An Initial Coin Offering (ICO) is a type of funding using cryptocurrencies, which is often a form of crowdfunding. It is the cryptocurrency industrys equivalent of an initial public offering (IPO) in the stock market. ICOs allow startups to raise capital by issuing tokens on a blockchain and then distributing tokens in exchange for a financial contribution. These tokens can serve an array of different functions, from granting the holder access to a particular service to entitling them to company dividends. ICOs can be a source of capital for startup companies, and they can allow startups to avoid regulations that prevent them from seeking investment directly from the public and intermediaries such as venture capitalists, banks, and stock exchanges, which may demand greater scrutiny and some percentage of future profits or joint ownership. However, ICOs may fall outside existing regulations, depending on the nature of the project, or be banned altogether in some jurisdictions, such as China and South Korea. ICOs are sometimes called "token sales".

ICO participants buy into an initial coin offering to receive a new cryptocurrency token issued by the company. This token may have some utility related to the product or service that the company is offering or represent a stake in the company or project. The primary difference between an ICO and an IPO is that investing in an ICO doesn’t secure an ownership stake in the crypto project or company. ICO participants are gambling that a currently worthless currency will later increase in value above its original purchase price. ICOs are largely unregulated, which makes them extremely risky.

To launch an ICO, a company needs to create a whitepaper outlining its project, a roadmap with short- and long-term goals, market research on other ICOs, a website, social media presence, and a marketing campaign. ICOs can be securities offerings, and they may need to be registered with the SEC or fall under an exemption to registration. ICOs may pose substantial risks, and while some ICOs may be attempts at honest investment opportunities, many may be frauds, separating investors from their hard-earned money with promises of guaranteed returns and future fortunes.