Evolution of Token Issuance Mechanisms: From ICO to IDO

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

The Development History of Token Issuance Mechanism

Initial Token Issuance (ICO)

ICOs rapidly developed between 2016 and 2018. Ethereum is one of the earliest and most successful cases, raising about $18 million in 2014 at a price of $0.35 per ETH. ICOs peaked in 2018, with total fundraising exceeding $6 billion. However, there was insufficient investor protection, with fraud rates exceeding 80%, and only 44% of ICO projects remained active within three months after issuance.

Initial Exchange Offering (IEO)

To address the issues of ICOs, IEOs emerged around 2019. They introduced a more regulated structure through centralized exchanges, conducting Token reviews and compliance checks. The survival rate of projects increased to 70-80%, while the fraud rate significantly dropped to 5-10%. However, listing fees, KYC requirements, and centralized control also brought some limitations.

Security Token Offering (STO)

STOs introduce regulated on-chain representations of traditional financial instruments. Although the survival rate is high (85-95%), it remains a niche issuance method due to complex legal structures, longer activity cycles, and limited secondary market infrastructure.

The Rise of IDO and the Era of Permissionless Issuance

The Initial Decentralized Exchange Issuance (IDO) marks a significant shift towards fully decentralized financing. It supports instant Token issuance and liquidity acquisition without the high listing fees. However, this convenience also brings higher volatility and a scam rate (estimated at around 10-20%).

platform to promote IDO

A certain DEX uses a Dutch auction mechanism for token issuance. Projects can apply to deploy their native Token and participate in a 31-hour Dutch auction, with the Token deployment fee decreasing linearly from the initial price to 10,000 USDC.

Another platform has simplified the issuance and trading of meme coins on a certain blockchain. Users can easily and cost-effectively issue Tokens, attracting investors who want to capitalize on the viral token trend. However, the convenience of token creation has also led to a surge in low-quality projects.

Comparison between IEO and IDO

IEOs and IDOs provide fundamentally different financing avenues for projects, each with its own advantages and disadvantages. IEOs offer a structured environment under the supervision of exchanges, enhancing investor confidence, but come with higher costs and limited participation. The due diligence conducted by exchanges can lead to more effective pricing and reduced investment risks. In contrast, IDOs lack formal regulation and are abundant in number, resulting in lower market efficiency and increased volatility.

Future Outlook: Hybrid Issuance Model and Regulatory Changes

The future development direction may be a hybrid model that combines on-chain liquidity with off-chain regulatory compliance. Emerging platforms adopt a Dutch auction mechanism for price discovery while maintaining structure. Platforms simplifying meme coin issuance are riding the wave of viral spread, but also face the risk of market saturation.

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 U.S. could impact the compliance of IDO platforms. The EU's MiCA (Markets in Crypto-Assets Regulation) sets a precedent for the licensing of crypto assets, which may encourage projects to move towards a regulatory-friendly structure.

Conclusion

By 2025, IDOs may still be the preferred choice for small, community-driven issuances, while IEOs and STOs will cater to more institutional-oriented projects. What we are witnessing is the evolution of financing forms towards issuance strategies that balance accessibility, compliance, and investor protection. As platforms mature and regulations gradually improve, a hybrid issuance framework will define a new era of crypto capital formation.