From Chaos to Control: What ICO and IEO Are, How They Differ, and Why the Second Format Replaced the First

Anyone in the crypto industry — even a complete beginner — has likely come across the abbreviations ICO, IEO, IPO, and IDO more than once. All of these are ways to raise investment capital, and many projects use one or several of these mechanisms. But what do they actually mean, and where do they happen? In this article, we’ll answer these questions and explain why the market shifted from ICO to IEO.

IEO (Initial Exchange Offering) is a newer fundraising model in which a startup sells tokens not directly to investors, but through a cryptocurrency exchange.

What Is an ICO (Initial Coin Offering)

ICO (Initial Coin Offering) was the first major fundraising format in the crypto industry. It emerged in 2013 with the launch of the Mastercoin project. The ICO model resembled classic crowdfunding: projects published themselves on specialized platforms with little to no strict regulation, issued their own tokens, and sold them directly to investors — essentially running token sales.

During the 2017 crypto boom, this approach became extremely popular thanks to a low entry barrier, minimal requirements, and the ability to raise capital without intermediaries. ICOs helped finance major ecosystems, including Ethereum, Cardano, TRON, Tezos, and a number of exchange tokens.

However, the lack of control created an environment where fraud became widespread. According to data from the Satis Group, more than 80% of ICOs conducted in 2017–2018 turned out to be fraudulent or failed to deliver on their promises. The absence of project screening, low transparency, and high risks undermined investor trust. As a result, the industry began moving toward safer token sale formats — including IEO — where exchanges oversee the listing process and apply stricter standards.

What Is an IEO (Initial Exchange Offering)

Initial Exchange Offering literally means an “initial exchange offering.” It is a newer fundraising format where a startup sells its tokens not directly to investors (as in ICOs), but via a cryptocurrency exchange.

The exchange acts as a transaction facilitator and a credibility layer: it performs project screening, requires mandatory participant verification, and provides token listing immediately after the sale. This structure gives projects access to the exchange’s broad user base, while reducing risks for investors and creating a more secure environment.

The first major player to scale the IEO format was Binance, which launched Binance Launchpad in 2017. The model quickly gained traction and was adopted by other platforms such as Bitmax, Bittrex, KuCoin, Huobi, and OKX, which introduced similar launch products.

Over time, the format proved itself through a number of successful offerings, including projects such as Matic Network (later rebranded), Axie Infinity, THORChain, WazirX, and others. Community interest in IEOs is also reflected in examples like the Sui offering on KuCoin Spotlight, which attracted hundreds of thousands of participants.

IEO vs ICO: What’s the Difference?

The main difference between IEO and ICO is the presence of an intermediary. In an ICO, a project issued tokens and sold them directly to investors — without third-party checks, without guaranteed listing, and without quality control. It was often enough to create a website, write a whitepaper, and run a marketing campaign. The whole process typically took 2–4 weeks, cost around $30,000–$60,000, and practically anyone could run an ICO — regardless of whether it was a legitimate product or a scam.

With an IEO, the exchange performs full due diligence: it checks the team, product, smart contracts, and legal structure. The process usually takes 2–6 months and requires serious investment from the project. Listing on top exchanges like Binance or OKX can cost from $200,000 to $1,000,000+.

Among ICO projects, only about 15% managed to get listed on exchanges, and only 23% generated profits for investors. IEOs showed the opposite trend: the average ROI on Binance Launchpad in 2019–2021 was reported at 1,766%. Even in 2024–2025, as the market matured, IEOs still demonstrated an average ROI in the range of 480–770%.

Accessibility is the only area where ICO kept an advantage. ICO participation typically didn’t require an exchange account, identity verification, or holding the platform’s native token. It was enough to send Ethereum or Bitcoin to a contract address, and the tokens arrived in your wallet. The minimum entry was often as low as $100, making the format accessible worldwide.

In IEOs, the situation is different: to receive a strong allocation, participants often need to hold roughly $1,000–$10,000 worth of the exchange’s native tokens (BNB, OKB, etc.). Users also must check whether the exchange is available in their region. If it is, they need to register and complete KYC.

The regulatory environment ultimately determined the “winner.” In 2018, the SEC began actively pursuing ICO projects, classifying many tokens as unregistered securities. From 2024, the European uniоn introduced MiCA, which effectively restricted ICOs without a CASP license, while legalizing IEOs through licensed exchanges. That made IEOs the only legally compliant way to run a public token sale in many jurisdictions — one of the reasons for their growing popularity in 2025.

ICO did not disappear completely: in some countries it remains illegal, while others introduced regulations and guidelines. But its era as the primary capital-raising mechanism has ended. The industry chose legality and security over maximum freedom and anonymity, and the ICO reputation as a “scam generator” proved too strong to rebuild investor trust.

How Can You Participate in an IEO?

There are two main participation models for IEOs on centralized exchanges: Launchpool and Launchpad. These mechanics are used by leading crypto platforms such as Binance, Bybit, and OKX — still among the most active venues for exchange-based launches. On major exchanges, Launchpool has gradually become the dominant format, while Launchpad is used less frequently.

Launchpool

Launchpool allows users to participate without buying tokens directly. Participants lock assets approved by the exchange — typically BNB, BUSD, or FDUSD — into a pool for a fixed period and receive new tokens as rewards proportional to their stake. The key advantage is that the locked assets remain owned by the participant and are returned after the farming period ends.

This reduces risk, removes competition for allocations, and makes participation more accessible: the entry threshold is often close to zero, and the distribution outcome is more predictable. Binance fully shifted to this model — the last classic IEO on Binance Launchpad took place in July 2023 with the Arkham project, after which Binance moved to Launchpool-only token launches.

Launchpad

Launchpad uses a different approach: investors buy new tokens during a limited window. Allocation size depends on holding the exchange’s native token — the more you hold, the more you can buy. The format is usually based on a fixed price or a subscription model with later distribution, which creates high competition for access.

Unlike Launchpool, Launchpad requires spending real funds and exposes participants to the risk of token price drops after listing. To reduce pressure and increase the number of successful participants, exchanges often impose purchase limits, but Launchpad remains more risky and less predictable. This format is still used on products such as Bybit Launchpad and OKX Jumpstart.

The shift from Launchpad to Launchpool after 2023 reflects not only investor demand for a higher probability of receiving tokens, but also regulatory considerations. Regulators often treat token sales as potential securities offerings, while staking with rewards can carry fewer legal risks in many frameworks. In addition, the decline in average IEO returns from 2019–2021 to the 2024–2025 period made the classic Launchpad model less attractive for many participants. Although both models still exist within the IEO structure and pursue the same goal, the market clearly trends toward Launchpool as a more stable, scalable, and transparent mechanism.

Success Stories and Failures: IEOs Are Not a Guaranteed Win

Since the IEO format emerged in 2017, many projects have used it: some became successful, others failed. One project raised more than $7 million in 15 minutes during its public token sale. Its initial price was $0.00012, and at the 2021 peak it reached $0.01357.

Another well-known metaverse project also launched on Binance Launchpad as an IEO. Its starting price at launch was $0.10 in 2020, and later at its peak it reached $165.37.

At the same time, high-profile listings do not guarantee massive success. For example, the SportFi (SPOFI) and RingX Platform (RINGX) tokens raised around $50,000 each at launch. Despite completing the token sale, their price dropped almost to zero shortly after listing. The same happened with the EMOGI (LOL) token on Huobi Primelist: the project raised $2.5 million, but then the token price fell by 99%.

Even with an exchange acting as a trusted gatekeeper and conducting deep project checks, no one is fully protected from negative outcomes. As always, we recommend doing your own research, verifying sources, and remembering that cryptocurrencies are high-risk assets. Stay attentive and cautious — and for more content about crypto and the industry, follow the BestChange blogs.