Throughout 2016 and especially 2017, the crypto world experienced something unprecedented: a fundraising frenzy driven by Initial Coin Offerings (ICOs). Projects would launch websites, write whitepapers, create ERC-20 tokens, and sell them to the public. In exchange, investors received tokens that might become valuable if the project succeeded. By the peak of 2017, hundreds of new ICOs were launching every month, collectively raising billions of dollars.
The appeal was obvious. For projects, ICOs were a way to raise money without dealing with venture capitalists, regulators, or legal complexity. For investors, they were a way to get early access to projects that might become the next Ethereum — with potentially massive returns. The ICO format was borderless: anyone with an internet connection and some ether could participate. This democratized access to early-stage investing in a way that had never been possible before.
Some ICOs were serious projects that went on to become important. Filecoin raised $257 million in 2017 and built a real decentralized storage network. Tezos raised $232 million and became a major smart contract platform. Bancor, Golem, Status, Basic Attention Token — all raised tens of millions and delivered functional products. These projects contributed real value to the crypto ecosystem.
But the vast majority of ICOs were either outright scams or hopeless pipe dreams. Projects with no technical team, no working product, and no realistic plan raised tens of millions of dollars from enthusiastic investors. Many founders simply ran away with the money — “exit scams” that left investors with worthless tokens. Others spent the money on salaries and marketing without ever shipping a working product. A 2018 study found that over 80% of 2017 ICOs had either failed or were identified as scams.
The total amount raised in ICOs during 2017 was staggering — approximately $5.6 billion by some estimates. It was the largest wealth transfer from retail investors to crypto entrepreneurs in history. Regulators eventually noticed. The SEC began declaring that many ICO tokens were unregistered securities. China banned ICOs outright in September 2017. By mid-2018, the ICO bubble had burst, and most of those 2017 projects were dead. But the ICO era had demonstrated something important: there was enormous pent-up demand for early-stage crypto investing, and the traditional financial system was completely unprepared to meet it.
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