In Especially ICO funding started gaining traction in 2016

In 2013, a company named Mastercoin conducted the first ICO in thehistory becoming one of the first applications built on top of the Bitcoin Blockchain.

Founders raised what was then worth $500K USD. By 2014, Mastercoin had appreciatedin value to make the initial investment worth $5.5M USD, proving the validityof the investment model and paving the way for further ICOs.Since then, there has been a great variety of ICOs with a new oneslaunching every other day.

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Especially ICO funding started gaining traction in2016 and exploded in 2017, where the funding increased from $228m to $2.6bn,showing a tremendous increase within 1 year (Coindesk, 2017). Tezos and Bancorare among the top ICOs of 2017, with the earlier raising $230 million and thelatter raising $153 million. Additionally, in 2017 ICOs has outcompeted andoutperformed VC in the financing of cryptocurrency and blockchain startups inthe second quarter of 2017 for the first time (CB Insights, 2017). Such an explosive growth of ICOs has divided the industry into criticsassociating the phenomena as a bubble waiting to be popped and proponentsjustifying the use of such ICOs as a revolutionary innovation. In order tounderstand the features of ICOs and analyze the novelty of the new fund-raising,it will be more pronounced to compare it with other funding options availablefor startups in the financial market such as crowdfunding, angel investment orventure capital.

Additionally, defining ICOs in first place will be necessary in orderestablish a taxonomy for this phenomenon. Even though ICOs have experienced anexponential growth only in the last two years, the cryptocurrency community hasnot come together to clearly define what terms surrounded ICOs actually mean.Crowdsale, token generation event (TGE), initial coin offerings are the termswhich are interchangeably used by the community members and in the media. Theabsence of the clear taxonomy made it difficult to navigate within the ICOindustry as well as regulate this phenomenon. Broadly speaking, Initial Coin Offering is the process of raising moneyfor entrepreneurial blockchaininitiatives from a public token sale(Kaal, Dell’Erba, 2017). However, when digging below the surface, we observethat blockchain-based tokens represent a wide variety of assets, some of which qualifyas securities under U.S. law.