In this article, we will take a journey through one of the most transformative periods in the history of cryptocurrency, known as the initial coin offering (ICO) boom.
ICOs burst onto the cryptocurrency scene in early 2017, enabling thousands of new blockchain-based projects to quickly raise significant amounts of capital by selling tokens before they were released directly to investors. These projects issued their tokens as a way to secure funding for the launch of new networks and decentralized applications (DApps).
What exactly is an ICO? It is a token sale that combines the traditional initial public offering (IPO) model used in traditional finance with crowdfunding. The tokens are sold to raise funds for blockchain-based projects.
It is important to note that while the ICO boom is often remembered as a time when projects and investors made substantial returns, it was also plagued by exit scams and fraudulent schemes. These issues caught the attention of regulators and financial authorities, leading to increased scrutiny.
Despite the challenges faced during the ICO boom, it paved the way for the launch of some of the major projects in the crypto industry today. These include Ethereum, EOS Network, Chainlink, Filecoin, Tezos, and Telegram.
The largest ICO was conducted by Block.one, the creator of the EOS network, which raised a staggering $4 billion in 2018. Telegram also conducted a significant ICO, raising $1.7 billion. Unlike many other ICOs that were open to retail investors, Telegram’s ICO was limited to private investors with substantial capital.
Another notable ICO was conducted by Filecoin, a decentralized storage network, which raised over $257 million in 2017.
Interestingly, Ethereum itself was initially funded through an ICO. It raised a total of $18 million between July 22 and Sept. 2, 2014. Investors in the Ethereum ICO received Ether (ETH) in exchange for Bitcoin (BTC), with over $2.2 million worth of Ether being sold within 24 hours of the ICO launch.
During the ICO boom, most token sales took place on the Ethereum network. The network’s smart contracts made it easier for developers to create new tokens and launch protocols compared to other blockchain networks.
The increased use of Ethereum during the ICO boom led to the rise of ERC-20 tokens, which became the industry standard. This laid the groundwork for Ethereum’s continued prominence in the crypto ecosystem.
However, not all ICOs were successful or legitimate. Many projects lacked proper planning and were fraudulent, relying on hype and questionable marketing tactics without clear development plans. The rise of these illegitimate projects caught the attention of regulatory bodies like the United States Securities and Exchange Commission (SEC).
In 2017, the SEC investigated an ICO from an organization called “The DAO” and concluded that the sale was illegal and involved the offering of unregistered securities. This set a precedent, and the SEC took legal action against Block.one, ordering them to pay $24 million in fines. Telegram was also ordered to pay $18.5 million in fines and return $1.2 billion to its ICO investors. Telegram had to abandon its project as its native TON token was deemed a security.
Despite the regulatory scrutiny faced by ICOs, they played a crucial role in fundraising for important blockchain projects. The ICO boom laid the foundation for Ethereum’s dominance in the crypto ecosystem, established ERC-20 tokens as the industry standard, and significantly increased the use of Ethereum by developers.
Stay tuned for the next installment in our History of Crypto series, where we will explore the crypto winter of 2018 and examine the evolution of Ethereum during that time. Follow Cointelegraph for insightful updates on the developments in crypto history.