The history, downfall, and future of ICOs | Episode 1

The past 12 months have been gruesome for 99% of all crypto investors; however, the other 1% made a killing. Bitcoin drop by 86%, Ethereum saw double digest, and let’s not even get started on the ICO industry. In 2017 all the telegram heroes screamed F the Banks, but I would argue that the current state of the crypto ecosystem is worse than the banking sector.

Only a handful of useful Blockchains emerged, with Steem being the only mainstream adopted altcoin, Binance one of the only successful ICOs and 0 real dapps, that are not fed by human’s biggest drive: Greed

Since 2016, over 26 Billion USD has been invested in cryptocurrency related startups.  Where are the results more importantly, where the hell is the money?

Why has there been no progressWhy don’t we have a proper user-friendly wallet? Why are all ICOs so useless?

I believe the answer to that question can be found in a fundamental problem with the system, one that is slowly disappearing with every percent that Bitcoin loses of its total market valuation.

If you can make more money by pretending to work, than by actually working, nobody will work.

We created a negative feedback loop that crushed any development and made a crypto exchanges and ICO advisory/marketing companies filthy rich. The problem was these people were running the show and had a vast interest in keeping everything running as long as possible. 

Name of game: Find a team, hype it up, make as much money as possible before the rise, then pump it on the exchange and then dump it on the clueless retail investors. ICO marketing companies like Amazix that charged around a million USD per client and they had a LOT of clients. You can find a list of them here:

The idea of such companies was simple, why scam retailers that you have to deal with after and that could sue you if you can scam the scammers. Charge insane fees, paid 50% in USD and 50% in tokens. ICOs often had no problem paying in tokens, because its printed money for them. Who cares that it would destroy their secondary market. The market that will define their long term success. All they cared about was that they reach their hardcap. 

The best of both Worlds?

In 2016 the first ICO, Mastercoin launched, it was a revolution in fundraising. Up until that moment, banks and brokered firms had a monopoly on investment fundraising. Crowdfunding platform existed, but barely raised any money Up until then small companies had to depend on banks or security fundraisings. With the Ethereum everything changed. The ICO was born, a weird hybrid between a security and a community fundraising platform. Investors had no official insurance that their investment will ever bring any ROI, like with a security, but there was logic to why the investment would increase in value unlike with a voluntary fundraising platform.

In early 2016, crypto was owned by crypto nerds and keyboard heroes. The industry was confined to people that understood cryptographic coding, blockchain, and decentralized ecosystems.

People were dreaming of self-sufficient DAOs, now all they want is a Lambo.

Image result for mastercoin ico

The earliest days of ICO investing looked very different than EOS. Hardcaps ranged from entering here. People saw the ICO more like a fundraising platform. Smart developers and early crypto adopters had the chance to go through whitepapers written by smarter developers and invest their mad gains into some interesting ideas.

It did not take long for a renaissance of new decentralized startups to emerge. All type of coins emerged ranging from decentralized record keeping to early stable coins all the way to things like ripple and Litecoin. The ICOs started popping up left and right, but in small scale, usually raising between 3- 10 Million USD. In the early days between 2014 and mid 2016, all ICOs together, raised less than $70 Million USD. All that changed with the infamous DAO. 

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The untold story of the DAO

It is needless to say that that phase did not last long. In May of 2016 the largest ICO in history was raised. The DAO (Decentralized Autonomous Organization), with 168M USD risen in ETH, it was the biggest deal project fundraising in crypto. The DAO first showed people how irrational investors can be. The idea that you give an untested economic theory with a buggy source code $168 Million USD was unthinkable. Until it happened. The DAO then got hacked and named a security by the SEC, the rest is history.

When talking about the DAO, most people talk about how Ethereum rolled back their chain, or how the SEC shut it down, or how hackers stole all the ETH, nobody mentions the tremendous effect the DAO had on the ICO ecosystem.

The DAO rose in total over $168M USD from over 11.000 investors and was the first signal to the world that the ICO has real-world potential for raising large amounts of money.

Just months after the DAO, 100s of ICOs popped up all over the world. The untold message of the DAO was, you can get 100s of millions for a project with faulty code and without legal research or any product market fit.  This was the beginning of the ICO crave.

The race for fast money was on and everybody was hungry for more.

Image result for Visualizing the ICO Explosion gif

If you enjoyed this short episode on the history of ICOs, check out our other crypto stories on ICO DOG.

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