Initial Coin Offerings (ICOs) are a fundraising method commonly used in the cryptocurrency industry. They allow projects, typically blockchain-based startups, to raise capital by issuing and selling their own digital tokens or coins to investors. ICOs emerged as a popular alternative to traditional funding methods such as venture capital or initial public offerings (IPOs).

When a cryptocurrency project wants to raise money through an ICO, the project organizers’ first step is determining how they will structure the coin. ICOs can be structured in a few different ways, including:

• Static supply and static price: A company can set a specific funding goal or limit, which means that each token sold in the ICO has a preset price, and the total token supply is fixed.
• Static supply and dynamic price: An ICO can have a static supply of tokens and a dynamic funding goal—this means that the amount of funds received in the ICO determines the overall price per token.
• Dynamic supply and static price: Some ICOs have a dynamic token supply but a static price, meaning that the amount of funding received determines the supply.

These three different types of ICOs are illustrated below:

Process of Initial Coin Offering.

The process of an ICO involves the following steps:

Whitepaper: The project team prepares a whitepaper that outlines the details of their project, including its purpose, technology, team members, roadmap, and the specific problem it aims to solve. The whitepaper also describes the token model, the number of tokens to be issued, and how they will be distributed.

Token Creation: The project team creates a new digital token, usually based on an existing blockchain platform such as Ethereum. These tokens represent the project's utility or value and are often required to access the project's services or participate in its ecosystem.

Pre-sale and Public Sale: To raise funds, the project team may conduct a pre-sale or private sale of the tokens to early investors, typically at a discounted price. This phase is often reserved for larger investors or strategic partners. Following the pre-sale, the project team launches the public sale, also known as the main ICO event, where the tokens are offered to the general public.

Investment: Investors interested in the project send their contributions in the form of established cryptocurrencies, such as Bitcoin (BTC) or Ethereum (ETH), to the ICO's designated wallet address. In return, they receive the project's tokens, usually at a predetermined exchange rate. The funds raised through the ICO are typically used to finance the project's development, marketing, and other operational expenses.

Token Listing: After the ICO concludes, the project team aims to list their tokens on various cryptocurrency exchanges, making them tradable against other cryptocurrencies. This listing provides liquidity and allows investors to buy and sell the tokens on secondary markets.

ICOs gained significant attention and popularity during the cryptocurrency boom in 2017, as they provided an opportunity for early-stage projects to raise substantial funds quickly. However, the ICO space also faced challenges, including regulatory concerns, scams, and fraudulent projects that led to investor losses. As a result, regulatory bodies in many jurisdictions have since introduced stricter guidelines or even banned ICOs altogether.