Back in 2017, people were buying tokens for projects that didn’t even have a working prototype. One company raised $230 million without a team, a website, or a whitepaper that made sense. That’s the wild side of ICOs - and why so many lost money. But not all ICOs were scams. Some built real platforms that still run today. So how do ICOs actually work in blockchain? Let’s cut through the noise.
What Is an ICO, Really?
An ICO, or Initial Coin Offering, is how a new blockchain project raises money by selling its own digital tokens to early backers. Think of it like a startup selling shares - except instead of owning part of a company, you own a token that might give you access to a future service, voting rights, or just hope that its value goes up.
These tokens live on existing blockchains like Ethereum, Solana, or Binance Smart Chain. They’re not Bitcoin. They’re custom-built digital assets created using smart contracts. The project team sets a target amount - say, $5 million - and offers tokens at a fixed price, often discounted for early buyers. Once the funding goal is met or the time runs out, the tokens are distributed, and the project starts building.
Unlike traditional fundraising, there’s no SEC approval, no bank review, no board of directors. That’s the appeal - and the risk.
How the Process Actually Unfolds
Here’s what happens step by step when a team launches an ICO:
- They write a whitepaper. This isn’t marketing fluff - it’s a technical blueprint. It explains the problem they’re solving, how their blockchain solution works, who’s on the team, how the tokens will be used, and what the roadmap looks like. A good whitepaper reads like a software spec, not a sales pitch.
- They build a smart contract. This is the automated code that handles token sales. It locks in the rules: how many tokens to sell, at what price, when the sale ends, and who gets what. Once deployed, it runs on its own - no one can change it.
- They set up a wallet. Investors send cryptocurrency (usually ETH or BNB) to a public wallet address. The smart contract automatically sends back the agreed number of tokens based on how much was sent.
- They launch the sale. The ICO goes live. People from around the world send crypto in. Some use exchanges. Others use hardware wallets. A few use VPNs to bypass restrictions.
- The sale ends. If the goal is met, the project moves forward. If not, most smart contracts refund the money automatically. No one has to ask. It just happens.
After the sale, tokens often get listed on decentralized exchanges like Uniswap or centralized ones like Binance. That’s when trading starts - and the real price discovery begins.
Why People Invested (and Lost)
People didn’t invest in ICOs because they understood the tech. They invested because they saw others making money.
In 2017, Ethereum’s ICO raised $18 million in 2014. By 2017, those tokens were worth over $1,000 each. Stories spread fast. A guy in Manila bought $500 worth of a token called Golem. Two months later, it was worth $20,000. He quit his job. That’s the dream.
But the reality was brutal. Over 80% of ICOs in 2017 and 2018 failed to deliver on their promises. Some teams vanished with the money. Others built something, but no one used it. A few projects turned into real platforms - like Filecoin, which lets you rent hard drive space, or Chainlink, which connects blockchains to real-world data.
The difference? Teams that shipped code. Teams that had developers posting GitHub commits every day. Teams that didn’t promise moonshots - just clear, measurable goals.
Regulation Changed Everything
By 2019, the U.S. Securities and Exchange Commission started treating many ICO tokens as securities. That meant they had to follow the same rules as stocks. If a token promised profit based on someone else’s effort - like a company building a product - it was a security.
That killed the wild west. Projects had to either register with regulators or restructure. Many moved to jurisdictions like Switzerland, Singapore, or Malta, where rules were clearer.
Today, most serious blockchain projects don’t call it an ICO anymore. They use terms like Token Generation Event (TGE) or Public Sale. They do KYC (know your customer) checks. They limit how much one person can buy. They work with lawyers.
It’s less flashy. But it’s also less dangerous.
What’s Left of ICOs in 2025?
ICOs as they existed in 2017? Gone. But the idea? Still alive - just evolved.
Today, you’ll see:
- DAO token sales - where you buy a token to vote on how a decentralized organization spends its funds.
- Community launches - like when a new DeFi protocol opens its token to users who’ve been active on its testnet for months.
- Layer-2 token sales - projects building on top of Ethereum or Solana offering tokens to fund their scaling solutions.
And they’re not raising millions overnight. Most raise between $500,000 and $5 million. They spend months building a community before they even open the sale. They publish monthly updates. They show real usage numbers.
One example: The Solana-based project Jupiter launched its token in early 2024 after over a year of open-source development. It raised $8 million from 12,000 people - none of whom were anonymous. Every buyer had to verify their identity. The token now powers the largest decentralized exchange on Solana.
How to Spot a Real ICO (or TGE) Today
If you’re considering buying into a token sale now, here’s what to check:
- Is there a working product? Can you use it? Is it on mainnet? Or is it still on a testnet with no users?
- Who’s behind it? Are the team members real? Do they have LinkedIn profiles? Have they built things before?
- Is the code open? Check GitHub. Are commits happening weekly? Are there pull requests from other developers?
- Is there a clear token use case? Does the token actually do something inside the system? Or is it just a speculative asset?
- Are there legal disclosures? Do they say where they’re based? Do they explain compliance?
If the answer to any of these is "no," walk away. No amount of hype makes up for a lack of substance.
Why This Still Matters
ICOs taught the world how to fund open-source tech without venture capital. Before ICOs, if you wanted to build a decentralized app, you needed to pitch to Silicon Valley investors who wanted equity and control.
ICOs flipped that. Now, anyone can fund a project by simply using it. Developers build for users, not investors. Communities own the tools they use.
That’s the real legacy of ICOs - not the get-rich-quick stories, but the shift in power. Today’s DeFi protocols, NFT marketplaces, and Web3 apps all trace their roots back to that chaotic, messy, groundbreaking moment when people started buying tokens instead of stocks.
It wasn’t perfect. But it changed finance forever.
Are ICOs still legal?
Yes - but only if they follow local laws. In the U.S., most token sales now require registration with the SEC or must qualify as utility tokens with no profit expectation. In the EU, Singapore, and Switzerland, rules are clearer but still strict. Many projects now avoid U.S. investors entirely to stay compliant.
Can I lose money in an ICO?
Absolutely. Most ICOs fail. Tokens can drop to zero if the project dies, the team disappears, or no one uses the product. Even if the tech works, market sentiment can crush prices. Never invest more than you can afford to lose.
What’s the difference between an ICO and an IEO?
An IEO (Initial Exchange Offering) is when a cryptocurrency exchange like Binance or KuCoin runs the token sale for you. They handle KYC, marketing, and listing. It’s safer because the exchange vets the project - but you pay higher fees and have less control. ICOs are direct; IEOs are curated.
Do I need a wallet to participate in an ICO?
Yes. You need a crypto wallet that supports the blockchain the ICO runs on - usually Ethereum (ERC-20) or Solana (SPL). Popular choices are MetaMask, Phantom, or Trust Wallet. Never send funds from an exchange wallet - you might lose your tokens.
How do I know if a token sale is a scam?
Red flags: anonymous team, no code on GitHub, promises of guaranteed returns, pressure to buy quickly, or a website with poor grammar and stock images. Always check community forums like Reddit or Discord. Real projects have active, honest discussions - not just hype.
Jack Gifford
Man, I still remember when my buddy bought $2k worth of that Golem token and then spent the next six months bragging about his new motorcycle. Two months later, it was worth $200. He still drives a Prius.
Bridget Kutsche
Really appreciate this breakdown. The part about GitHub commits being the real litmus test? Spot on. I’ve seen so many projects with slick websites and zero code updates. If devs aren’t pushing daily, they’re not building - they’re just collecting ETH.
Also, the shift from ICO to TGE isn’t just semantics. It’s a cultural reset. People are finally learning that tokens aren’t lottery tickets - they’re utility keys.
Krzysztof Lasocki
Oh wow, so now we’re calling it a ‘Token Generation Event’? That’s like renaming a dumpster fire to ‘artisanal urban combustion experience.’
Still, the fact that people now do KYC and have lawyers? Honestly? Kinda sad. The magic of ICOs was that anyone could throw money at a dream. Now it’s just VC 2.0 with crypto jargon.
Christina Morgan
Can I just say how much I love how this post didn’t just trash ICOs? It showed the evolution. Like, yeah, 2017 was a circus - but the fact that we’re now building DAOs and community-led launches? That’s the real win.
I’ve been in crypto since 2015. We’ve gone from ‘send BTC to this random address’ to regulated, transparent token sales with audit reports. That’s progress.
Also, Jupiter’s launch? Perfect example. 12k verified people. Real usage. No anonymous devs. That’s the future.
Santhosh Santhosh
Actually, I think the real legacy of ICOs is not the money or the tech, but the idea that ordinary people can fund innovation without permission. Before ICOs, if you were not in Silicon Valley, or didn’t know a VC, your idea died in a Google Doc. Now, even in rural India, a developer can build something and get funded by strangers on the internet. That’s revolutionary. I know because I’ve seen it happen - a friend from Kerala raised $300k in ETH for a decentralized farming ledger, no pitch deck, no connections. Just code and community. That’s what matters.
Yes, there were scams. Yes, people lost everything. But the door opened. And now, even if it’s more regulated, it’s still open. That’s more than we had in 2010.
Veera Mavalwala
Oh please. You’re romanticizing chaos. ICOs were a global Ponzi scheme dressed in blockchain pajamas. People weren’t investing in tech - they were investing in FOMO, Instagram influencers, and Telegram groups full of bots.
And now you call Jupiter’s launch ‘progress’? Please. They did KYC? Big deal. Every scammy startup does KYC now to look legit. It’s just theater. The real winners are the exchanges that took 10% fees and the lawyers who got rich off compliance paperwork.
Meanwhile, the average person still gets rug-pulled. You think regulation fixed that? No. It just made the rug-pulls more expensive and slower.
Ray Htoo
Love how this post contrasts the wild west with today’s sober reality. The part about ‘tokens as utility keys’ hit home. I used to think crypto was about flipping coins. Now I get it - it’s about owning a piece of the infrastructure you use.
I’ve been using Uniswap for two years. I hold a little UNI not because I think it’ll moon, but because I trade on it daily. That’s the shift. Tokens aren’t shares anymore - they’re membership cards to digital towns.
And yeah, GitHub commits matter. I once invested in a project because their repo had 200 commits in a week. They shipped a bug fix within 48 hours. That’s trust.
Patrick Sieber
One thing people forget - ICOs didn’t die because of regulation. They died because people got tired of being lied to. The market self-corrected. That’s more powerful than any SEC memo.
Today’s token sales are boring. And that’s beautiful. Boring means sustainable. Boring means you can actually read the docs. Boring means the team isn’t flying to Dubai to ‘network’ while the code sits untouched.
I miss the chaos? A little. But I’d rather have a slow, honest build than a 1000x scam that vanishes in 3 months.
Kathy Yip
i think the real question is… if we’re all just buying access to something… why do we still call them ‘investments’? maybe we’re not investors… we’re just early users. like beta testers with wallets.
Kieran Danagher
Christina Morgan above said it best - the shift from ICO to TGE isn’t about regulation, it’s about maturity. But let’s not pretend the new system is perfect. KYC doesn’t stop fraud, it just makes it harder for the poor to participate.
I’ve seen devs in Nigeria get rejected from token sales because their ID photo didn’t meet ‘brightness standards.’ Meanwhile, a guy in Switzerland with a Swiss bank account and a fake LinkedIn gets whitelisted.
Regulation didn’t fix inequality. It just moved it behind a login page.
Natasha Madison
Don’t be fooled. This whole ‘TGE’ thing is just the deep state’s way of controlling crypto. The SEC didn’t kill ICOs - they co-opted them. Now every token sale needs a lawyer, a compliance officer, and a PR team. That’s not progress. That’s capture.
Who benefits? Big finance. The same banks that crashed the economy in 2008. Now they’re the ones writing the rules. You think this is freedom? It’s just another cage with a blockchain logo on it.
Sheila Alston
It’s disgusting how people still defend ICOs. You’re basically saying it’s okay to let strangers take your money with no accountability. That’s not innovation - that’s moral bankruptcy.
What happened to personal responsibility? If you’re dumb enough to buy a token from a guy named ‘CryptoKing77’ with no website, you deserve to lose everything.
And now we’re calling this ‘decentralized finance’? More like ‘decentralized fraud’ with a fancy whitepaper.
sampa Karjee
As someone who actually studied blockchain architecture at IIT, I must say - this post is dangerously oversimplified. You treat ICOs as if they were a monolith. But the reality is far more nuanced. The failure rate was high because 95% of teams lacked even basic computer science literacy. They didn’t understand Merkle trees, let alone smart contract security. And now, with ‘TGEs,’ you’re still seeing the same amateurs with tokenomics models ripped from Medium articles. The only difference? Now they hire consultants to make it look legit. The core problem remains: people confuse marketing with engineering. And until that changes, nothing has truly evolved.