The Tezos Blockchain project smashed all records with the biggest ICO to date, dwarfing the $150 million raised by Bancor’s ICO last month. This represents a rise of over 870% for the ICO market cap over the last year.
The History of ICOs
A more technologically nuanced alternative to the historically unchallenged Initial Public Offering (IPO), ICO is the brainchild of the meritocrats rather than the aristocrats. ICOs have opened up a new world of fundraising for start-ups and entrepreneurs by offering them an opportunity to raise significant capital through the use of cryptocurrencies, without headaches associated with having equity stakeholders and regulators. This new technological model that nourishes its ideas by implementing the Blockchain technology has strongly challenged and shaken the Venture Capital business model.
The Numbers Game
A research firm called Smith & Crown reported that a total of $522 Million has been raised in the first five months of 2017 from just 65 ICOs. BasicAttentionToken (BAT), a cryptocurrency startup called that aimed to weed out the middlemen, frauds, and trackers in Digital Advertising by creating a decentralized, transparent digital ad exchange based on Ethereum Blockchain held its ICO a couple of months ago. It raised $35 Million in just 24 seconds.
The creators of another startup called Mysterium Network, which seeks to build a decentralized VPN, received $14.4 Million from investors in less than 45 minutes. The month of June saw the launch of two huge ICOs. Bancor Foundation, which aims to create a new reserve cryptocurrency, managed to raise $153 Million in under 3 hours while Status, a messaging platform managed to raise $108 Million. This took the total amount raised from ICOs to $850 Million.
With recent ICOs all outperforming each other, ICOs have become the biggest trend in the crypto-world off late. The market cap for ICOs has increased from $12 billion to $100 billion over the last year, a massive spike of over 870%. To put this in perspective, it is six times the growth observed by the stock market cap during the years of the dot com bubble in the late 90s. However, this is not a recent fad as investors in cryptocurrencies reportedly made massive returns in 2016, several over 2000%.
Tezos and Other Exciting New ICOs
Tezos raised a staggering $232 Million worth of Bitcoin and Ether coins which makes it by far the largest ICO in history. According to its website:
[Tezos is a] decentralized blockchain that governs itself by establishing a true digital commonwealth and facilitates formal verification, a technique which mathematically proves the correctness of the code governing transactions and boosts the security of the most sensitive or financially weighted smart contracts.
In addition to Tezos, several other interesting ICOs have recently made the news. Augur, a decentralized prediction market which has the potential to revolutionize the world of betting raised over $5.2 Million through its ICOs. ChronoBank, which has been dubbed “the Uber of the recruitment industry,” raised $5.4 Million. Another exciting project, whose ICO is currently underway, is Agrello which provides a way to ‘create and manage smart-contract-based legal agreements by engaging your own AI counselor’ and can even be used those not well versed in coding or legal skills.
Riding on this wave of success, there are plenty of exciting upcoming ICOs on the horizon. For the more adventurous minded, an Estonian online adult entertainment platform called RasputinOnline has announced it will hold its ICO on the 20th of July. The success of ICOs has even seen the emergence of cryptofunds that offer a way to invest across multiple cryptocurrencies, such as eToro’s cryptofund, and startups that invest in cryptocurrencies directly, such as Pantera Capital.
The Path Ahead for ICOs
Critics have often cynically labeled ICOs as get-rich-quick scheme due to the seemingly exponential valuations that lack regulations. Harvard Business Review correctly pointed out how a ‘lack of control over financials, strategy, and operations; and the lack of business use-cases’ has the potential to leave scars in the minds of investors when things go sour. Just like any other industry, ICOs have also had their fair share of scams and fraudulent schemes that have resulted in a loss of trust for potential investors. The biggest scandal thus far has been the $150 Million DAO scandal.
However, any nuanced analysis needs to look at the broader picture here. People are finally stand up to the oppressive legacy system of banking and are recognizing how traditional fiat currency is just a tool to enslave the masses with debt. Cryptocurrencies might be complicated and confusing, but they symbolize a new era of decentralized economies in the history of the world. ICOs represent an opportunity to level the playing field, even if just a tiny bit.
By systematically favoring meritocracy over aristocracy, it ensures the brilliant, hard working minds no longer having to rely on Venture Capitals for funding. Through ICOs, cryptocurrencies have provided us with perhaps the greatest revolution in mankind’s history yet and given us an ability to drive innovation faster in a wealth of different industries as is evidenced by the myriad of Blockchain projects in the works.
This transition to crowdfunding from conventional institutional fund-raising is sure to usher in a new period of ever-evolving global financial markets. No one can predict when the ICO bubble will eventually burst, but until then it looks set to offer an unprecedented financial opportunity to developers to execute their vision.
Do you think the ICO model will last, or will the government step in to regulate this booming arena? What are the ICOs that you’re looking forward to the most? Let us know in the comments below!
Images courtesy of Smith and Crown, Shutterstock