How Do ICOs Work and What Happens When They End?

Let’s say you’ve got your eye on a new cryptocurrency project. It hasn’t launched yet, but the team behind it is selling tokens early to raise money and get things rolling. That’s basically what an ICO—Initial Coin Offering—is: a way for crypto projects to fundraise by offering their token before the product is ready. Unlike a traditional IPO, where companies sell stock, ICOs offer tokens that may give buyers access to a future platform, some form of governance, or simply the hope of future profits. It’s a bit of a gamble—but one that’s attracted a ton of interest.

What Happens During an ICO?

When a team wants to raise funds through an ICO, they start by putting out something called a white paper. It’s kind of like a business plan mixed with a technical blueprint. It usually includes what the project aims to do, how it plans to use the money, what the token does, how many tokens there will be, and any other key info investors should know.

Once the white paper is out, the project gets to work on getting attention. Promotion is mostly done online—Twitter, Reddit, Telegram, and crypto forums are the usual spots. There are some limitations depending on the country or platform, but generally, the goal is to build hype and get potential backers interested.

Now here’s where the money comes in. Investors send in funds, typically in the form of well-known cryptocurrencies like Bitcoin or Ethereum.

In return, they get the project’s tokens. Depending on the setup, those tokens might give them access to future services, voting power in the project’s direction, or the hope that the value will increase down the line. Some investors keep an eye out for the best presale crypto opportunities, hoping to catch a token early enough to see big returns later. This phase is crucial—it’s where early adopters decide if the project is worth their money and trust.

After the ICO Ends: What Comes Next?

When the sale ends, the team’s got funds and the investors have their tokens—but that’s just the beginning. Now, the real pressure kicks in.

First, there’s token distribution. The project sends out the tokens to contributors, either manually or through a smart contract. Many teams also push to get those tokens listed on exchanges. That’s important—it allows trading and creates liquidity, which is a big deal for anyone hoping to sell or buy more.

Then it’s all about execution. Teams are expected to follow through on the roadmap from their white paper. That means delivering a working product, onboarding users, and hitting the milestones they promised during the funding phase.

At the same time, communication becomes critical. Teams usually stay active on Twitter, Discord, or email newsletters, giving updates on what they’ve shipped and what’s coming next. Without consistent updates, the community starts to lose trust—and fast.

The most serious projects also spend this time growing their ecosystem. That might mean running developer programs, hosting AMAs, or offering incentives for community contributions. The goal is to build not just tech, but also a user base that sticks around.

Why ICOs Aren’t All the Same

There’s more than one way to run an ICO, and the structure really depends on the goals of the team.

Some go with a fixed price and a fixed supply—let’s say 1 million tokens at $1 each, with the goal of raising $1 million. Simple and clean.

Others might keep the supply fixed but let the final price float depending on demand. For example, if they raise $3 million for those 1 million tokens, each one ends up being worth $3.

Or they do it the other way around—fixing the price but letting the total number of tokens created depend on how much funding rolls in. So if they want to sell each token at $1 and they raise $5 million, they’ll issue 5 million tokens.

Each approach has its pros and cons. What matters is that the structure is clear and fair, and that it’s laid out transparently in the white paper.

The U.S. Rules Around ICOs

In the United States, ICOs are generally treated as securities offerings and fall under the SEC’s jurisdiction. The SEC uses the Howey Test to figure out if a token is considered a security. If it is, the project has to either register the offering or qualify for an exemption.

Some projects use Regulation A+ (which allows up to $75 million in fundraising) or Regulation D, which has different limits and rules depending on who’s investing. These exemptions help projects stay legal, but it’s still a legal maze—especially for small teams.

There’s also the matter of anti-money laundering laws. If a project handles money, it may need to register with FinCEN and follow rules designed to prevent financial crime. All of this means running a fully compliant ICO in the U.S. is challenging, and many teams either go international or work with legal experts from the start.