ICOs are comparable to the Initial Public Offering (IPO).
Just as an IPO is launched to raise capital by a firm similarly, ICOs are launched to generate money for a start-up project.
How Initial Coin Offerings Raised Billions and Changed Fundraising
The critical difference is that IPOs are regulated and fall under the umbrella of securities market (shares in the company) whereas ICOs are unregulated and do not fall under any strict category of already established market structures.
However, there are few suggestions that ICOs should be treated as securities in the light of some scam ICO schemes launched in the last few months and growing concerns around investor protection.
Recently the Securities and Exchange Commission (SEC) suggested that all coins, ICOS, digital assets fall under the definition of security.
This means that same laws would be applicable to ICOs, Bitcoin and other digital coins that are in applicable to securities.
Also, an introduction of formal Know Your Customer (KYC) and Anti Money Laundering (AML) is also being recommended to addresses issues related to money laundering.
Experts are recommending Howey Test as some criteria for any ICO to be considered a security.
Why This Matters for Blockchain Technology
Another difference is that ICOs by design usually require investors to invest using cryptocurrencies and payouts are paid using cryptocurrencies, most commonly this is the new token (a new cryptocurrency) introduced by the ICO.
This can also be Fiat currency, but most commonly cryptocurrency is used.
For example, in the Ethereum crowdfunding campaign a new token, Ether was introduced.
The name token sale for crowdfunding is also quite popular and both terms are used interchangeably.
Key Points to Remember
- Initial Coin Offerings (ICOs) ICOs are comparable to the Initial Public Offering (IPO).
- Just as an IPO is launched to raise capital by a firm similarly, ICOs are launched to generate money for a start-up project.
- The critical difference is that IPOs are regulated and fall under the umbrella of securities market (shares in the company) whereas ICOs are unregulated and do not fall under any strict category of already established market structures.
- However, there are few suggestions that ICOs should be treated as securities in the light of some scam ICO schemes launched in the last few months and growing concerns around investor protection.
Going Deeper: Advanced Concepts
When a new blockchain based application or organization is launched, a new token can be launched with it as a token to access and use the application and also to gain incentives that are paid in the very same token that has been introduced by the ICO.
This token is released to the public in exchange of some already established cryptocurrency (for example, Bitcoin or Ethereum) or Fiat currency.
The advantage is that when the usage of the application or product launched increases the value of the new token also increases with it.
This way the investors who invested initially gain a good incentive.
Conclusion
Initial Coin Offerings (ICOs) represents one of the many innovative layers that make blockchain technology so powerful and transformative. As distributed systems continue to evolve, a solid understanding of these core concepts becomes increasingly valuable — not just for developers, but for anyone building, investing in, or working alongside blockchain-powered systems.
Whether you are just starting your blockchain journey or deepening existing expertise, mastering these fundamentals gives you the tools to think clearly about decentralized systems and make smarter decisions in this rapidly evolving space.