Embarking on a journey into a significant era of cryptocurrency history, we will explore the initial coin offering (ICO) boom. ICOs burst onto the crypto scene in early 2017, providing a platform for numerous blockchain-based projects to swiftly raise substantial amounts of capital by selling tokens to investors before their official release. These projects offered tokens in exchange for funding to launch new networks and decentralized applications (DApps).
What exactly is an ICO? It is a token sale that combines the initial public offering (IPO) model from traditional finance with crowdfunding, as tokens are sold to raise funds for blockchain-based projects. It is important to note that while the ICO boom is often remembered for the significant returns made by projects and investors, it was also plagued by exit scams and fraudulent schemes, catching the attention of regulators and financial authorities.
Among the ICOs during the boom, several projects have become prominent players in the crypto industry. Ethereum, EOS Network (EOS), Chainlink (LINK), Filecoin (FIL), Tezos (XTZ), and Telegram (TON) were all launched during this period. Block.one, the creator of the EOS network, conducted the largest ICO, raising an astounding $4 billion in 2018. Telegram, on the other hand, raised $1.7 billion in its ICO, which was mainly limited to private investors with significant capital. The decentralized storage network Filecoin secured the third-largest ICO, raising over $257 million in 2017.
Interestingly, Ethereum itself was initially funded through an ICO, raising $18 million between July 22 and Sept. 2, 2014. Investors in the Ethereum ICO received Ether (ETH) in exchange for Bitcoin (BTC), resulting in over $2.2 million worth of Ether being sold within 24 hours of the ICO launch. Most ICOs during the 2017-2018 period took place on the Ethereum network, as its smart contracts made it easier for developers to create new tokens and launch protocols compared to other available blockchain networks.
The functionality provided by Ethereum led to a rapid increase in the price of its native token, Ether, which skyrocketed from around $10 in January 2017 to a peak of nearly $1,400 in January of the following year. Additionally, the widespread use of Ethereum during the ICO boom established ERC-20 tokens as the industry standard and solidified Ethereum’s influential position in the crypto ecosystem.
Despite the success stories, the ICO boom was marred by legal issues. While some projects utilized the raised funds appropriately, many others either had poor planning or turned out to be fraudulent, relying on hype and deceptive marketing without legitimate development plans. The emergence of these illegitimate projects caught the attention of the United States Securities and Exchange Commission (SEC). In 2017, the SEC began investigating ICOs, particularly focusing on an organization called “The DAO,” and deemed its sale illegal and the offering of unregistered securities.
Following this precedent, the SEC took legal action against Block.one, the parent company of the EOS network, imposing $24 million in fines. Telegram also faced regulatory action, resulting in $18.5 million in fines and the return of $1.2 billion to its ICO investors. Telegram was forced to abandon its project as its native TON token was deemed a security. However, the TON network was later salvaged by a community of developers due to its open-source codebase.
Despite the regulatory scrutiny, ICOs played a crucial role in fundraising for several significant blockchain projects. Notably, the ICO boom paved the way for Ethereum’s dominance in the crypto ecosystem, establishing ERC-20 tokens as the industry standard and significantly increasing Ethereum’s usage by developers.
Stay tuned for the next installment in our History of Crypto series, where we will delve into the crypto winter of 2018 and explore the key developments in Ethereum during that time. Follow Cointelegraph for insightful updates on the evolution of crypto history.