An Initial Coin Offering (ICO) is a fundraising method cryptocurrency startups use to raise capital. It allows companies to bypass traditional financial institutions like banks or venture capital firms and directly raise funds from the public. ICOs are often compared to Initial Public Offerings (IPOs) in the stock market, but investors receive digital tokens instead of shares.

In an ICO, a company issues its cryptocurrency or tokens and sells them to investors in exchange for established cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH). These tokens can serve various purposes, such as granting access to a product or service, or they may be held as an investment if their value appreciates over time.

ICOs gained immense popularity between 2016 and 2018, leading to significant innovation in blockchain-based projects. However, due to a lack of regulations, many ICOs became scams or failed projects, causing investors to lose money. Governments and financial regulators in various countries have since imposed stricter rules to protect investors.

Despite the risks, ICOs remain attractive for blockchain startups because they allow them to secure funding quickly and globally, provided they maintain transparency and regulatory compliance.