ICO Mania

Alongside the 2017 Bitcoin surge came something else: the ICO boom.

Initial Coin Offerings — ICOs — were a fundraising mechanism where new cryptocurrency projects sold digital tokens to investors. The pitch was simple: buy our token now, watch it increase in value as our platform grows.

In 2017 and 2018, ICOs raised over $20 billion globally. Some projects had nothing but a whitepaper and a website. Some had less than that. Celebrities endorsed tokens. Anonymous teams launched projects with no product, no team credentials, and no accountability.

The result was predictable in retrospect. The vast majority of ICO projects failed, were abandoned, or were outright scams. Investors who put money into the top-performing ICOs of 2017 saw an average return of negative 99% by 2019. Billions of dollars evaporated.

The ICO boom is instructive for understanding the Bitcoin ecosystem. Bitcoin itself had no ICO. Satoshi didn’t pre-sell coins to insiders, didn’t raise venture capital, didn’t promise returns. Every Bitcoin in existence was earned through mining — a process open to anyone.

The ICO era attracted regulatory attention worldwide and triggered crackdowns that affected legitimate projects alongside fraudulent ones. It also permanently damaged the reputation of the broader “crypto” space in the eyes of many observers.

Bitcoin benefited, eventually, from the distinction. When investors started asking harder questions — who controls this? what gives it value? can the rules be changed? — Bitcoin’s answers were different from everything else.

Tomorrow: the 2018 crash — what happened after the party ended.

— The Daily Bit