The Hype and Death of ICO

The Listing.Help Blog
6 min readFeb 5, 2020


Recap: who invented ICO, how it gets so much hype and how it ceased to be so, and how much money startups and scammers raised.

At the very start of 2020 Bitcoin surged amid a possible confrontation between Iran and the United States, and the Wuhan coronavirus outbreak, but legislative regulation of the cryptocurrency market and methods for attracting financing have not yet been fully developed. One of the most hyped types of funding was ICO (Initial Coin Offering) at the turn of 2016–2018.

The dawn of ICO

At the dawn of its development, there was no correlation between the idea of cryptocurrency and huge profits (or even store of value). Usually, teams developed their projects in their free time from the day job. That is why it took so long to improve the code and fix bugs. Mastercoin (renamed as OMNI) was the first crypto project which required initial funding for the development.

J.R. Willett stated the idea of Mastercoin in January 2012 in “The Second Bitcoin WhitePaper.” He suggested that “the existing Bitcoin network could be used as a protocol layer for higher-level protocols to enable new rules for contracts, thus enabling the creation of new currencies without changing Bitcoin itself or requiring the creation of an alternate blockchain to handle new rules.” The same thing was proposed by the Ethereum project two years later but in a different technical design.

The method of fundraising was as simple as possible: anyone could buy tokens of the project just by sending bitcoins to a special address. According to the Hackernoon, the Mastercoin project raised 5,000 bitcoins during the ICO, which was approximately $ 500,000 in 2013. Six months later, the price of the project token increased ten times. Such success left no one indifferent. However, the problem was the very method of fundraising: it was centralized, and therefore many called the first ICO as a scam.

Ethereum surge

After Mastercoin, the main event in the ICO sphere was the creation of the Ethereum project, which was proposed by Vitalik Buterin at the end of 2013. As early as July 2014, Ethereum launched an ICO and raised over $18 million. Until now, this ICO remains one of the most profitable: at the stage of ICO, the token cost $ 0.32, now it is trading inside the range of $170-$190 (the all-time high was at $ 1,400 in 2017).

The first ICOs had the structure of non-profit organizations: non-profit foundations were created to manage the collected capital and to develop projects, as the activities of such organizations in many jurisdictions are not taxable. Thus, Ethereum created its foundation in Zug, a small town in Switzerland, because of its favorable financial regulation. Other ICOs have decided to set up their companies in the Cayman Islands, Gibraltar, Malta, and Singapore. The main motivation for this placement was the desire to avoid any form of taxation during crowdsale.

Ethereum brought one more key innovation — the programmable smart contracts and the most widely used one is the ERC-20. The main purpose of this type of smart contract was to create a new cryptocurrency token and move it from one person to another. As a result, a new mechanism for conducting an ICO was created: participants sent Ethereum to the address of the smart contract and received back tokens of a new project.

As a result, the overwhelming majority of ICOs were conducted based on Ethereum — the simplicity of writing smart contracts got boosted the popularity of the platform and made it quite easy to attract funding. There were dozens of ICO in 2016, and a real breakthrough occurred during the spring of 2017 after a surge of major cryptocurrencies. During the summer and autumn of 2017, at least a couple of hundred ICOs per month were conducted all over the world.

2018 was the peak year for the ICO market: more than half of all crowdsales held during that year. Neither the ban of ICOs in China, nor the block of crowdsale ads on Google and Facebook, nor The Wall Street Journal study, according to which 271 ICOs for a total amount more than $1 billion turned out to be fraud, prevented this. However, in that same year, a decline in interest in ICOs began.

Interest decline

Since 2016, the number of ICOs held worldwide has exceeded 5,000, but not all of them have been completed successfully. According to ICOBench, crowdsale organizers managed to collect the declared amounts of funds only in 35 percent of all cases. Even less was the share of projects that did not turn out to be fraudulent or commercially unsuccessful.

There were plenty of reasons for the “death” of ICO as an instrument for fundraising: from the actions of financial regulators, that tightened control and initiated litigations on a some of the projects; to the actions of projects themselves, that didn’t take any steps to develop their products. At the same time, some of the projects became notorious by performing exit-scams (for example, Benebit, Confido, and LoopX) or thanks to internal disputes (for example, the infamous Tezos project, which raised more than $230 million).

Hackers create an additional threat to the market. A study by Ernst & Young on the risks associated with investing in cryptocurrencies says that more than 10% of the funds raised by the organizers of the ICO were stolen as a result of hacker attacks. The last straw was the significant sink in the price of many cryptocurrencies during 2018. The ICO wave was mainly due to the rise of the Bitcoin price, so the collapse of the leading cryptocurrency exchange rate inevitably led to a decrease of interest in any crypto investments.


As a result, interest in the ICO has fallen significantly: project fees have fallen, regulations have not yet been adopted, and litigation is still ongoing. Nowadays, cryptocurrency has entered a more stable phase.

The ICO market experienced an incredible rise and fall in just 2–3 years and showed all its unpleasant sides. However, the demand for decentralized financing through cryptocurrencies remained, both among investors and startups. During the “crypto winter,” the ICO model of fundraising underwent inevitable transformations, and now the campaign for the initial token offerings can be divided into three types: ICO itself, STO (Security Token Offering) and IEO (Initial Exchange Offering). We will talk about them more in the following publications of our blog.

Stay tuned!

The Listing.Help team



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