The Evolution of Token Issuance Mechanisms: The Development from ICO to IDO

Since the birth of Bitcoin in 2009, the cryptocurrency financing ecosystem has undergone significant changes. As blockchain projects continue to explore new fundraising methods, various token issuance mechanisms have emerged, each influenced by market conditions, technological advancements, and regulatory changes.

Token Issuance Mechanism Timeline

Initial Token Issuance (ICO)

ICOs experienced explosive growth between 2016 and 2018. Ethereum was one of the early success stories, raising approximately $18 million in 2014 at a price of $0.35 per ETH. In 2018, ICOs reached their peak, raising over $6 billion in total. However, this model has significant issues with inadequate investor protection, with a fraud rate exceeding 80%, and only about 44% of ICO projects remained active three months after issuance.

Initial Exchange Offering (IEO)

To address the chaos of ICOs, IEOs emerged around 2019, introducing a more regulated structure through centralized exchanges. These platforms conduct token reviews and compliance checks, increasing project survival rates to about 70-80%, while the fraud rate significantly decreases to around 5-10%. However, listing fees, KYC requirements, and centralized control also bring certain limitations.

Security Token Offering (STO)

STO introduces a representation of traditional financial instruments on a regulated blockchain. This model has the highest survival rate (85-95%), but remains niche due to complex legal structures, longer activity durations, and limited secondary market infrastructure.

The Rise of IDO and the New Era of Permissionless Issuance

The Initial Decentralized Exchange Offering (IDO) marks a significant shift towards fully decentralized financing. Some emerging platforms support instant token issuance and liquidity acquisition without the high listing fees. However, this convenience comes with higher volatility and fraud rates (estimated at around 10-20%).

Promote the IDO platform

Some emerging platforms use a Dutch auction mechanism for token listing. Projects can apply to deploy native tokens and participate in auctions, with the token deployment costs decreasing linearly from the initial price. Other platforms have simplified the issuance and trading of meme coins on certain blockchains. Users can easily and cost-effectively issue tokens, attracting investors looking to capitalize on viral token trends. However, the ease of token creation has also led to a surge in low-quality projects.

Comparison of IEO and IDO

IEO and IDO provide distinctly different financing avenues for projects, each with its unique advantages and challenges. IEO offers a structured environment under the supervision of exchanges, enhancing investor confidence, but it comes with higher costs and limited participation. The due diligence of exchanges can lead to more effective pricing and reduced investment risks. In contrast, IDO lacks formal regulation and is abundant in quantity, resulting in lower market efficiency and increased volatility.

Future Outlook: Hybrid Issuance Model and Regulatory Changes

The issuance mechanism is not only a technical tool but also shapes capital allocation, investor participation, and narrative formation. In the future, hybrid models that combine on-chain liquidity with off-chain regulatory compliance may emerge.

Some new platforms adopt the Dutch auction mechanism for price discovery while maintaining structure. Other platforms simplify meme coin issuance, riding the wave of viral spread, but there is a risk of market saturation. These models reflect the market's desire for innovation.

At the same time, the policies of the United States and the European Union are creating a clearer framework for token issuance. The upcoming stablecoin framework in the United States and broader regulatory clarity may impact the compliance of IDO platforms. The EU's MiCA (Markets in Crypto-Assets Regulation) sets a precedent for the licensing of crypto assets and may drive projects towards a regulatory-friendly structure.

Conclusion

Looking ahead to 2025, IDOs may still be the preferred choice for small, community-driven issuances, while IEOs and STOs will serve projects that are more institutionally oriented. What we are witnessing is not a competition of financing formats, but an evolution towards issuance strategies that balance accessibility, compliance, and investor protection. As platforms mature and regulations solidify, hybrid issuance frameworks will define the next era of crypto capital formation.