ICO: what it is in cryptocurrency and how it works

Today, together with our leading expert Yevhen Kasyanenko, we will figure it all out, namely: what an ICO in cryptocurrency really is, why it is needed, and whether it is worth looking into at all.

ICO — what is it, why do projects and investors need Initial Coin Offerings?

An ICO (Initial Coin Offering) is a way to raise money to launch a crypto project without getting involved with banks, venture capital funds, and all that bureaucracy. It’s much simpler: the team creates its own token (digital asset) and offers it for sale in exchange for crypto or regular money. It’s kind of like crowdfunding (raising money for a business on special online platforms), only in the world of crypto and without intermediaries.

Why do crypto projects launch ICOs

For cryptocurrency startups, an ICO is a way to:

1. Attract investment without intermediaries. The team doesn’t have to spend years looking for investors, undergoing checks, reporting to funds; they raise funds fairly quickly.
2. Launch a token that works in the ecosystem. Many coins give access to platform features, allow you to pay for services, and participate in voting.
3. Quickly gather a community around an idea. The more people buy the token, the higher the interest in launching and promoting it. The project gains an audience that is interested in its success.

Why investors participate

For investors, an ICO is:

1. An opportunity to get involved in a project at an early stage, before the token appears on the exchange.
2. A chance to buy a digital asset cheaply and profit from its growth.
3. Support for an interesting idea or technology that the investor believes in.

But there are also risks, ranging from losing money to the complete disappearance of the project. There is no regulator to protect everyone. Investments at the start of a startup’s development work on the principle: your safety is your responsibility.

“An ICO in cryptocurrency is a fast and relatively affordable way to raise funds. It gives a startup a chance to get off the ground and an investor a chance to get involved in the project at an early stage. But as with any investment instrument, it is important not to chase promises, but to soberly assess the risks, documentation, team, and tokenomics logic,” emphasizes Yevhen Kasyanenko.

How a cryptocurrency ICO works – the main stages

When delving deeper into what an Initial Coin Offering, or simply a cryptocurrency ICO, is, it is important to understand right away that it is not just about “selling tokens and raising money.” A successful launch is always backed by careful preparation, legal compliance, and good community engagement.

Below, we will finally take a closer look at what an ICO is and how it works, step by step.

1. Project preparation

It all starts with an idea. The team formulates the concept, thinks through the technical implementation and economics of the crypto project. One of the main documents at this stage is the White Paper. It is like a business plan, only in the crypto world: it explains how the product works, why the token is needed, and how the team intends to achieve its goals.

At the same time, a roadmap is created—essentially, a schedule for the project’s development: when the MVP will be ready, when the beta version will be launched, when the listing will take place, etc.

2. Legal work

The cryptocurrency industry is not yet clearly regulated everywhere, but the legality of the project is a must if developers want to avoid problems. Teams often choose jurisdictions with loyal regulation: Singapore and Switzerland are the top destinations for launches.

“It is important for every startup to understand in advance whether the token falls under the definition of a ‘security’ in different countries. This affects the legal risks and restrictions on sales,” adds our expert.

3. Promotion and audience engagement

A good crypto project without attention is like a book that no one has opened. Therefore, at this stage, a marketing campaign is launched: publications on crypto platforms, activity on social networks and forums (Reddit, X, Telegram), speeches at meetups and events.

In addition, Airdrops (distribution of coins for simple actions) and Bounty programs (rewards for helping with promotion) are launched. This helps to form the first loyal community around the project.

4. The token sale itself (sale of tokens)

At this stage, the cryptocurrency ICO itself begins: a sales window opens where participants can buy project tokens. Most often for ETH, BTC, stablecoins such as USDT, or regular fiat money. Sales can take place on the crypto project’s website or through specialized Launchpad platforms.

Here it is also important to determine in advance:

• the total number of coins;
• the price;
• the distribution among investors, the team, and partners;
• the vesting period to protect against sharp market declines.

5. Token listing and development

After the sale is complete, the project is listed on exchanges, which is an important moment for the liquidity of the cryptocurrency. The higher the interest and trust, the more willing exchanges are to add the asset.

But the story doesn’t end there. The real work is just beginning: the team implements the product, executes the roadmap, introduces features, and attracts new users and partners. Investors continue to monitor progress and make decisions—whether to hold the token or sell it.

“A cryptocurrency ICO is a whole process, not just the sale of crypto. It requires preparation, openness, and the ability to build trust. If everything is done correctly, both the project and its early investors win. But as with any cryptocurrency market tool, it is important to be not only an enthusiast but also a sober analyst,” emphasizes Yevhen Kasyanenko.

Advantages and disadvantages of cryptocurrency ICOs

Initial Coin Offering is a convenient and quick way to raise money to launch a crypto project, which is why it has become so popular. But with opportunities come risks. Especially for those who invest blindly.

Let’s take a look at the advantages of this format and where the pitfalls most often lie.

Advantages

Among the advantages of ICOs, we highlight:

1. The opportunity to get in at an early stage. The main advantage for investors is access to tokens at the very beginning, when they cost pennies and the project is just gaining momentum. If the team actually implements its plans, the price of the coin can increase tenfold, and sometimes even a hundredfold. There are plenty of examples on the market: Ethereum and Binance Coin were also once sold at bargain prices.
2. It’s an easy way to raise money for a startup. For crypto teams, it’s an alternative to venture capital. No need to spend years going to funds, listening to rejections, and signing piles of documents. Create a token, set up a website, write up the economics and white paper, and you’re ready to go.
3. Accessible to everyone. Anyone can participate in the initial presale of a cryptocurrency—you don’t need to be a qualified investor, and it doesn’t matter how much money you have in your wallet: $50 or $50,000. This makes the market more democratic and open than, for example, the presale of assets on traditional stock exchanges.
4. No intermediaries. No banks, brokers, approvals, or commissions “for nothing.” Money goes directly from the investor to the project.

Disadvantages

The disadvantages of ICOs include:

1. High risks and lack of regulation. Often, there are no regulators, as there are on the stock market. If the project turns out to be a fake, it is almost impossible to get your money back. The pre-sale market is still full of scams; it’s like the Wild West of crypto — if you don’t know how to check, you pay.
2. Lack of legal protection. If the tokens depreciate or the team simply stops communicating, investors are left alone with their losses. It is pointless to go to court, especially if the crypto project is registered somewhere in the Marshall Islands.
3. Volatility. Even with honest startups, tokens often “jump” in price: they grow by 300%, then fall by 70%, then jump again. It all depends on the news, hype, listings, and the general market sentiment. For beginners, such swings can be shocking.
4. The gap between promises and reality. Many teams sell an idea, not a product. Everything looks good on paper, but there is no real development. Once the money has been raised, the motivation to see the project through to completion drops sharply.

“An ICO is a tool. And like any tool, it can be useful if used wisely. There is a chance to make a super profit, but with it comes the chance to lose everything. Therefore, before participating in presales, it is important not only to believe in the project, but also to be able to ask uncomfortable questions: Who is on the team? Is there an MVP? Where is the company registered? How is the tokenomics structured? Are there any token locks for the team?” notes our expert.

How to choose a reliable ICO and avoid scammers

As many have already understood from the above, investing in an ICO can bring both serious profits and equally serious losses. Unfortunately, there are still plenty of scams, fake teams, and projects that disappear immediately after raising funds. Therefore, before transferring money, it is worth keeping a cool head and conducting your own mini-audit.

Below, we have compiled a list of important aspects to pay attention to in order to avoid falling prey to scammers.

Check the team and documentation

“If you don’t know who is behind a crypto project, that’s already a red flag,” says Yevhen Kasyanenko.

Look at the founders: do they have experience in blockchain, business, or IT? Can you find their LinkedIn profiles, publications, or mentions in the media? Transparency is critical here.

The same goes for documentation. A normal crypto startup has a white paper — an online document that outlines the essence of the idea, the token’s economics, the project’s architecture, and the implementation timeline. If there is no white paper, or if it is written in a style that is all talk and no substance, it is better to walk away.

Analyze the technology

Serious projects always have at least a minimum viable product—a prototype, MVP, or access to the code on GitHub. If you are being sold only an idea on a beautiful landing page without a single line of code, it may just be a money grab.

This is especially important if they claim that “everything is already ready.” Check for yourself: go to the repository, evaluate the activity of the developers, watch the demo (if available).

Beware of unrealistic promises

If the ICO presentation says “1000% per month” or “guaranteed return,” run away. This is a classic bait for gullible investors.

A normal project does not promise profits. Its founders explain how the product works, what problem it solves, and why the token may grow in price, but without grandiose phrases and cosmic predictions.

“In investments, especially in cryptocurrency and especially in the early stages of its development, there can be no guarantees. The market is always unpredictable,” adds our expert.

Check the reputation

See what people are writing about the project on forums (e.g., Bitcointalk), Reddit, Telegram chats, and YouTube. Is there any discussion? How does the team respond to uncomfortable questions? If the moderators ban anyone who criticizes, that’s a reason to think twice.

It is also useful to check the website domain — when it was registered, who the owner is, how often the information is updated. Scammers often create “one-day” websites with template landing pages.

“A reliable ICO is not ‘promises on a beautiful website,’ but a clear team, open technology, and a clear understanding of why the project needs a token. And most importantly, don’t invest your last money. Even the most promising crypto startup may not take off,” advises Yevhen Kasyanenko.

Successful ICOs that changed the market

Not all cryptocurrency ICOs end in scam or failure. Some of them have become truly historic: they not only raised millions of dollars, but also laid the foundation for entire areas of the cryptocurrency industry.

Here are just a few examples of those that really took off:

• Ethereum (2014). Raised about $18 million through an ICO, one of the first and most successful. Ethereum introduced the market to the idea of smart contracts — programmable transactions on the blockchain, which became the basis for DeFi, NFTs, and thousands of dApps. The pre-market price was around $0.30, and later reached $4800+ (as of early August 2025). The platform became the main building block of the entire crypto infrastructure.
• EOS (2017-2018). Raised approximately $4 billion and is the most expensive ICO in history. The EOS team promised to create an alternative to Ethereum with greater speed and scalability. Despite the controversy surrounding centralization, the project has taken an important place in the ecosystem. Token price at launch: around $1, at peak – over $20.
• Binance Coin (2017). Raised around $15 million. At the time of the Initial Coin Offering, it was “just a coin for discounts on the exchange.” But Binance has grown into the largest crypto exchange, and BNB has entered the top ranks in terms of capitalization. It is now used in DeFi, Launchpad, Web3 applications, and even to pay for real goods. Pre-market price: $0.10, at its peak over $800.

These ICOs proved that even in a difficult and risky format, real breakthroughs are possible. But their success is the result not only of the idea, but also of a strong team, a well-thought-out economy, and sustainable development after the token sale.

“If a project is still alive and developing 3-5 years after the ICO, that’s already a good indicator. Everything else is easy to check: the code, the community, the dynamics of development,” comments Yevhen Kasyanenko.

Failed and scandalous ICOs – the other side of the coin

Now let’s take a look at some familiar examples of Initial Coin Offerings that became high-profile scams or failures, leaving investors with nothing:

• The DAO (2016) – $150 million was raised, but due to a vulnerability in the code, hackers stole a third of the project’s funds. This led to the split of Ethereum and the emergence of Ethereum Classic.
• Plexcoin (2017) – promised +1354% profit. In reality – a scam, SEC intervention, and frozen assets.
• SaveDroid (2018) – raised millions and… disappeared, leaving a meme on the website. Later they said it was a “joke.”

The moral here is simple: a high-profile ICO is not a guarantee. So, let’s repeat – analyze, check, and don’t be fooled by promises of “X100 in a month.” .

ICO regulation – what you need to know

Although there are no traditional regulators here, as there are in the stock market in some jurisdictions, which may make ICOs seem like an easy way to raise money, the legal side of things is becoming stricter every year. In some countries, this format is already under control, while in others it is banned. Ignoring the law means facing blocks, fines, or even court proceedings. Below, we will describe how things stand in different regions:

• The United States. ICOs are a focus of attention here. If a token is recognized as an investment asset, the project must be registered with the SEC and comply with securities law. Without this, there is a risk of lawsuits and blocks. A striking example is the long-running saga with Ripple’s XRP coin, which ended successfully.
• European Union. Here, the rules are becoming increasingly strict: most tokens fall under MiCA and other laws. Crypto projects are required to be transparent, comply with KYC/AML, and play fair with investors.
• China. One of the most “tough” markets, where crypto is basically completely banned. Participation in such projects can have serious consequences for both startups and investors.
• India. The law does not explicitly allow ICOs, and the authorities regularly warn against investing in crypto. Many crypto projects operate semi-legally, at their own risk.
• Switzerland. A real “oasis” for crypto startups. Token presales can be conducted here officially, but only with complete transparency and compliance with all rules.
• Singapore. Regulation is clear but flexible. If the coin is not an investment, registration is not required. The main thing is compliance with MAS requirements for KYC, AML, and disclosure of information.

Conclusion: potential, but not for blind faith

Initial Coin Offering remains one of the most effective ways to launch a crypto project and raise money. But it is not a magic button for “quick profits or rapid growth.” The winners here are not those who believe in loud promises, but those who dig deeper, ask questions, and take a sober look at the risks.

If you are thinking about launching your own blockchain startup or want to understand which ICOs are really worth paying attention to, the KISS Software team is ready to help you at every stage:

• We launch turnkey crypto projects: from tokenomics and documentation to marketing and legal work.
• We help investors find truly promising ICOs that are worth getting involved in.

Write to us now for a free consultation, turn your idea into a working crypto project, and turn your investment into an informed decision rather than a lottery ticket.