Posted on November 11, 2018

Initial Coin Offerings (ICOs) is a type of funding using cryptocurriencies. Literarily it means that someone offers investors some units of a new crypto currency or crypto-token in exchange against crypto currencies like Bitcoin or Ethereum. Since 2013 ICOs are often used to fund the development of new crypto currencies. In 2017, Initial Coin Offerings (ICOs) exploded onto the scene ranging from relatively unknown fundraising method used in the blockchain community, to raising over $5 billion. ICOs allowed blockchain startups to crowdfund their projects through the blockchain by issuing digital tokens, which the users can then trade, spend, and use within the blockchain platform.

Up until 2017, ICO companies that raised over a few million dollars were a rarity. In 2015, Ethereum which is the second largest crytocurrency at present, raised $18 million due to its innovative smart contracts. Ethereum was topped by the DAO in 2016 because DAO raised $150 million in a matter of minutes. DAO was then later stolen and thousands of people lost their money. Since the days of these early ICOs, the concept of taken off in 2017. According to the ICO rating website, ICOdata , there has been nearly $5 billion in ICO funding since the beginning of the year. Most funds were generated between May and October, with November being the most active month with over $900 million fund generation. Average token reward for ICO projects during 2017 was calculated on January 3, 2018. Consequently, token ratio, i.e. the average reward per USD 1 spent on tokens during token sales is $47.86. The maximum token reward for projects competed in 2017 was 6398.671x for the spectrecoin ICO. The average amount of funds collected per projects was $16 million.

Some of the largest ICOs in year 2017 were:

Filecoin: $257 Million USD

Tezos: $236 Million USD

Bancor: $153 Million USD

Paragon: $120 Million USD

In 2017, Waterloo company Kik decided that their experiment creating their own Token was successful and they would move forward with a cryptocurrency. The result of that was one of the most exciting ICOs, KIK’s KIN. The reason we find KIN exciting was that the creators “KIK” had an opportunity to test their own version of a token, called KIK Points. These Points were traded through their platform, and enabled people to create apps and receive payment through them. They also enabled users to purchase the points or win them through apps or by watching ads. They ran the experiment from 2014–2016 and were able to demonstrate a higher transaction volume than Bitcoin (per unit). Convincing them that creating a Blockchain / Classic token hybrid would give them the best results

Unlike other tools, ICOs can crowd fund their fundraising campaigns with little or no regulatory oversight,  and without the need of an MVP (Minimum viable Product), client base, or any resemblance of financial statement or proof of an actual company existing. This attracted all kinds of scrupulous characters who were drawn to the anonymity and perceived ease of raising funds. The perceived ease of rasing funds has led to people creating a blockchain idea on the internet in order to get rich quickly.

Over the course of 2017, there has been a true process of maturation in the ICO market. As the figure of funds raised through ICOs skyrocketed so also is the skepticism of investors trying to know which project is legitimate, and which project were scams. ICO projects had to legitimize themselves, so they began recruiting and hiring formal Wall Street bankers, experienced lawyers, and well-respected industry players in response to the skepticism of inventors. While the total amount of funds being raised through ICOs has slowed in the end of 2017, it can somewhat be equated to the rise in the price of both Bitcoin (BTC) and Lthereum (ETH), which was often used to buy into ICOs.  Additionally there were an increasing number of companies towards the end of the year, which didn’t hit their “soft caps.” A soft cap is the minimum amount needed to be raised for an ICO to be viable. Otherwise, the funds will be returned.

Every year since 2013 has been the greatest year for ICOs. 2017 has no exception, creating a market that is recognizable, and most of service. I predict that 2018 will be at least one unicorn (a Billion dollar company) born from the this revolution.