How Past ICOs Are Shaping the Future of Technology
The ICO industry has receded over the past year, but ICO companies are on the rise, reshaping the world we live in
With a flurry of airdrops and giveaways, the flow of Initial Coin Offerings (ICO) increased in 2017 into a deafening roar of multi-billion dollar crowd sales. By the year’s end, 873 ICOs had generated a combined total of over $6.1 billion. The bullish climate led to speculation that venture capitalism would forever be changed.
Yet, despite a promising start to 2018, the bubble of ICO investments deflated just as quickly as it appeared. While total ICO funding for 2018 so far stands at over $6.9 billion, the industry has clearly suffered from a bearish year. According to data from ICOData.io, just $31,075,391 was raised during September, the lowest for 16 months.
The ICO industry may be on its knees, but from its ashes have risen any entirely new breed of startup: the ICO company. Flush with millions (or billions) of dollars’ worth of Bitcoin, Ethereum and other digital assets, these companies have now become investors. Their investment decisions and priorities are fundamentally reshaping the tech landscape and irrevocably changing the way we live, work and communicate. The ways in which ICO companies are choosing to invest their cash, and the types of investments they are choosing, show that ICO companies are still, very much, on the rise.
A brief look at the rise, and fall, of the ICO industry
In simplest terms, ICOs are merely the latest incarnation of a much older form of venture capitalism: crowdfunding. ICO tokens are similar to dividends and those who participate in an ICO are investing in a startup whose success or failure rests on their ability to deliver on their promises. Prior to 2017, creating a new cryptocurrency or forking an existing one was so complex and prohibitively expensive as to be the preserve of a select few. The 29 ICOs that occurred during 2016 raised a combined total of just $90 million.
The following year saw the introduction of technology that greatly lowered the cost of entry and removed many hitherto barriers. The $69 million raised by ICOs during Q1 2017 quickly mushroomed to $800 million by the second quarter. By July, the combined market capitalization of all cryptocurrencies passed $100 billion for the first time and the rest is history. Few developments encapsulated the crypto-mania of the times better than the emergence of Forkgen – a website that let anyone create their own fork of Bitcoin.
Although bitcoin’s most recent bubble began to deflate a few days before Christmas 2017, the ICO market remained strong during the first quarter of 2018. A number of monstrous, multi-million dollar ICOs including Dragon ($320M), Huobi ($300M) and Bankera ($150M) helped propel the market to new highs. According to a joint report from PwC and the Crypto Valley Association, the average size of an ICO in early 2018 had “almost doubled from $12.8 million to over $25.5 million” compared with the previous year, despite the price collapse of cryptocurrencies.
However, averages can be misleading and the reality was that a handful of massive ICOs, such as Telegram’s $1.7 billion ICO, were skewing the data. A select few superstars were making bank, masking the fact that the number of ICOs and the amounts they raised was slowly but surely dwindling throughout the year, resulting in its current paltry value of $31,075,391 for September.
The rise of ICO companies
Whether the ICO market bounces back or not is irrelevant: its bubble has left a lasting legacy. An entirely new breed of startups, funded and fueled by Ethereum and other cryptocurrencies, are here to stay and they aren’t going anywhere. By parlaying their digital assets into other revenue streams such as cryptocurrency exchanges and hardware, they are transforming all aspects of technology and all areas of the economy.
While ICO investors may have liked to think of themselves as ‘nouveau’ investors, they were essentially investing in startups. These new enterprises – ICO companies – are now actively using their capital to launch something they believe will revolutionize whatever industry they are focusing on.
ICO companies are channeling their cash into new technologies, innovations and other avenues in a way never seen before. Slowly, but surely, ICO companies are irrevocably changing the world around us in ways that most people remain oblivious to. Here’s a summary of the most significant ways that ICO companies are influencing and molding the tech landscape.
Sirin Labs is developing a blockchain smartphone with an ultra-secure Android OS
For evidence that ICO firms are on the rise, look no further than Sirin Labs. When their ICO concluded on December 25, 2017, they had raised over $157 million, making theirs one of the largest ICOs ever. These funds supported the development of the Solarin privacy phone, an ultra-secure phone with an eye-watering $14,000 price tag. According to Engadget, a $1,000 handset named the Finney is due for release this November.
While the Finney is specifically geared towards cryptocurrency users and may not have mass-market appeal, it is running on a forked version of Android. Solarin has declared that they have made their version of Android significantly more secure. This fact alone may not be enough to tempt non-crypto users into buying a Finney. However, it is highly likely that Solarin’s ultra-secure version of Android will influence other handset manufacturers to up their game. Future handsets from the likes of Samsung, HTC and Huawei may well run a Solarin-inspired secure Android OS, much to the benefit of all smartphone users.
Filecoin is revolutionizing how the internet works
We use the internet for everything. The wonder of the web is that people share so much about themselves, yet the internet has evolved in a very fragile way with many single points of failure. We saw this danger play out during the 2011 Egyptian internet blackout where suddenly, one morning, people woke up to find their internet had completely shut down. Filecoin is working on using decentralization and peer-to-peer nodes to change this and create a safer, more secure, decentralized internet.
Filecoin raised $257 million during their ICO and are creating a distributed data storage network backed by a token. They built the IPFS protocol to create a web without central points of failure. They are essentially monetizing cloud storage and hope to ensure that people can access their data more securely, without connection issues.
Telegram is building a payments network to rival VISA/Mastercard
Like Filecoin, Telegram is funneling significant amounts of its $1.7 billion ICO funding into building a decentralized internet. Its 23-page long white paper shows that the Telegram Open Network (TON) will have many of the same benefits as Filecoin’s IPFS protocol. It will revolutionize how people access their data and the ease with which they can stay connected.
However, Telegram is also working on a decentralized app store – like the App Store or Google Play but for decentralized apps – and a completely new micropayment network called ‘TON Payments’. Although there have been no official statements from Telegram to confirm this, reports indicate that Telegram is aiming to combine “minimum transaction time with maximum security,” and “become a VISA/Mastercard alternative for the new decentralized economy.”
BitBounce launched their own crypto exchange to help users trade cryptocurrencies
Few other trends define the rise of ICO companies more clearly than the emergence of new, independent, cryptocurrency exchanges. Traditionally, ICO firms would have to pay exorbitant fees for their coins or tokens to be listed on exchanges such as Coinbase or Binance. Unfavorable, one-sided deals left smaller ICO firms at the mercy of the larger exchanges – they typically had no recourse if their tokens were suddenly delisted without notice.
We’ve seen a definite trend in the number of ICO companies looking to sidestep these issues by launching their own exchanges from scratch. We at BitBounce, a blockchain-based email spam solution, launched our own cryptocurrency exchange platform called CredoEx so that its users could buy and trade their digital assets more easily.
BitBounce is aiming to eradicate the perennial problem of spam email by putting a cryptocurrency paywall on email inboxes. Available as a Chrome extension, an iOS app, and an Android app, BitBounce pays its users in a cryptocurrency called Credo when they receive emails from people they don’t know.
BitBounce hasn’t been alone in launching an exchange. We’ve seen a definite trend in the number of ICO companies choosing to go it alone and give their users new ways of exchanging and managing their digital assets. Just as BitBounce lets users exchange their Credo for Bitcoin, Ethereum and other cryptocurrencies on CredoEx, the Japan-based social media giant LINE decided to create its own exchange, BitBox, when it launched its own token, LINK, for example. Besides competing with the top crypto exchanges, these independent exchanges open up new revenue streams for the ICO companies who own and operate them, fundamentally changing the way that the crypto markets work.
The ICO market boom may have turned to bust, but the ICO companies that were formed during the good times are transforming the tech landscape. By parlaying their digital assets into revolutionary investments and developing new revenue streams, these firms are rising from the ashes of the ICO bubble. From the decentralized internet envisioned by FileCoin to the ultra-secure smartphones being pioneered by Solarin and the entirely new ways of trading cryptocurrencies being introduced by BitBounce, all signs indicate that ICO firms will continue their inexorable rise.