During the initial coin offering (ICO) boom in 2017, thousands of new blockchain-based projects emerged, raising substantial amounts of capital by selling tokens directly to investors. This fundraising method combined elements of traditional finance’s initial public offering (IPO) model with crowdfunding. While the ICO boom resulted in significant returns for some projects and investors, it was also plagued by exit scams and fraudulent practices that caught the attention of regulators.
Despite the challenges, the ICO boom served as a launching pad for several major crypto projects. Ethereum, the second-largest cryptocurrency by market capitalization today, was initially funded through an ICO in 2014, raising $18 million. This set the stage for many ICOs to follow. Ethereum’s smart contracts made it easy for developers to create new tokens and launch protocols on its network, leading to a surge in ERC-20 tokens, which became the industry standard.
Some of the most notable ICOs during the boom include Block.one’s EOS, which raised a record-breaking $4 billion in 2018. Telegram, a private messaging app, also conducted a successful ICO, raising $1.7 billion. Unlike most ICOs available to retail investors, Telegram’s ICO was limited to private investors with substantial capital. Another significant ICO was conducted by Filecoin, a decentralized storage network, which raised over $257 million in 2017.
Along with the success stories came many poorly planned or fraudulent projects that lacked legitimate development plans. The rise of these illegitimate projects caught the attention of regulatory authorities, such as the U.S. Securities and Exchange Commission (SEC). In 2017, the SEC investigated an ICO conducted by an organization called “The DAO” and concluded that it was offering unregistered securities, leading to legal action and fines.
Block.one, the parent company of the EOS network, was ordered to pay $24 million in fines, while Telegram was fined $18.5 million and required to return $1.2 billion to its ICO investors. Telegram was forced to abandon its project after its native TON token was deemed a security. The TON network was later salvaged by a community of developers as its codebase was open-source.
Despite the legal woes and regulatory scrutiny, ICOs played a crucial role in fundraising for many blockchain projects. Ethereum’s rise to dominance within the crypto ecosystem can be attributed in part to the ICO boom, as it established ERC-20 tokens as the industry standard and increased the use of the Ethereum network by developers.
While the ICO boom was a transformative period for the crypto industry, it also highlighted the need for stricter regulations to protect investors from fraudulent projects. In our next installment, we will explore the crypto winter of 2018 and analyze the evolution of Ethereum during that time. Stay tuned to for updates on the developments in crypto history.
Of course, there were some fraudulent projects that tarnished the ICO boom, but regulatory authorities like the SEC stepping in shows their commitment to investor protection. It’s reassuring to know that they’re looking out for us.
I can’t believe Block.one’s EOS raised $4 billion! 😱 That’s a huge amount. But it’s unfortunate that they were fined for unregistered securities. 🙅♂️