What is an ICO?
ICO (Initial Coin Offering) is a fundraising method equivalent to a company's public offering (IPO) and was very popular during the 2017 cryptocurrency bull market. ICO has many Chinese translations, the common translation is "initial coin offering" or the better understood "token crowdfunding".
Usually, cryptocurrency projects that want to conduct an ICO will publicize fundraising information on the Internet and explain how much money can be invested with 1 coin.
After investors participate, they will receive the purchase amount when the cryptocurrency is listed, and then weigh whether to continue holding or sell at a certain point in time.
Introduction to ICO operation model
According to cryptocurrency exchange Coinbase, when a cryptocurrency project (project) attempts to raise funds through an ICO, the first step is to confirm the token structure.
The project team can set a funding target amount or limit so that each token allocated in the ICO campaign has a preset price, and the total supply of tokens must be limited and fixed.
Common ICO token structures include the following two forms:
Fixed total supply + dynamic financing target: ICO can be set to a fixed total supply of tokens and a dynamic financing target, and the amount of resources finally obtained by the project team determines the total price of each token.
Dynamic total supply + fixed price: ICO can also be set to a dynamic token supply, but the price is fixed, and the amount of resources finally obtained by the project team determines the total supply of tokens.
The specific differences between ICO and IPO
Although ICO and IPO are both ways of raising funds for companies, they are very different in terms of supervision, cost and convenience. (CryptoCity) has been compiled into a table for everyone as follows:
Differences in ICOIPO regulatory requirements. No regulatory permission is required. The company/project size is medium or small. The cost is relatively low and the time required is shorter and longer. The implementation location is blockchain, as long as you understand the smart contract deployment and currency issuance procedures. Stock exchanges require intermediaries such as lawyers and brokers to assist in the issuance of content. Cryptocurrency stock market scope. People around the world can invest. Only in areas where they apply. Subscriber privileges can usually purchase tokens at a lower price, which is beneficial to subsequent sales. Investors can obtain equity. a share of the company's future earnings
What are some examples of successful ICOs?
ICO funding was very popular before 2018. Here are a few projects that were successful at the time and are still alive today:
Ethereum ($ETH)
Ethereum ($ETH), the world’s second largest cryptocurrency by market capitalization, is one of the pioneers in using ICOs to raise funds. It is understood that Ethereum raised $15.5 million through ICO in 2014, and investors received a total of 50 million Ethereum coins at a price of $0.311.
If you were an investor who participated in the Ethereum ICO fundraising at that time, you would have seen Ethereum reach a high of around $1,400 during the bull market of 2017 to 2018; if you had held it longer, you would have seen it in 2021 It rose to an all-time high of $4,382.72.
If you had held Ethereum from the presale at $0.311 to $4,382.72, you would have been rewarded 14,091 times more. But for many retail investors, it was very difficult to hold a project that seemed full of uncertainty at the time for seven years, and endure multiple bear market shocks along the way.
Yuzu Coin ($EOS)
柚子幣（$EOS）由Block.one 公司發行，並在2017 年至2018 年進行ICO 籌資，最終獲得41 億美元，投資者除了散戶之外，還包含多家風險投資機構，創下史上最高ICO 籌資log.
Yuzu Coin ($EOS) is one of the early competitors of Ethereum. It is known as "Blockchain 3.0" and focuses on solving the problems of high transaction fees, slow processing speed and scalability of blockchain.
According to historical information recorded by ICO Drops, $EOS was worth around $1 when it first started raising funds in 2017. It was later quoted at $4.5568 after its public listing in 2018, and rose all the way to $22.71 with the bull market.
However, $22.71 became $EOS’s final glory. Due to overly complex operations, long-term lack of innovation, and the credit bankruptcy of founder BM, the price of $EOS has been declining year by year. Even during the bull market from 2020 to 2021, it did not hit a new high. It was criticized by blockchain commentators "Bit Big Pig" ” Criticism is dying a slow death.
TRON ($TRX)
TRON ($TRX) is the native token of the Tron blockchain. The project was founded by Chinese entrepreneur Justin Sun. It is one of the few ICO projects that appeared in 2017 and is still alive today. Currency.
According to historical data recorded on ICO Drops, $TRX started its ICO as early as the first quarter of 2017, which was divided into private fundraising (difficult for retail investors to participate) and public sales. The pre-sale price of the public sale was $0.00000038. In September 2017 The price was $0.0021 at the time of listing.
Tron Chain is also one of Ethereum’s competitors, boasting extremely fast transaction speed, scalability and reliability. $TRX’s all-time high of $0.2317 occurred in January 2018, which also coincided with the tail end of the 2017-2018 cryptocurrency bull market.
Although $TRX is currently the 11th largest cryptocurrency in the world by market capitalization and occupies a certain advantage in the stablecoin market, founder Justin Sun’s style is quite controversial. TRON is advertised as a decentralized project, but asset management company VanEck once commented that it is overly centralized and its ecological development is mainly controlled by Justin Sun.
Polkadot（$DOT）
Polkadot was led and founded by Ethereum co-founder Gavin Wood. It began ICO private placement and public sales in 2017, and it was not officially issued and listed until 2020.
According to the historical data of ICO Drops, $DOT sold for between $0.288 and $1.2 during the pre-sale stage, while the historical high price was $54.98, which occurred in November 2021. $DOT has since fallen over 90% from its highs.
Due to the founder's great reputation and its focus on a multi-chain ecosystem that seems to be quite futuristic, Polkadot once became a popular public chain, but the team's recent budget allocation situation is worrying.
(CryptoCity) previously reported that in Polkadot Chain’s financial report for the first half of 2024, the total expenditure was as high as US$87 million, of which marketing expenses were US$37 million, accounting for nearly half of the expenditure.
These marketing expenses are mainly used for advertising and media, online and offline community building activities, and large-scale conferences. However, community members generally reported that this huge marketing expense did not bring significant market impact and user growth.
After the bull market ended in 2021, and when Bitcoin hit a record high in early 2024, $DOT failed to achieve greater success, and its current market value has fallen to 20th in the world.
How to avoid ICO scams?
Due to the imperfect supervision of ICO and the low execution cost, unscrupulous elements in the industry often create ICO fraud. How can investors avoid ICO scams? First, you need to understand the common types of ICO scams:
Take the money and run away: Scammers will use various names or inducements to raise funds through ICO, and then disappear without warning. There are reports that victims lost more than $100 million in ICO scams in 2018.
Bounty Scam: In a bounty scam, the ICO team designs a bounty program but does not deliver on the financial rewards promised to the PR campaign sponsor.
Listing scam: Scammers will deceive victims and claim that ICO tokens will be listed on exchanges, but in the end they will not be listed on exchanges; some ICO tokens will be listed on exchanges, but they will only be listed on "specific exchanges". At this time, Pay attention to whether there is a joint fraud between a fraud group and an exchange. The classic case is the fraud case involving ACE Ace Exchange.
White paper plagiarism scam: Scammers just copy and paste the white paper content of a well-known blockchain project, and then create a new project with a similar or different name. The development is worrying.
Phishing URLs: Scammers will set up fake websites that look like ICO projects to trick investors into depositing tokens into suspicious addresses.
Ponzi scheme: This type of ICO scam often lures victims with the promise of high rewards or low risk. This scam has no legitimate income structure. It just distributes the funds of new investors to old investors. It is a classic Ponzi scheme structure.
After understanding the common ICO fraud techniques, you can also refer to the anti-fraud methods provided by the security company Trend Micro to guard against ICO scams.
1. Good website and community management
Trend Micro points out that fraud groups’ websites are usually casually designed, and social accounts lack management or are fake accounts, while decent projects usually manage their images more actively and interact with the community.
2. Open and transparent team
To know whether the ICO you are participating in is a scam, it is important to investigate the team behind it. Trend Micro points out that if the developer members are anonymous, it may be a warning sign of scams, and decent projects usually provide participants and background information.
3. Complete white paper
If the white paper of an ICO project is written carelessly or is suspected of plagiarism, it may be a scam. Trend Micro pointed out that decent projects usually provide complete and detailed white paper content, recording the project goals, uses and technical description.
4. Is the token distribution even?
Trend Micro pointed out that if most of the tokens issued by a project are obtained by the development team, or are excessively concentrated in a few wallets, there may be the possibility of running away. Investors can use blockchain browsers, tokens Investigate based on economics and other factors.
5. Is there any false propaganda?
Trend Micro pointed out that when ICO projects release cooperation news and endorsed figures, investors should investigate their authenticity on their own. Fraudulent groups often use false propaganda to attract investors, and it is not uncommon to use the names of artists and experts to promote their products.
6. Whether the smart contract is subject to third-party audit
Investigating the security of ICO project smart contracts in advance is also one of the ways to determine fraud. Trend Micro pointed out that you can investigate whether the smart contract has been audited by a credible third party. If there is a lack of audit or insufficient security, it may be a red flag.
7. Liquidity management
When an ICO project issues tokens, it usually plans the initial liquidity and lock-up amount (temporarily locking the tokens that cannot be moved). Trend Micro pointed out that investors can check to whom the liquidity funds are allocated and how much liquidity is locked to judge the project’s centralization risk and trust level.
List of Noteworthy ICO Projects in 2024
As cryptocurrency exchanges become more and more common, the method of raising funds for listing solely through ICO is becoming less and less common. Now most of them are through Initial Exchange Offering (IEO), or a combination of IEO and pre-listing pre-sale. To proceed, let us first understand the difference between ICO and IEO:
ICO V.S IEO Comparison of the Token Issuance Method ICOIEO Features The development team issues it themselves and is issued with the assistance of the exchange. Participation method Invests through the project official website. Usually, you pledge specific cryptocurrencies on the exchange to gain the advantage of new coins. You can master the entire issuance process. The exchange will help Your publicity has disadvantages and high risks. If your marketing strength is insufficient, you may have a high threshold for fund-raising failure and need to be reviewed by the exchange.
Here are a few new projects to be listed on Binance IEO in 2024:
Etherfi ($ETHFI): Re-staking track
Etherfi ($ETHFI) is a liquidity re-pledge project. To put it simply, users can get eETH (LRT) by staking native $ETH or stETH and other tokens on Etherfi, and at the same time obtain Etherfi’s loyalty points and EigenLayer’s Points, and eETH can also be used on other platforms to earn income (such as purchasing products from the DeFi income platform Pendle).
If you want to withdraw and pledge again, Etherfi allows users to exchange eETH back to $ETH or stETH at any time, which is very convenient for users who pursue liquidity.
This narrative of having one fish, two fish, three fish, and having leveraged investment benefits has attracted many Ethereum users. Even Justin Sun, the founder of TRON, once deposited 20,000 $ before the end of Etherfi’s first airdrop event. ETH, successfully obtained nearly 3.5 million tokens.
Notcoin ($NOT): Telegram mini-game trend
Notcoin ($NOT) is a free game on Telegram, which started the Tap to Earn craze in the currency circle. Its concept is very simple: let players earn points by tapping the screen crazily, and have the opportunity to do so. Share 100,000 Toncoin ($TON) and millions of in-game tokens.
The way $NOT is issued is different from most non-meme currency projects. Generally speaking, in order to avoid excessive selling pressure in the early stages of listing, many new projects usually lock a large number of tokens and unlock them according to specific rules or time.
But $NOT unlocked 100% of the token supply when it was first listed, and like many meme coins, it is fully circulated.
Later, many TG mini-game projects were also listed through Binance IEO, such as Hamster Kombat ($HMSTR), Catizen ($CATI), etc.
Ethena ($ENA): Synthetic USD Protocol
Ethena ($ENA) is a synthetic U.S. dollar protocol. Its current main product is the U.S. dollar-anchored stablecoin $USDe. Unlike Tether ($USDT), $USDC and other stablecoins that are still backed by equivalent U.S. dollar fiat currencies, $USde The collateral assets are composed of equal amounts of Ethereum long spot and Ethereum short futures.
The concept of $USDe originated from BitMEX founder Arthur Hayes’ discussion of U.S. dollar stablecoins, but Columbia Business School professor Austin Campbell believes that $USDe is actually more like a “structured note” than a stablecoin, and analyzed 4 layers of potential risks .
io.net ($IO): Shared GPU computing power
IO.NET is a decentralized artificial intelligence computing and cloud platform that integrates underutilized GPU and CPU computing resources to allow machine learning (ML) startups to gain nearly unlimited access at a fraction of the traditional cloud cost. computing power.
In order to attract users, IO.NET has designed a points system. As long as you provide computing resources and complete specified tasks, you can earn points, and then get the airdrops allocated after IO.NET issues coins.
This model of providing computing power to earn points is very popular in the decentralized physical infrastructure network (DePIN) industry. Grass Xiaocao mining, which can use WiFi, also uses a points system.
ICO Scam News List 2024
Although you may gain profits by participating in ICO fundraising, you must also be careful of investment risks and fraud. The following is news related to ICO fraud for readers’ reference:
A scam involving 2.2 billion junk coins! The founder of ACE and three others have bail amounted to 58 million
Chainalysis: It takes more than a month to harvest, and the pig-killing plate replaces Ponzi as a major fraud!
Keelung Mayor Xie Guoliang is involved in controversy! The "Baodao Financial Fraud Case" has sparked discussion again. Where did the 20,000 ETH disappear?
Huang Licheng was kicked out by the "blockchain detective": he emptied more than 20,000 ethers and issued 10 garbage projects
The currency price dropped to zero overnight! Revealing the scam of “pumping and dumping” in the currency circle: How to detect and escape early?
ICO Risks You Must Know: Security and Legal Supervision Issues
As mentioned earlier, due to the lack of regulation and security concerns about ICOs, people must carefully evaluate investment risks.
As early as 2018, Taiwan’s Financial Supervisory Commission issued a press release providing public information on ICO risks.
The Financial Supervisory Commission identifies ICO tokens as virtual commodities. Whether they are regulated by the Securities and Exchange Act should be determined on a case-by-case basis. If an ICO token is recognized as a security by the Financial Supervisory Commission and the ICO issuer raises funds in Taiwan without the consent of the Financial Supervisory Commission, it may violate Article 22, Paragraph 1 of the Securities and Exchange Act.
A research report published by the central bank in 2018 pointed out that many ICO fundraising activities are fraud and illegal money-raising activities. Many projects just package traditional financial fraud and pyramid schemes into ICOs, so the public needs to know how to identify scams.
In addition, in 2017, the U.S. Securities Commission (SEC) also stopped the ICO plan of the California company Munchee and regarded the ICO tokens the company wanted to issue as unregistered securities; the Central Bank of China is very strict on ICOs. In the same year A complete ban on any domestic ICO fundraising activities.
How to participate in ICO?
If ordinary investors want to participate in an ICO, they usually proceed through the following 5 steps:
Conduct detailed research on ICO projects of interest.
Apply to participate on the ICO project official website.
Have your crypto wallet ready with funds for purchase.
Wait for the official opening of the public sale and execute transactions (specific details depend on the individual ICO).
Receive and store purchased ICO tokens.
Take Portal ($PORTAL), which will be listed in 2024, as an example. The project had a public pre-sale before being listed, and retail investors were allowed to buy it first. The participation method is similar to the 5 steps listed above. At that time, the public sale price of $PORTAL was US$0.15. It was later listed on Binance through IEO, bringing nearly 26 times the income. However, it later plummeted and is currently only worth US$0.35.
