Crypto Global

Review - ICO boom

Oct 13, 2020

Do you remember the ICO boom? These projects have always been top!

In 2017, a new sheriff came into the financial world: Initial Coin Offerings (ICOs) triggered an unexpected hysteria that extended far beyond the industry. For example, the US SEC, the security enforcement agency, released a report warning investors not to invest in celebrity-touted ICOs. In today's article you will learn about the purpose of ICOs, their history and what remains of the gold rush atmosphere of that time. To this end, we present selected projects that emerged like a phoenix from the ashes and have a decisive influence on today's blockchain landscape.

It all began in 2013, well before the bubble formed, when software engineer J.R Willett presented an innovative form of corporate finance and thus shocked the financial world unexpectedly. In the traditional financial world, a company has two types of fundraising: equity and debt financing. Willett wistfully realized that there was no room for him and his project idea. The big day came after months of research. Willett raised half a million US dollars in public funds in the first documented ICO and did not know what hype he would trigger with it later.

In the case of an initial public offering (IPO), the lengthy process is accompanied by a broker (often one or more investment banks), dozens of lawyers and strict regulation. In addition, the first-round financing is only available to approved units - the general public remains largely excluded. The ICO financing form is intended to counteract this and allow the process to take place more efficiently on a decentralized blockchain. The introduction of the Ethereum blockchain plays a decisive role here, as it paved the technological basis for the widespread use of ICOs.

Driven by the simplicity of the process, dozens of projects - with or without a business plan - set out on a journey to raise funds from the public. According to the industry portal Crunchbase, US $4.9 billion in capital was raised through ICOs in 2017, ten times the amount of the previous year. The official figures diverge widely and in some cases there is talk of almost seven billion US dollars in 2017. In Switzerland, too, 130 million francs were invested in ICOs this year.

Despite the bubble-like development and the associated damage to reputation, many market experts consider the ICO boom to be one of the most important episodes in the advancement of technology. This episode showed the dynamism that the industry can develop and bring innovations to market in record times. Some examples from the ICO times that are firmly anchored in the sphere and in portfolios of investors are presented below (as of October 12, 2020):

ChainLink (market capitalization of 4.2 billion USD, + 9781% since ICO) - This project closes the gap between the blockchain and the outside world. ChainLink is an information oracle that includes external factors or data in the smart contracts and this is completely impartial. Examples of this are the successful delivery of goods by post or the result of a football game that is to be evaluated for a sports bet.

Tron (market capitalization of USD 1.9 billion, + 1198% since ICO) - This project is a blockchain-based operating system. Founded by Justin Sun, one of the most famous faces in the world, Tron has a clear goal: to turn the current structure of the media industry upside down. The media industry is currently structured in such a way that a few large companies such as YouTube, Facebook and Apple determine to a large extent which media are viewed and published on their websites. Not only do they control what can be seen, they also receive most of the money the media generates. So Tron wants to help reward content creators more for their efforts.

EOS (market capitalization of 2.5 billion USD, + 165% since ICO) - An often-cited criticism of Ethereum is that it often incurs high transaction costs with relatively slow transaction times. EOS was founded to develop a decentralized platform for the creation of dApps - similar to Ethereum - which has never existed on this scale before. The project has ambitious goals: It hopes to be able to scale to a size where it will have no competition. In practical terms, this means that EOS should be able to process millions of transactions per second without incurring any fees.