New projects raise funds by selling tokens in several ways: ICOs, IEOs, and IDOs. The names differ by just one letter, but they reflect different ways of organizing a sale—and different stages in the history of the crypto industry.

$ETH ’s early development was funded by a public crowdfunding campaign in 2014. Current price: 2256.28 (24h +0.35%).

— ICO: The project sells directly —

An ICO (Initial Coin Offering) is when a project sells tokens directly to the public to raise funds for development. The Mastercoin sale, launched in July 2013, is often considered the earliest ICO.

In July 2014, Ethereum launched a public crowdfunding campaign, in which participants used Bitcoin to purchase ETH. The funds supported Ethereum’s early development.

Around 2017, ICOs surged in popularity. Many projects raised large amounts of money with nothing more than a white paper, and many later failed to deliver on their promises. The experience taught the industry a lesson that has been repeated ever since: “Understand a project before you get involved.”

— IEO: Vetted by an Exchange —

An IEO (Initial Exchange Offering) is a token sale conducted through an exchange’s launch platform, with the exchange responsible for vetting the project and handling the sale. In early 2019, Binance Launchpad’s BitTorrent (BTT) sale sold out in less than 15 minutes, kicking off a wave of IEOs.

Exchange vetting adds an extra layer of review, but it doesn’t mean a token’s price won’t fall after listing. You’re still responsible for the price risk of a newly issued token.

— IDO: An On-Chain Sale —

An IDO (Initial DEX Offering) is a token launch on a decentralized exchange or an on-chain launch platform, where users participate directly with their wallets. It’s accessible and fast, but there’s less vetting, so fake projects and phishing pages are more common.

When participating in an IDO, always verify the page and contract address before connecting your wallet or approving any transactions.

— No Matter Which Method —

Before participating in any sale, it’s worth checking three things: who gets the tokens, when each party’s tokens unlock, and how much is being raised and what the funds will be used for. Focusing only on hype and promotion can make it easy to overlook this key information.

Anyone who approaches you to promote “private sale allocations” or “insider prices” is often running a scam; legitimate sales are announced through public channels.

— In a Nutshell —

ICO, IEO, and IDO differ only in how they’re organized. Changing the name doesn’t make the risks of a new token disappear. Only invest what you can afford, and make sure you have an exit plan.

Anything to add? Let’s chat in the comments.