Crowdfunding

Blockchain ICOs are often compared to crowdfunding or crowd investing on the Blockchain. Most cases are hybrid and don’t fall under either class. As critical crowdfunding wherever the investment takes into account donations, ICOs offer the supporters the likelihood of a return of investment of the token at a later date for the next value. ICOs can be seen as a mixture of a donation, investment or venture capital.

Most ICOs that were conducted in 2016 and 2017 didn’t offer investors a conventional stake in the startup. These investors will be seen as supporters of a project and are entirely driven by the return of their investment.

History of Initial Coin Offerings

The first token sale (also known as an ICO) was held by Mastercoin in July 2013. Ethereum then raised money with a token sale in 2014, raising around 31,000 BTC in July, equal to approximately $18.3 million at the time. ICOs and token sales started gaining popularity back in 2017. There were at least 18 websites tracking ICOs before mid-year by then.

In May, the ICO for a new web browser called Brave generated about $35 million in just under 30 seconds. As of November 2017, there were around 50 offerings a month,with the highest-grossing ICO as of January 2018, being Filecoin, raising $257 million (and $200 million of that within the first hour of their token sale). By the end of 2017, ICOs had raised almost 40 times as much capital as they had raised in 2016, although still amounting to less than two percent of the capital raised by IPOs.

ICOs are sometimes called “token sales“. Amy Wan, a crowdfunding and syndication lawyer, described the coin in an ICO as “a symbol of ownership interest in an enterprise—a digital stock certificate” stating that they are likely subject to regulation as securities in the U.S. under the Howey test. Ethereum is (as of February 2018) the leading blockchain platform for ICOs with more than 80% market share.

An initial stake-pool offering (ISPO), also known as an ISO, is a novel variation of an ICO for funding cryptocurrency projects. In an ISPO, users stake their cryptocurrency holdings (mostly notably ADA) through a stake-pool operated by the cryptocurrency project.

The first formal ISPO, and so far the most successful, was launched on July, 1st, 2021. By October 2021 more than 35,000 participants across the world contributed more than 600 million ADA (worth more than $1 billion USD in October 2021). Participants receive 0.065 $MELD/$ADA stake/epoch while keeping full ownership of their ADA.