What is an ICO? How initial coin offerings work and why they are risky
By SendPay Business · · 2 min read
An ICO, or initial coin offering, is a way for a crypto project to raise money by selling newly created tokens to the public, usually in exchange for other cryptocurrencies. ICOs were very popular around 2017 and 2018.
How an ICO works
- A project publishes a white paper describing its plan and its token.
- It sets a price and a sale period for the new tokens.
- Buyers send crypto to the project's smart contract or wallet.
- Buyers receive the new tokens, which may later trade on exchanges.
ICO vs IPO
In an IPO, a company sells shares under strict securities rules, with audited accounts and legal duties to shareholders. Tokens from an ICO usually give no ownership in a company, and many ICOs had little or no oversight.
Why they are risky
Many ICO projects never delivered what they promised, and some were outright scams where the team disappeared with the money. Regulators in several countries have since treated many tokens as securities and taken action against unregistered sales.
Where SendPay fits
SendPay does not run or list token sales. A SendPay platform lets your customers buy, sell and hold crypto next to their cash, with assets held with regulated partners and a trading fee you set.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.