Initial Coin Offering (ICO)
In short: An Initial Coin Offering (ICO) is a crowdfunding sale, or crowdsale, in which an early-stage company raises capital by selling newly created…
An Initial Coin Offering (ICO) is a crowdfunding sale, or crowdsale, in which an early-stage company raises capital by selling newly created cryptocurrency tokens. Buyers usually pay with established cryptocurrencies or fiat money and receive the new tokens in return.
Why it matters
ICOs let projects raise money from buyers around the world without a bank, a venture fund or a stock exchange listing. That openness also brought problems: disclosure was often thin, many projects never delivered what they promised, and some were outright scams. Regulators in many countries have examined whether tokens sold this way are securities, often using tests such as the US Howey Test, so the rules for ICOs differ from one country to another.
Example
A startup publishes a whitepaper describing its planned product and the role of its token. It deploys a token smart contract, announces a sale window and a fixed number of tokens per unit of cryptocurrency, and sends tokens to buyers' wallets when the sale closes. Whether the token later trades anywhere, and at what price, depends on exchange listings and demand, not on the sale itself.