At Consensus 2023, CoinDesk panelists reflected on significant events in crypto history, with the majority of votes going to the “ICO mania” period from early 2017 to mid-2018. Initial Coin Offerings (ICOs) introduced both opportunities and challenges to the crypto space, with issues such as investment fraud and securities violations still posing problems today. One study even found that 80% of ICOs during the boom were scams.
However, the ICO boom wasn’t solely characterized by deception and fraud. Some of today’s most significant decentralized finance projects, including Aave and 0x, were launched during the ICO bubble. Informed, cautious, and fortunate speculators could have reaped substantial returns from investing in authentic, productive initiatives.
ICO accessibility offered ordinary individuals the chance to profit from their insights, regardless of their location or citizenship. This fulfilled crypto’s promise to eliminate financial intermediaries, such as venture capitalists and investment bankers. According to one speculator, this period was about building infrastructure through trial runs.
ICOs were perceived as similar to Initial Public Offerings (IPOs), accessible to individuals capable of setting up a digital wallet and funding it with a smart contract token like ETH, SOL, or ATOM. However, ICOs fundamentally differed from IPOs as token buyers did not formally own any part of a company. While IPO investment gains relied on growing corporate revenues, ICO tokens only increased in value due to demand for their usage. This “utility token” concept was believed to distinguish token sales from securities offerings.
Unfortunately, ICOs often failed to deliver on their ideal of a completely unregulated financial market. Valuable projects such as Aave, Filecoin, and Cosmos emerged, but they were often overshadowed by fraud, theft, and failure. ICOs could be effective fundraising tools, but their lack of regulation invited extensive fraud.
Projects like Monolith managed to expand their funding through DeFi-based hedging and leveraging strategies, but such activities often diverted valuable resources away from developing the actual product pitched to investors. Moreover, the temptation to speculate ICO funds led some founders to prioritize treasury management over product development.
Although the ICO era might be considered over, ICOs still occur frequently. A regulatory regime that imposes transparency and controls on ICOs while preserving their accessibility could emerge in the future. The free market economic theory suggests that the ICO scene might eventually lead to smarter investors and a safer market. However, the persistence of ignorance and recklessness among crypto speculators challenges this optimistic outlook.
Source: Coindesk
