ICO comeback: a lost goldmine or a repetition of old mistakes?

In 2017-2018, ICOs were a breakthrough in the cryptocurrency world. In those years, investors literally fought for the opportunity to be the first to invest in a new project. But the boom was followed by a downturn due to regulatory restrictions, widespread fraud, and numerous failures. Surprisingly, at the end of 2024, people started talking about ICOs again. On the one hand, it’s an opportunity to return to the days when you could make a huge profit. On the other hand, ICOs raise many questions about transparency and risks. What makes startups start thinking about reviving this controversial fundraising tool?

What is an ICO?

First, let’s take a quick refresher. An ICO (Initial Coin Offering) is a fundraising model that allows projects to issue their tokens and sell them to investors to raise funds and support further development.

How does it work? A startup creates a new token with certain functions or useful properties within the planned ecosystem. This coin can provide access to the platform, the right to vote on important decisions regarding the project, or represent a share of ownership.

The success of an ICO is most often measured by the amount of money raised during the sale of tokens, regardless of their final price. Some investors measure the success of an ICO by the return on investment (ROI) of the token purchased during the sale, taking into account the change in its price.

In 2017-208, ICOs were extremely popular, raising billions of dollars for crypto projects. This model promised decentralization, fair distribution for small investors, and the absence of intermediaries.

The most successful ICOs

• EOS (EOS). Block.one, a private company based in Hong Kong, held a record-breaking ICO in 2017-2018, raising $4.1 billion.
• Telegram (GRAM). The Telegram Open Network (TON) ICO raised more than $1.7 billion in 2018 to create a scalable blockchain for decentralized applications.
• Tezos (XTZ). The Tezos Foundation raised $232 million in July 2017 to develop a blockchain platform with its own cryptocurrency, XTZ, focused on scalability, security, and self-management.
• Filecoin (FIL). In 2017, Filecoin raised $233 million, offering decentralized data storage that has become an important part of the Web3 infrastructure.
• Polkadot (DOT). The project raised $145 million in 2017.
• Ethereum (ETH). During the ICO in 2014, 2000 ETH were purchased for 1 BTC.
• NEO (NEO). “The Chinese Ethereum, backed by the Chinese government and Microsoft, rose from $0.03 to $196 in 2018. But now it costs $15.35.
• Alias (ALIAS). Focusing on anonymity, Alias grew from $0.001 in 2016 to $0.15 in 2021, but as of 2024, it is trading for $0.013.
• Ark (ARK). Ark provides integration of other cryptocurrencies. The ICO started at $0.04 per token, reaching almost $11 at its peak in 2018. The current price is $0.5287.
• Stratis (STRAX). The British project has raised almost 1000 BTC. The token started at $0.01, and this spring it was traded for $1.65 (although the price has now fallen to $0.05549).

ICOs have become popular because of:

• Ease of launch. Creating a token and selling it to investors takes a minimum of time thanks to the existence of specialized platforms.
• Huge profits. Investors who backed projects such as Ethereum were able to make incredible profits. ETH cost approximately $0.31 at the start of sales in 2014, and at the time of writing, the price is $3,647.73. That is an increase of 11,766 times or 1,176,192%.
• Lack of regulation. In the early years, the cryptocurrency market was practically unregulated, which made it easier to raise funds.

Why did ICOs lose popularity?

• Massive frauds. Pros according to the Satis Group researchAlmost 80% of ICOs in 2017 were fraudulent or unrealized projects.
• Regulatory pressure. After the fall of the crypto market in 2018 regulators, such as the US Securities and Exchange Commission (SEC), began to actively review projects. Many ICOs have been classified as unregistered securities and appropriate action has been taken.
• High risks. Due to the lack of guarantees and regulations, a huge number of investors lost money.

The revival of ICOs

At the end of 2024, there is a renewed interest in initial coin offerings (ICOs):

• Former Binance CEO Eric Zhang launched BuidlPad, a platform focused on honest projects and retail investors.
• Donald Trump’s victory in the US presidential election and the resignation of SEC Chairman Gary Gensler have created favorable conditions for innovation in the cryptocurrency sector.
• Investors are disappointed with the low return on investment in crypto projects. On this emphasized and Arthur Hayes, a well-known investor and former head of the BitMEX cryptocurrency exchange.

Why are ICOs still dangerous?

New platforms such as BuidlPad and Legion (the company plans to become one of the first MiCA-compliant crypto asset managers in the EU), introduces mechanisms for verifying and evaluating projects to increase investor confidence.