History of Initial Coin Offerings (ICOs). A look back at past booms.

This article discusses the history of Initial Coin Offerings (ICOs), which have taken the world by storm. In addition to the flow from the first ICO boom to the third ICO boom, we will write in detail about how and why STOs (Security Token Offerings) and IEOs (Initial Exchange Offerings) were created. They say that history repeats itself, and looking back at the history of ICOs can provide a variety of insights.

The world's first ICO takes place in July 2013

ICO stands for Initial Coin Offering, a method of raising funds by distributing tokens originally issued by a project to investors. The world's first ICO was conducted in July 2013 by a project called Mastercoin (now Omni) led by J.R. Willet. The project raised funds by distributing coins based on the amount of bitcoin invested.

What is the background behind ICOs? An ICO is an opportunity for anyone, regardless of national borders, to invest a small amount directly in a project of their choice. This was unthinkable within the traditional investment framework. At first, however, ICOs were very niche, and participation in ICOs by projects such as Maidsafe and NXT, which followed Mastercoin, was limited to a core audience, including early Bitcoin participants.

Ethereum succeeded in raising about 1.6 billion yen worth of funds at the time.

ICOs gradually began to increase in number in 2014, but they still lacked excitement. The ICO of Ethereum in July 2014 raised about 31,500 BTC (about 1.6 billion yen at the time) and attracted a lot of public attention. Vitalik Buterin, a 19-year-old Russian at the time, invented Ethereum.

How was Ethereum able to raise such a huge amount of money? To answer this question, we need to look at the trends in the world of crypto assets after the birth of Bitcoin.

The altcoins that appeared after the birth of bitcoin in 2009 were mainly copies of bitcoin with improved parameters. The most notable example is Litecoin, created by former Google employee Charlie Lee in October 2011, which took over the Bitcoin system and improved on the number of coins issued and block time, but was still an extension of Bitcoin in concept. 

The next generation of coins, called Altcoin 2.0, will include NEM, Bitshares, and Dash. Dash, for example, was designed to enhance bitcoin's anonymity to achieve complete anonymity. These coins are extensions of the bitcoin concept.

Thus, a variety of new crypto assets with new features have emerged since the birth of Bitcoin, but they all have one thing in common: users take advantage of the features offered by the project. However, Ethereum did not provide its own features for users to use, but rather provided a development environment for users to implement new features. This is why Ethereum is called the world computer. This has expanded the possibilities that the world of crypto assets has to offer.

Emergence of konify, a full-fledged ICO platform

The success of Ethereum ICOs led to the first ICO boom, with Storj, Swarm, and many other projects taking advantage of the boom to raise funds. The first ICO, Getgems, was introduced and received a great deal of excitement. Milestone-based ICO methods are those that use multisig to allow developers to access funds only in stages. In 2015, however, Konify released Factom as its second project, but the amount raised was less than expected at the time, about 100 million yen, and Konify went out of business soon after. Thus, the first ICO boom came to an end.

The Second ICO Boom

After the first ICO boom, the market cooled down for a while, but when the Ethereum mainnet launched in July 2015, Augur successfully raised about 500 million yen as a service on Ethereum. 2016 saw DApps (decentralized applications) on Ethereum attracted attention, and Lisk, Digix, Waves, and others raised hundreds of millions of yen in funding, ushering in the second ICO boom.

In the first ICO boom, core participants who were familiar with crypto assets stood out, but in the second ICO boom, many light participants who were unfamiliar with crypto assets began to participate, and people began to invest without knowing much about the project. The DAO incident occurred at such a time.

What is The DAO case that recorded historic damage?

In May 2016, the ICO of a project called The DAO made headlines when it raised approximately 15 billion yen in 28 days from more than 11,000 investors. However, The DAO, which began as a use case for the DAO (autonomous decentralized organization) concept, shocked the public in June of the same year when it lost more than a third of the amount raised, about 6.5 billion yen, due to a vulnerability in its smart contract.

Related article: What will the  DAO democratize?

As a result, the Ethereum Foundation, led by Vitalik, hard-forked and pretended the incident never happened. However, the measure to save The DAO, which is only one of the use cases of Ethereum as a decentralized protocol, disappointed many market participants as it was a centralized intervention. The second ICO boom came to an end after this The DAO case.

The Unprecedented ICO Bubble and Regulations in Many Countries

Although many predicted that ICOs would go completely under the radar due to The DAO incident, projects such as Singular DTV and Golem raised over several hundred million yen starting at the end of 2016. spring 2017 brought a bubble that should be called the third ICO boom. In June of the same year, Bancor succeeded in raising approximately 17.4 billion yen in just a few hours of its launch. By the end of the year, a number of projects successfully raised 10 billion yen one after another.

In the third ICO boom, projects that did not have proper white papers also raised hundreds of millions of yen. The market heated up to the point that a large number of fraudulent and malicious projects were also created, and 90% of ICOs are said to be scams. Regulators in various countries regulated ICOs one after another to protect investors. In July of the same year, the United States made unauthorized ICOs punishable; in September of the same year, China banned ICOs; and in October of the same year, South Korea banned ICOs.

In 2018, ICOs that are not public sales but private sales attract huge amounts of money, but the boom gradually fades away and is replaced by STOs (Security Token Offerings) and IEOs (Initial Exchange Offerings). The private sale ICOs attract huge amounts of money, but the boom gradually dies out.

Looking back on the history of ICOs

Democratization of various areas is one of the major themes in the Web3 world, and with regard to ICOs, "democratization of fundraising" was the philosophy at the time. However, as a result of rampant fraudulent projects, ICOs became difficult to implement, and STOs and IEOs were born as a practical solution. This website will provide information on STOs and IEOs.

Related article: Why is Web3.0 gaining popularity?