What is an ICO?

An ICO or "Initial Coin Offering" is essentially an initial public offering on a blockchain. This means that at face value, an ICO would never have any third party like a government or bank involved in it. During an ICO, a company or group of developers would raise money in a well-known cryptocurrency like Bitcoin or Ether, in exchange for future access to their own new cryptocurrency.

Typically these ICO-generated cryptocurrencies were based on the ERC-20 standard, which refers to a few specific guidelines for creating cryptocurrencies in smart contracts that live on the Ethereum blockchain.

Because ICOs have now died out, we will speak of them in the past tense below.

How did an ICO work?

Most ICOs would take in Bitcoin, Ether, or both using a cryptocurrency wallet's address (a public address) that the team posted on a simple website. Therefore, an ICO's transactions were peer-to-peer, just like any other cryptocurrency transaction, with one major difference. Because ICOs used smart contracts, they had the added functionality of being able to attach ownership to future stakes of the project's coins or "tokens" based on a preset proportion of Bitcoin, Ether, or both.

For example, if the project said that every 1 Ether would receive 100 of its coins, then the wallet would take in the Ether, and the smart contract involved would note the deposit and schedule the sending of the 100 coins once the ICO was over and the new coins were fully minted (created). Generally, this redemption occurred anywhere from at the close of the ICO period to a week after it.

Why were ICOs revolutionary?

ICOs were revolutionary because they enabled anyone to raise funds in a matter of moments for any sort of project as long as it was blockchain-based. Consequently, for the first time in history, startup fundraising had truly become peer-to-peer with most of the activity occurring on the Ethereum blockchain.

In 2017 in particular, this resulted in more than $20 billion in peer-to-peer funding as well as Bitcoin reaching $20,000 a coin at the height of the ICO-driven bull market.

Why did ICOs die out?

ICOs died out because of a variety of factors including a wide prevalence of scams and a lack of KYC processes, which led to increasing regulatory pressure on the cryptocurrency space from all around the world. Though the death of the ICO resulted in the entire cryptocurrency market falling more than 50% from its height, the true founders and builders learned from the mistakes of 2017 and since then, have been working to build the crypto space in a better image. Included in these efforts is the work to build a better form of crypto-based fundraising, which has taken the ICO through many new iterations that we’ll discuss in future posts.

Start with crypto today

Sign up on NBX, a trusted Norwegian cryptocurrency exchange and custodian, and kickstart your crypto journey safely.
Crypto 101
Explore the most popular crypto terms and find answers to your questions.

How to start saving in crypto?

Read

What is Solana?

Read

How is blockchain secured?

Read

What is phishing simulation and security awareness training?

Read

What is Tether?

Read

What is DAI?

Read

What is an option and why should I care?

Read

What is a Private Key?

Read

What is Bitcoin?

Read
Blog

Insights, Trends, Analysis

Unraveling the cryptocurrency industry revolution.
#crypto101

Cardano Native Tokens (CNTs) Explained: Use Cases, Benefits, and More

In this article we go throguh Cardano Native Tokens explaining their use cases, benefits and also the three currently listed CNTs on Cardano USDM, Hosky and Palm.
5 minutes
2025-05-07
#crypto101

How to Evaluate Cryptocurrency Projects

Learn how to analyze crypto projects: assess utility, tech, tokenomics, team, community, and partnerships to make smarter investment choices.
5 minutes
2025-03-31
#crypto101

How to Start Investing in Cryptocurrencies (Part 2)

Learn how to build your crypto investment strategy, choose the right profile, and manage risks with NBX. (part 2)
5 minutes
2025-03-31
Cookie Consent

By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.