In 2015, I thought the world was about to change.
Ethereum was soon to launch and I was sure it would be transformational. It provided a simple language that developers of all skill levels could build on top of. With that, the entire financial market—insurance, savings accounts, investment accounts—was suddenly ripe for rethinking.
But I felt despondent. So few people seemed to care.
A cadre of developers were experimenting with Bitcoin and Ethereum, but the cryptocurrency investments that needed to be made, including capital for projects, excitement from top level programmers, attention from prospective entrepreneurs, and demand from customers, were strangely absent.
A completely unexpected “innovation” set the world on fire: the initial coin offering (ICO).
In Gotham City, Commissioner Gordon uses the bat-signal to summon Batman when crime is afoot. The ICO, for all its mainstream criticism, was the bat-signal that attracted so many to crypto. It catalyzed coordination that made cryptocurrency into a mass movement explored not just by cyperphunks, but by everyone.
Though it can be easy to dismiss the financial speculation, unfounded hype, and projects like Dentacoin (“The Blockchain Solution for the Global Dental Industry”) that emerged from the ICO craze, these forces were critical to jump-starting the industry.
Source: Dentacoin Website
Launching a new technology platform like a cryptocurrency means solving a coordination problem. If a single party doesn’t show up, the whole thing could fall apart. Put simply, projects succeed when they bring together disparate parties who provide four key inputs: capital, media coverage, talent, and customers.
The early internet required internet service providers, internet applications, modems, backbone infrastructure, and computer hardware teams to all develop infrastructure concurrently, supported by a gusher of talent, capital, and buzz.
The ICO boom provided all four essential elements, pushing the crypto economy into the mainstream (though that is cold comfort to those who lost money on an ICO). While smart contracts seemed to me like the technical solution for taking crypto mainstream, it turns out that it was the capital and excitement that emerged from the ICO boom that may allow crypto to eventually rival today’s financial systems.
ICOs triumphed because speculation aligned the disparate parties.
Like most startups, blockchain teams needed money. A lot of it to pay salaries, fund product development, and market and sell the hell out of their products. The ICO allowed ordinary people to participate in financing early projects, unlocking a new source of cheap capital for projects. This worldwide participation far outstripped that of the dot com boom and equalized the playing field for new entrepreneurs.
ICOs gave these teams the money no one else would. Smelling a trail of fresh cash and afraid of having their lunch handed to them, VCs sat up and took notice.
The ICO boom also led to a frenzy of coverage by media organizations, social network algorithms, and crypto celebrities. The skyrocketing prices led crypto punditry, increased page views, giant conferences, and tons of Twitter followers. The coverage made financing, recruiting, and crypto sales cycles easier.
Was BTC really king this year?— Ran NeuNer (@cryptomanran) December 21, 2017
BTC returns: 16x
ETH returns: 103x
LTC returns: 70x
DASH returns: 123x
If your biggest holding was BTC this year you did not make great great investment decisions.
Soon, well known companies like Nasdaq, JP Morgan, State Street, and Microsoft got excited. They bought services from nascent startups and provided crucial early funding. Most importantly, they provided validation that brought many skeptical parties along.
Even if their investment was to score some marketing and position them as a leader in their space, this fear of missing out brought validation to the space. Even trivial forms of corporate support—say Azure supporting Ethereum—allowed crypto entrepreneurs to argue that mainstream adoption was at hand, which helped to raise that next financing round or convince that critical engineer to join
The importance of such a boost cannot be understated. The crypto revolution had an insatiable need for great talent, who needed to be trained to build blockchain applications. In 2015, a tiny handful of programs taught cryptocurrency courses, and these were sparsely attended. The ICO boom attracted a torrent of engineer, which made the market respond with a plethora of new training opportunities. By 2019, 56% of the world’s top 50 universities offered a cryptocurrency class.
Google Trends: Solidity searches
Source: Google Trends Solidity
The ICO hype similarly led to a surge of interest from entrepreneurs. Repeat entrepreneurs discarded old ideas for new crypto ideas, and prospective entrepreneurs made the leap into blockchain. Betting on crypto at such a nascent stage was risky, but the plentiful capital, easy recruiting, and free media made it extremely attractive.
I’ve often wondered whether new platforms can grow without setting as much capital on fire, as the ICO boom did.
The boom certainly provided the financing, media coverage, talent, and customers that transformed the crypto industry. It was the bat-signal that attracted people and resources to the space at a crucial time.
Originally Published 1/13/2020All opinions expressed are solely my own. feedback? drop a note to nemil at this domain