ICO School 2. — Origin of ICOs
2017 saw an explosion of activity — 342 token issuances raised almost $5.4 billion — and thrust the concept to the forefront of blockchain innovation…
The first sale of so-called tokens was carried out by Mastercoin in July 2013. Even though not that popular at the time this was a historical moment. The second event that sparked the ICO gold rush was Ethereum in 2014. Seven projects raised a total of 30 million dollars that year, and Ethereum alone raised over 18 million dollars.
2015 was a quieter year: Activity started to pick up in 2016, when 43 sales — including Waves, Iconomi, Golem and Lisk — raised $256 million. Included in that total is the infamous sale of tokens in The DAO, an autonomous investment fund that aimed to encourage ethereum ecosystem development by allowing investors to vote on which projects to fund. Not long after the sale raised over $150 million, a hacker stole approximately $60 million worth of ether, leading to the project’s collapse.
2017 saw an explosion of activity — 342 token issuances raised almost $5.4 billion — and thrust the concept to the forefront of blockchain innovation. Sales selling out in increasingly shorter periods of time fuelled the frenzy, and in the haste to get “in on the action,” project fundamentals became less important to would-be investors.
By the middle of the year, ICOs had overtaken venture capital as the main source of funds for blockchain startups as they flocked to what appeared to be an easier and faster way to raise a huge amount of money without sacrificing equity in the company.
As the ICO frenzy built up steam regulators around the world began to raise increasingly urgent alarms. No country was more concerned than China. In order to protect Chinese investors, the authorities announced that ICOs were a fraudulent way to make money.
This ban was followed by sharp warnings from a number of other regulators, including the European Central Bank and the IMF. Russia has also taken steps to more heavily regulate the cryptocurrency market and a number of large financial institutions have voiced concerns about the state of the market.
Despite the risks associated with them, ICOs are an important fundraising tool. They have allowed more people than ever to invest in new and revolutionary ideas.
