the amount of funds raised.
Dynamic supply and Static price: When the price is fixed, and supply is flexible, the effective funding raised would depend on the supply of tokens sold during an ICO. In this kind of structure, funding becomes the factor of dynamic supply.
How to Participate in an ICO?
ICO investments can be rewarding and profitable, but users must be cautious and aware of the risks in crypto investments. In order to invest in ICO safely and securely, you can follow these steps:
Always enter an ICO through an ICO website to ensure ICO transparency and legibility.
ICO usually involves crypto-to-crypto transactions. Keep a wallet ready with your preferred type of tokens. You can also purchase the tokens via a CEX/DEX.
Move your crypto to a non-custodial walle,t which forms the sole means of financial communication in DeFI. Check whether your wallet meets all requirements as asked.
Use your crypto to purchase tokens in the ICO. While doing so, be sure of the address and wallet.
Move newly collected tokens to a safer wallet or use them to access utilities on the network.
ICOs vs. Initial Public Offerings (IPOs)
An initial coin offering is similar to an initial public offering (IPO) in a stock market. However, there are quite a few differences between the two fundraising methods.
ICOs vs IPOs
Future of ICOs: Why Do Companies Want To Use ICOs Even in 2025?
Enthusiasts talk of bringing ICOs back despite their failures and notorious history. Today, mechanisms such as better price discovery and vesting schedules and new sale mechanisms like auctions, node sales, and fixed price sales can redeem ICOs from their sins. (read: disadvantages)
There’s a clear regulatory shift being witnessed, too, in favor of ICOs. The Trump-era SEC, the upcoming MiCA token launch framework in Europe, and an increasing number of crypto-friendly states across the globe will all come together to help founders feel more confident to launch their tokens via an ICO without the fear of regulatory action.
ICOs also level the playing field for retail investors. Retail investors can get better opportunities and prevent the VCs from taking the first slice of the cake every time, and that too at discounted prices. Also, ICOs do away with crooked reward systems that mostly always bring in loads of users, but most of them dump the tokens when the incentives cease to exist.
A real community member would not only hold the native tokens but also uphold the goals and sanctity of the platform and bring in more users. Alex Topchishvili, Director of Marketing at CoinList, says, “ 𝐼𝐶𝑂𝑠 𝑏𝑜𝑜𝑡𝑠𝑡𝑟𝑎𝑝 𝑒𝑎𝑟𝑙𝑦 𝑢𝑠𝑒𝑟 𝑎𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛 𝑏𝑦 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑡𝑜𝑘𝑒𝑛𝑠 𝑡𝑜 𝑖𝑛𝑐𝑒𝑛𝑡𝑖𝑣𝑒-𝑎𝑙𝑖𝑔𝑛𝑒𝑑 𝑖𝑛𝑣𝑒𝑠𝑡𝑜𝑟𝑠 𝑡ℎ𝑎𝑡 𝑑𝑟𝑖𝑣𝑒 𝑤𝑜𝑟𝑑 𝑜𝑓 𝑚𝑜𝑢𝑡ℎ 𝑎𝑛𝑑 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝑒𝑣𝑎𝑛𝑔𝑒𝑙𝑖𝑠𝑚. 𝐴 𝑐𝑜𝑢𝑝𝑙𝑒 𝑜𝑓 ℎ𝑢𝑛𝑑𝑟𝑒𝑑 𝑒𝑣𝑎𝑛𝑔𝑒𝑙𝑖𝑠𝑡𝑠 > 𝑡ℎ𝑜𝑢𝑠𝑎𝑛𝑑𝑠 𝑜𝑓 𝑑𝑒𝑡𝑎𝑐ℎ𝑒𝑑 𝑢𝑠𝑒𝑟𝑠.”
Though ICOs boomed during 2017-18 before regulatory setbacks and scams set them back, there are quite a few benefits to crypto founders' continuing to go the ICO route today. At NFT.EU, we are ready for the ICO revival, are you?
