ICO vs IEO vs IDO: What’s the Difference?

The cryptocurrency industry changes at a rapid pace, and so do the ways in which blockchain projects secure funding. Over the years, different models have emerged to connect projects with investors. If you keep up with crypto news, you’ve probably seen the terms ICO, IEO, and IDO. They’re common in the industry, but not everyone fully understands what they mean or how they differ.

These terms describe different ways for crypto projects to raise capital, and you can think of them as distinct forms of crowdfunding designed for the blockchain world. Each one has its structure, its own benefits, and its own risks. If you’re an investor trying to get early access to potentially promising projects, or a blockchain founder in need of capital to build your idea, it’s important to understand how these fundraising methods work.

In this guide, the goal is to explain ICOs, IEOs, and IDOs clearly, without any unnecessary hype. The explanations here will focus on what each method involves, how they operate, and what sets them apart.

Key Takeaways

• ICOs (Initial Coin Offerings) were the first large-scale fundraising method in crypto. They do not have strict regulations or official vetting processes.
• IEOs (Initial Exchange Offerings) involve centralized exchanges that review and approve projects before launching them, giving an extra layer of security.
• IDOs (Initial DEX Offerings) are run on decentralized exchanges and rely on liquidity pools and automated market makers.
• Each fundraising method comes with different levels of accessibility, investor protection, and risk.
• Newer fundraising models are appearing, such as ILOs (Initial Liquidity Offerings) and STOs (Security Token Offerings).
• Regardless of the model, investors should always perform thorough research before participating in any token sale.

What Is ICO, IEO, and IDO in Crypto?

The three terms represent alternative ways of crypto projects to source investment funds. Although they have the same fundamental aim, i.e. to introduce the money to construct and introduce a project, they vary in the way of organization and extent of control.

ICO (Initial Coin Offering)

The most primitive and initial type of financing with the help of tokens is ICO. It is kind of like an IPO in standard finance, but it is far less regulated. During an ICO, the project offers new tokens to the investors. The investors are rewarded with digital tokens instead of a material product or a stock at a company, which could only gain in value in the event of a successful project.

The ICOs were very popular in the boom years of 2017-2018 when billions of dollars were earned. However, due to the lack of significant control, the number of scams, low quality of work, and failure was also high during this period. The history has given ICOs a somewhat famous but infamous reputation of being innovative and at the same time controversial risky.

Initial Exchange Offering (IEO)

The process of an IEO resembles ICO in its ability to sell tokens to the general population; the significant difference, however, is that the sale takes place on a centralized cryptocurrency exchange instead of being run directly by the team of the project. Binance, KuCoin, and Huobi are examples of exchanges having hosted IEOs.

The exchange is the facilitator in an IEO. The investors then purchase the new tokens by using the platform of the exchange and not sending the money to the project. The exchange also vets the project, personnel and technical viability before deciding to host the token sale. This vetting process serves to lend a certain amount of credibility and even safeguarding of the investor against blatant fraud.

It was partly due to the growth in popularity of IEOs following the deceleration of the ICO hype due to investors seeking greater assurances of security and increased candidness in vetting.

Initial DEX Offering (IDO)

An IDO takes place on a decentralized exchange (DEX) rather than a centralized one. Projects launch their tokens through platforms such as Uniswap, PancakeSwap, or special launchpads like Polkastarter or DAO Maker.

IDOs typically use liquidity pools and automated market makers to facilitate token sales. They combine the open participation of ICOs with features from decentralized finance (DeFi), such as no central authority controlling the sale, which is a key difference when discussing ICO vs IEO vs IDO.

This model has grown alongside the Web3 and DeFi movements, appealing to projects and investors who value decentralization, permissionless access, and global participation.

How Each Fundraising Method Works

Understanding the exact steps for each model helps explain why a project might choose one over another and what an investor can expect when participating.

How ICOs Work

1. Preparation – The project team writes a detailed whitepaper describing their goals, technology, and tokenomics. They create smart contracts for the token and set a fundraising target.
2. Marketing – They promote the ICO across different channels to attract interest from potential investors.
3. Token Sale – Investors send cryptocurrencies like Bitcoin or Ethereum directly to the project’s wallet or smart contract and receive the new tokens in return.
4. Post-Sale – After the ICO ends, tokens are distributed, and the team may try to get them listed on trading platforms – After the ICO ends, tokens are distributed, and the team may try to get them listed on trading platforms.

Pro Tip: Always read the whitepaper and research the team. Look for practical use cases, achievable timelines, and clear communication.

ICOs are straightforward and give full control to the project team, but the IDO model offers additional benefits. However, this lack of a third-party filter means investors must handle all due diligence themselves.

How IEOs Work

1. Application – The crypto project applies to run its token sale on a specific exchange.
2. Review – The exchange reviews the project’s technical documents, checks the team’s background, and assesses the feasibility of the idea.
3. Approval – If the exchange approves, it helps prepare the token sale, sometimes offering marketing and technical assistance.
4. Sale – Investors purchase the tokens directly on the exchange, usually using the exchange’s own token or other supported cryptocurrencies.
5. Listing – The tokens are typically listed for trading on that same exchange immediately after the sale, especially in the context of the IEO model.

Because the exchange’s reputation is tied to the outcome, it has an incentive to avoid hosting low-quality or fraudulent projects.

How Each Crypto Fundraising Model Works?

1. Choosing a Platform – The project selects a decentralized launchpad.
2. Community Vetting – Some launchpads use governance votes or staking to allow their community to approve projects, a feature that enhances the IDO model – Some launchpads use governance votes or staking to allow their community to approve projects, a feature that enhances the IDO model.
3. Providing Liquidity – The project adds funds to liquidity pools on the DEX, similar to the IDO model – The project adds funds to liquidity pools on the DEX, similar to the IDO model.
4. Token Sale – Investors take part through the launchpad, often after staking its native token to gain access.
5. Immediate Trading – Tokens become tradable on the DEX as soon as the sale ends.

IDOs offer broad accessibility anyone with a crypto wallet can join but popular ones may require staking, which creates a financial entry barrier.

ICO vs IEO vs IDO: Main Differences

Security and Trust

• ICOs – Least secure, as there is no third-party vetting, particularly when comparing the ICO vs IEO models. This made them prone to scams during the 2017–2018 boom.
• IEOs – Safer because exchanges screen projects, and their credibility is on the line.
• IDOs – Somewhere in between, with some vetting by launchpads but less centralized oversight.

Accessibility

• ICOs – Usually open to anyone with a crypto wallet, though some countries have banned them.
• IEOs – Participation depends on exchange rules, often with KYC and regional restrictions.
• IDOs – Generally open worldwide, but staking requirements can limit access – Generally open worldwide, but staking requirements can limit access.

Regulatory Position

• ICOs – Often operate in legal gray areas, with some being treated as unregistered securities – Often operate in legal gray areas, with some being treated as unregistered securities.
• IEOs – More likely to fit within compliance structures due to exchange involvement.
• IDOs – Similar regulatory uncertainty to ICOs, though decentralization can make enforcement harder.

Cost and Speed

• ICOs – Lower costs since there’s no intermediary, but the team handles everything from marketing to security.
• IEOs – Require revenue sharing with the exchange, often 10–20%, plus possible listing fees.
• IDOs – Launchpad fees vary, often lower than centralized exchanges.

Liquidity

• ICOs – No guaranteed liquidity; listing depends on negotiations with exchanges.
• IEOs – Tokens are usually listed on the host exchange right after the sale.
• IDOs – Provide instant liquidity on DEXs, though prices can be volatile initially.

Which Fundraising Model Is Best for Crypto Startups?

It depends on the project’s situation:

Go for an ICO if:

• Your team has strong technical skills to run the sale independently.
• Your target investors are crypto-savvy and don’t mind higher risks.
• You want full control over how the sale is run.
• You’re ready to navigate uncertain regulations.
• You can manage your own marketing successfully.

Go for an IEO if:

• You want the trust boost that comes from exchange vetting.
• You need promotional support.
• You want investors to feel more confident.
• You’re fine sharing a portion of your funds with the exchange.
• You want guaranteed liquidity after the sale.

Go for an IDO if:

• You believe in decentralization and Web3 values.
• You want access to the DeFi audience.
• You want immediate liquidity without relying on centralized listing approvals.
• You’re comfortable working with DeFi technology.

Many projects mix these methods starting with a private sale, moving to an IDO, and then securing listings on centralized exchanges.