ICO Revival: Decentralized Funding's Resurgence

The Revival of ICOs: An Overview

A notable trend has emerged in the cryptocurrency market: the strong return of Initial Coin Offerings (ICOs), while the hype around airdrops fades. This shift signals a move in funding models from those led by venture capital to more decentralized approaches.

ICOs are not a new concept. Some of the most prominent cryptocurrencies, such as Ethereum and Augur, were initially launched through this method. After a period of quiescence between 2022 and 2024, ICOs are experiencing a significant resurgence in 2025.

Why the ICO Comeback?

One of the primary reasons for the resurgence of ICOs is the significant increase in the number of cryptocurrency market participants since the initial wave between 2014 and 2018. The number of participants has more than tripled, with a compound annual growth rate of 4.46%, and an increase in the level of expertise among participants. Additionally, the increase in stablecoin supply has contributed to expanding the pool of available funding.

However, the increase in participants is not the sole driver. The root cause lies in the inherent deficiencies of current funding models. During the market cycle between 2022 and 2024, many projects raised funds from venture capital funds at discounted valuations, then depressed the initial circulating supply, resulting in much higher valuations upon public listing. This has resulted in insiders monopolizing most of the gains, with reduced profit-making opportunities for retail investors.

ICOs vs. Airdrops

Airdrops are often viewed as 'free money,' leading to immediate selling pressure. This has contributed to a general sense of fatigue among retail participants, who have shifted to meme coins characterized by low barriers to entry, high volatility, and the absence of venture capital involvement.

This dynamic has led to an increasing misalignment of interests between retail investors, project teams, and venture capital. Retail investors seek fairer entry opportunities, while project teams need sustainable communities and not just short-term speculation. Venture capital often seeks disproportionate early gains. This tension has created a need for a new model to realign incentives, which is embodied by the return of ICOs.

Why are ICOs Appealing?

ICOs offer a clearer incentive structure, allowing retail investors to participate on fairer terms. ICO participants are more likely to be long-term committed because they are purchasing tokens rather than receiving them for free. This helps to reverse the recent trend of shortening on-chain asset holding periods.

Furthermore, ICOs provide greater transparency regarding circulating supply and valuations, increasing the potential for significant gains for early participants. This contrasts with many airdrop projects that suffer from poorly designed incentive structures.

The Rise of Early Funding Platforms

The market is seeing the growth of early funding platforms, such as Echo and MetaDAO, which aim to facilitate ICOs. These platforms reflect the market's desire for high-liquidity, insider-driven launch models. They aim to help projects achieve long-term growth through ICOs.

How to Prepare

Success in this evolving landscape requires adopting a long-term mindset and adjusting actions accordingly. This involves building loyalty to a specific wallet address and demonstrating consistent and coordinated on-chain behavior. This may include experimenting with different protocols, deploying liquidity in pools, and contributing to public goods like Gitcoin.

In the future, ICOs may offer discounts to users with a proven track record of trustworthy on-chain behavior. Metrics such as YAP threshold, which combines verified on-chain behavior, may become key criteria for ICO qualification or discounted token allocation, rewarding those who demonstrate ongoing commitment and alignment of interests.

Potential Challenges

ICOs face several challenges. Poorly designed token economic models can lead to failure. If tokens are overpriced, it may be difficult to gain traction in the open market.

Regulatory and legal considerations also pose significant hurdles. These legal uncertainties can impede the success of ICOs, and in some cases, may push projects towards venture capital.

Another challenge is the potential for market saturation. As numerous projects conduct fundraising simultaneously, the overall enthusiasm for ICOs may wane.

Conclusion

The resurgence of ICOs reflects the market's desire for fairer project launches and a reduction in venture capital scams. While ICOs are unlikely to completely replace airdrops, they are likely to serve as a driving force for the creation of hybrid models, where long-term alignment becomes central to any project's go-to-market strategy.