Surely you do know what crowdfunding is, don’t you? Someone shares a project or personal circumstances on an online platform, and whoever wants to help them or invest in their initiative can donate some money. Well, crowdsales in crypto aren’t that different, except that it’s always about investing in a new idea, and it always involves the purchase of newly minted tokens.
To be more specific, a crowdsale in the crypto space is a fundraising method in which a DLT-based project offers its native tokens (created by their team) to the public in exchange for established cryptocurrencies, such as Bitcoin or Ether, or fiat money, like USD or EUR. This process typically occurs before the project is fully launched and is often part of an Initial Coin Offering (ICO) or a similar token distribution event. Crowdsales allow early supporters to acquire tokens at a fixed or tiered price, and the funds raised are generally used to finance the development and deployment of the project’s ecosystem or platform.
ICO, by the way, was the most popular type of crypto crowdsale some years ago. And, between 2017 and 2018, it was in charge of demonstrating everything that could go wrong with this new and unregulated model.
A bad track record
In layman’s terms, an ICO happens when someone (which could be, literally anyone with Internet and a minimum level of crypto literacy) decides to put together a website, some social channels, and, if we’re lucky, a whitepaper, to offer some kind of new crypto project to potential investors (anyone with Internet, too). These investors would be buying a batch of recently-minted tokens to fund that project and, if everything goes well, their tokens would acquire a lot of value in time. No laws, no limits, and no more requisites than a crypto wallet and a dream.
Except. Yes, things often go wrong. In 2017 and 2018, ICOs exploded in popularity, quickly becoming the go-to way for crypto startups (and scammers) to raise money. What started quietly with projects like Mastercoin suddenly turned into a frenzy, with Ethereum’s early success showing the potential: early buyers paid just $0.31 per ETH —now worth around $1,600. Big names like Tezos, Filecoin, and EOS raised millions (even billions), and it seemed like anyone with a vague whitepaper and some marketing could secure funding in minutes.
But behind the hype, problems grew. Many teams had no working product and still walked away with millions—some didn’t stick around at all. A 2018 report by
Regulations for ICOs
After 2017, regulatory agencies around the world began scrutinizing ICOs due to the increasing concerns. Governments responded in different ways. China and South Korea imposed full bans on ICOs, while others, like Australia, New Zealand, and France, released regulatory guidelines or introduced opt-in frameworks. The U.S. took a case-by-case approach, driven largely by the Securities and Exchange Commission (SEC), which began classifying some ICOs as unregistered securities offerings.
A key tool in the SEC’s evaluation is the
This scrutiny led to several high-profile crackdowns. One example is the case of Block.one, the company behind EOS, which raised over $4 billion through an ICO and later
As regulatory pressure mounted and the investor trust in the old model evaporated, the crypto space adapted. New models like Security Token Offerings (STOs) and Initial Exchange Offerings (IEOs) emerged, focusing on compliance and investor protection. These alternatives signaled a shift toward more structured, legally sound fundraising strategies.
New Crowdsale Models
People still launch and participate in ICOs, but crypto projects today also use other
STOs often require investors to be accredited, ensuring they meet specific income or asset thresholds. This approach offers legal protections and aligns closely with traditional investment models but in a tokenized form. On the other hand, Initial Exchange Offerings (IEOs) and Initial DEX Offerings (IDOs) serve as alternatives that bypass some regulatory hurdles. The latter type, especially, is largely immune to most regulations because funds are handled in a decentralized way, and users have to check for red flags by themselves (liquidity pools, smart contracts, etc.)
IEOs are organized by centralized exchanges, which manage the token distribution and require projects to meet certain listing standards, such as a clear whitepaper and technical setup. IDOs, by contrast, take place on decentralized exchanges (DEXs), providing instant liquidity and broader access but often with less oversight. Both options allow non-accredited investors to participate, though IEOs may be more selective due to the involvement of centralized platforms acting as gatekeepers.
Other forms like Initial Farm Offerings (IFOs), Initial NFT Offerings (INOs), and Initial Game Offerings (IGOs) expand crowdfunding into DeFi, digital collectibles, and gaming. IFOs typically require users to contribute to a liquidity pool using the DEX’s native tokens in exchange for early access to new project tokens. INOs involve the sale of NFTs that may carry ownership or access perks, while IGOs focus on gaming-related assets or tokens. Most of these models avoid the need for accredited investor status but still carry risks due to market volatility and limited regulation, similar to the original ICOs.
Accredited Investors
As mentioned above, some new, regulated crypto crowdsale models require investors to be accredited. An accredited or verified investor is someone who meets specific financial or professional criteria that allow them to invest in opportunities not open to the general public. Depending on where you live, the requirements may vary. In the U.S., for instance, you typically need a net worth above $1 million (excluding your home) or an annual income of at least $200,000 for the last two years.
In the crypto world,
If you want to participate in all available types of crypto fundraising, verifying your accredited investor status (if you are one) is key. In the
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