The ICO Comeback: Will History Repeat Itself?

Back in 2017 and 2018, ICOs raised $13 billion across over 2,000 projects, as per ICObench data. However, their ease of entry and high fundraising potential also made them breeding grounds for fraud, with scams costing investors over $1.3 billion, according to Statis Group.

Sid Powell, CEO of Maple Finance, believes the landscape has changed. Speaking to DL News, he noted:

“The old days of sending ETH based on a white paper are gone. We’re now operating in a very different environment.”

A recent example of this evolution was MegaLabs’ $10 million raise for its layer-2 network, MegaETH, through the Echo platform. It was completed in just three minutes, offering both equity and token warrants. However, critics warn that such fundraising, while swift, could mirror the speculative frenzy of past ICOs.

Fraud Concerns and Evolving Regulations
The ICO boom of 2017 produced both winners and losers. While EOS raised $4.2 billion and Brave secured $35 million in just 30 seconds, the SEC pursued 70 enforcement actions against ICO-related misconduct between 2013 and 2022.

Unlike traditional capital raises, ICOs have also been used to build communities via airdrops. But professional bot farms often exploit this mechanism, leading to uneven token distribution. For instance, one farmer earned $2 million in Magic Eden tokens during its token launch.

According to Ivan, a contributor cited in DL News:

“Free tokens don’t foster loyalty. People value assets they consciously purchase.”

The MegaLabs raise tackled this issue by capping individual investments, ensuring fairer participation.

Stronger Guardrails Are Key
The new wave of community rounds is expected to integrate stricter investor protections, such as know-your-customer (KYC) measures and tailored disclosure agreements. Bill Hughes of Consensys also emphasized the need for a safe-harbor mechanism to provide projects with legal clarity.

With incoming SEC Commissioner Paul Atkins signaling support for such measures, the groundwork for a safer ICO landscape seems to be forming.

BitGalactic’s Take:
The resurgence of ICOs as “community rounds” reflects the industry’s drive for innovation and inclusivity, but the risks remain high. While streamlined mechanisms like MegaLabs’ raise show promise, the crypto space must prioritize trust and transparency. A safer and regulated framework could unlock the true potential of these fundraising tools, but without such guardrails, the line between opportunity and exploitation remains razor-thin.