Fundraising is an important aspect of technology development, whether it is a web2 or web3 project. The common terms used in web2 industries are Series Funding: A, B, C or angel investing. However, vocabulary in the web3 and blockchain space is quite different. You hear of Initial Coin Offerings (ICOs), and others.

In this article, we will explore the basics of Initial Coin Offerings (ICOs), Initial Liquidity Offerings (ILO), and Initial Staking Pool Offerings (ISPOs). So when next you attend that web3 event, you have a better understanding of what they mean. Let's dive in!

Initial Coin Offerings (ICOs)

ICOs are fundraising mechanisms where new projects issue their tokens to raise capital. Investors purchase these tokens with established cryptocurrencies like Bitcoin or Ethereum. The web3 project that wants to embark on an ICO creates and offers its native tokens to investors.

An example is the Ethereum ICO in 2014, where Ether (ETH) tokens were sold to fund the development of the Ethereum blockchain.

Learn more about ICOs in this video:

Initial Liquidity Offerings (ILOs)

ILOs are another type of Web3 funding mechanisms that focus on providing immediate liquidity for new tokens by pairing them with a stable cryptocurrency in a decentralized liquidity pool.

A typical example is Uniswap's introduction of UNI tokens through an ILO on its decentralized exchange (DEX).

ILOs encourage community participation in liquidity provision and also enable immediate trading of the newly issued tokens.

Learn more about ICOs in this article by Oodles Blockchain.

Initial Staking Pool Offerings (ISPOs)

ISPOs involve the issuance of new tokens to users who stake existing tokens in a project's staking pool. This mechanism combines fundraising with community engagement.

Cardano's ISPO for the launch of native tokens, where ADA holders staked tokens to receive the new tokens is an example of ISPO.

ISPOs are known for their incentive structure which rewards participants with new tokens based on their staking level and duration. They also strengthen the project's community through active participation.

Learn more about ISPOs in this video:

Note: This article serves as an introductory guide, not advice on which fundraising to participate in. Investors/web3 project owners should conduct thorough research before participating in any fundraising activities in the web3 space.

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