Exploring the ICO Boom: A Defining Chapter in Cryptocurrency History
Summary:
This article revisits the initial coin offering (ICO) boom in early 2017, where promising blockchain-based projects swiftly raised capital by selling pre-released tokens to investors. Despite the regulatory scrutiny and rampant fraudulent activities, the era played a crucial role in launching major projects like Ethereum, EOS Network, Chainlink, Filecoin, Tezos, and Telegram. Particularly, Ethereum, which was itself kickstarted as an ICO, underpinned most of the ICOs during 2017-2018, leading to a surge in Ethereum's intrinsic value and the standardization of ERC-20 tokens in the industry.
In the course of this write-up, we would be taking a journey into one of the most impactful eras in the history of cryptocurrency, often referred to as the initial coin offering (ICO) era. Early 2017 saw the surge of ICOs in the cryptocurrency market as they provided an avenue for many new blockchain-backed projects to quickly amass considerable investments by selling tokens that were yet to be released, directly to potential investors. In a bid to get their projects up and running, they gave out their tokens in exchange for financial support that would help in creating new networks and decentralized applications (DApps).
But what exactly is an ICO? It is essentially a token sale which merges the initial public offering (IPO) concept commonly utilized in conventional finance, with crowdfunding. This is done to raise capital for a blockchain-driven project. It is crucial to point out that while the ICO era is retrospectively seen as a period where both the projects and investors made massive returns, it was also fraught with incidences of exit scams and rug pulls. These unsavoury occurrences would later attract the attention of financial regulators and authorities.
Despite the ICO boom period being characterized by multiple regulatory and financial hitches, it served as the launch pad for some of the biggest projects in the cryptocurrency industry today. Some of these include Ethereum, EOS Network (EOS), Chainlink (LINK), Filecoin (FIL), Tezos (XTZ), and Telegram (TON). In the history of the ICO boom, the largest ICO was implemented by a private firm, Block.one, which created the EOS network. EOS successfully garnered $4 billion in 2018. The second-largest ICO was facilitated by Telegram, which secured $1.7 billion. Contrary to many other ICOs that were openly offered to retail investors, Telegram’s ICO was predominantly off-limits, catering to private investors with large reserves of capital.
Interestingly, Ethereum, which played a significant role in the ICO boom, started off as an ICO, with a total capital raise of $18 million between July 22 and Sept. 2, 2014. Investors who took part in the Ethereum ICO were given Ether (ETH) in exchange for Bitcoin (BTC), with Ether worth over $2.2 million being sold within the first 24 hours of the ICO. Most of the ICOs that occurred between 2017 and 2018 were carried out on the Ethereum network, with smart contracts enabling developers to easily create new tokens and launch protocols than on any other existing blockchain networks.
From 2017 to 2018, the Ethereum network facilitated the creation of new ERC-20 tokens which were automatically allocated to investors once the amount required for funding had been reached. These projects were subsequently managed by DAOs. Following the functionality provided by the Ethereum network, the price of Ether, the network's native token, shot up dramatically from about $10 in January 2017 to almost $1,400 in January of the next year.
Despite the fact that many projects utilized the funds garnered from ICOs judiciously, thousands of other projects were either ill-conceived or blatantly fraudulent. These projects relied on exaggerated hype and dubious marketing strategies without a legitimate development plan or vision. The steady rise of these illegitimate projects caught the attention of the United States Securities and Exchange Commission (SEC). After conducting an investigation into an ICO conducted by an organization known as “The DAO” in 2016, the SEC concluded that the sale was illegal and involved the offering of unregistered securities.
However, despite the negative attention from regulatory bodies, ICOs contributed significantly to the fundraising system for some of the most crucial projects in blockchain technology we have today. The ICO boom, for instance, set the stage for Ethereum's overwhelming prominence in the cryptocurrency ecosystem today, by establishing ERC-20 tokens as the industry standard and exponentially increasing the use of Ethereum by developers.
Stay tuned for the next instalment in our History of Crypto series, where we will explore the crypto winter of 2018 and examine the key aspects in Ethereum’s growth during that period. Keep up with Cointelegraph for insightful updates on the developments in crypto history.
Published At
4/2/2024 7:05:00 PM
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