It all began with Mastercoin, the protocol layer built on Bitcoin that pioneered the Kickstarter-style funding revolution for crypto projects way back in 2013. The team behind the protocol, later renamed as the Omni Layer, had the idea of outlining the features they wished to build and giving Bitcoin holders an opportunity to contribute to their project in exchange for part-ownership of their protocol.
However, it wasn’t until Ethereum popularized smart contract technology that ICOs truly took off, mainly as a result of the simplicity with which anyone could set up a crowdsale contract to issue their own token. Teams got into the habit of issuing ERC-20 tokens as placeholders for some future token that would be native to their yet-unlaunched network. Investors poured millions into crowdsale contracts on promises made by the teams behind their chosen projects that they could deliver on their roadmap and create functional technology.
Enthusiasts were quick to proclaim ICOs as the leading new model for capital formation, going even as far as labeling it a threat to traditional venture capital.
Blowing Bubbles in The Air
Finally, following a period of irrational exuberance that drew comparisons to some of the most epic asset bubbles of the past, the ICO market came tumbling down in spectacular fashion. As 2017 gave way to 2018, the value of once-popular tokens continued to bleed as token holders began to realize that countless crypto projects could talk the talk but that actually executing proved challenging due to the immaturity of foundational technologies and the resource limitations facing blockchain developers. While some projects succeeded in launching functional mainnets and products, a sizeable percentage of the 2016-2017 cohort of ICOs have yet to release any production-level code as of this writing.