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Aug 22, 22  |  Ashar Ali

Differences Between ICO V/S IDO Explained

One of the most important success criteria for every new business is having access to sufficient capital, and fundraising has long been a key strategy for luring investors. This procedure has undergone a radical change in the realm of crypto ventures. Pre-selling tokens is a proven method for new crypto companies to raise capital. Through these channels, the public first learned about ICOs and, subsequently, IDOs to finance cryptocurrency projects. This article will compare and contrast initial coin offerings (ICOs) with initial deposit offerings (IDOs), highlighting the key differences between the two and the benefits each crypto fundraising strategy offers.

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What is ICO?

Once upon a time, initial coin offers (ICOs) were the standard for cryptocurrency fundraising. It is sufficient for a crypto startup to produce a white paper outlining the planned system to get investment. After that, a token sale would occur, and the coins would serve as the de facto money of the future. Investors who trust in the project’s potential may acquire a token for fiat dollars or cryptocurrency. This is a gamble made with the expectation that the token's worth will increase as the product nears release.

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The initial coin offering began in 2013. ICOs back then were unregulated and quick ways to bring in capital. However, the practice didn't really take off until 2017, when several organizations adopted it. Experts estimate that $5.6 billion was raised via ICOs. This kind of financing reached its zenith about the same time as Bitcoin's value was at its highest. Here are the top initial coin offerings (ICOs) in 2017 and 2018:

  • EOS – $4.19 billion.
  • Telegram Open Network – $1.7 billion.
  • TaTaTu – $575 million.
  • Dragon Coin – $407 million.
  • Hyundai DAC – $258 million.
  • Filecoin – $257 million.
  • Tezos – $232 million.
  • Sirin Labs – $157.8 million.
  • Bancor Network – $153 million.
  • Polkadot – $145 million.

While initial coin offerings (ICOs) took many years to become widely popular, they swiftly fell out of favor. A stunning $12.5 billion was invested in 1,253 ICOs in 2018. A major drop occurred in the year's second half, however. In 2019, multiple ICOs battled to raise funds from backers. Reporting records reveal that just 84 projects received around $350 million in financing, significantly decreasing from prior spending levels.

Attackers' decision to take advantage of the mechanisms was a major factor in decreasing ICO popularity. Speculation and greed have been a problem across the sector. In 2018, for instance, over half of all ICOs were fraudulent; even though some regulations and guidelines for ICOs have been imposed, the fundraising technique has not been able to recover from the blow it took.