ICO
Initial Coin Offering. A token sale where a project sells tokens directly to the public, usually before any product exists. ICOs dominated 2017-2018 funding and are now mostly replaced by airdrops, IDOs, or fair launches.
Also known as: Initial Coin Offering, token sale
ICOs were the original mechanism for token-funded projects to bootstrap. The pattern was simple: a project published a whitepaper, set a price per token, opened a sale window (sometimes a few hours, sometimes weeks), and accepted ETH or BTC from anyone willing to buy. The 2017 cycle saw ICOs raise tens of billions of dollars across thousands of projects, the vast majority of which delivered nothing or actively defrauded their buyers. The SEC and other regulators started cracking down hard in 2018, and the model collapsed under legal pressure plus investor exhaustion.
The fundamental problem with ICOs was that they offered no due diligence requirements, no track record verification, and no recourse for buyers. A team with no product, no engineering experience, and no intention of building anything could raise $50M with a slick whitepaper. Most of them did. By 2019, post-ICO surveys found that 70-80% of 2017 ICOs were either failed, scams, or zombie projects with no functional product. The remaining 20-30% included some genuine successes but most were marginal.
What replaced ICOs was a mix of more disciplined funding mechanisms. IDOs (Initial DEX Offerings) launched tokens directly on a DEX with built-in liquidity, removing the “raise then disappear” pattern. Airdrops distributed tokens to existing users instead of selling them. Fair launches skipped the sale entirely. VC rounds with proper vesting schedules became the norm for serious projects. Each of these has its own problems but none has been as catastrophically bad as the ICO era at the absolute level.
The historical lesson is that any token sale mechanism that asks public buyers to send money in exchange for promises of a future product needs strong vesting, transparent on-chain records, and ideally some form of legal accountability. Most modern DeAI projects have learned this. When you read “X raised $20M in a seed round in 2024,” the implication is that institutional VCs did at least some due diligence. The OYM Returns Score’s Token Distribution dimension scores projects partly on whether their initial distribution mechanism was credible or extractive.