The ICO era, 2017–2018
How token sales raised money in 2017, why the SEC's DAO Report changed the rules, and what replaced the initial coin offering once the boom ended.
In 30 seconds
An ICO (initial coin offering) was a token sale in which a project sold newly created crypto tokens, usually ERC-20 tokens on Ethereum, directly to the public through a smart contract. In 2017 ICOs raised roughly $5 billion (estimates range from about $4.9B to $5.3B), before SEC enforcement and falling prices in 2018 brought the boom to an end.
What was an initial coin offering?
An ICO borrowed the language of a stock market listing but skipped almost every part of it. A team published a whitepaper describing what it planned to build, deployed a token contract, and invited buyers to send ether or bitcoin in exchange for the new tokens. There was usually no prospectus, no underwriter and no registration with a securities regulator.
Most 2017 sales used the ERC-20 standard, a common interface for fungible tokens on Ethereum. Every ERC-20 token answered the same basic functions, so wallets and exchanges could support a new token within days of its sale.
How big the 2017 ICO boom became
The totals are hard to pin down, because sales were global, often unregistered and reported by the projects themselves. Estimates for 2017 differ by source: Crunchbase counted about $4.9 billion, while CoinDesk's figures imply about $5.3 billion. The fairest summary is that token sales raised roughly $5 billion (estimates range from about $4.9B to $5.3B) over the year.
Demand built in waves. A sale could be announced, promoted on forums and messaging channels, and closed within hours. Many teams had no product yet; the token sale was the funding round.
The same speed made it easy to raise money for projects that were vague, copied or fraudulent. Buyers had little information, no standard disclosure and no clear legal claim on the issuer. Those conditions explain why the period is remembered both as an experiment in open fundraising and as a bubble. The later rules are set out on the crypto regulation page.
How a 2017 token sale worked
A presale offered tokens to early or larger buyers at a discount. The public sale then opened a crowdsale contract with a start time, a fixed rate of tokens per ether, and often two limits: a soft cap, the minimum needed for the sale to go ahead, and a hard cap, the most it would accept.
Buyers sent ether to the contract address and received tokens in the same wallet. Some contracts accepted only whitelisted addresses after identity checks, a practice that spread as legal pressure rose. Once the sale ended, the team sought exchange listings, and from then on the market, not the sale rate, set the price.
Lifecycle of a 2017 token sale
- WhitepaperThe team publishes the plan, token role and sale terms.
- PresaleEarly buyers get discounted tokens, often under private agreements.
- Contract deployedAn ERC-20 token and crowdsale contract go live on Ethereum.
- Public saleBuyers send ether and the contract issues tokens up to the cap.
- Exchange listingTokens list on exchanges and open trading begins.
The SEC's DAO Report, 2017
On July 25, 2017 the SEC published an investigative report on The DAO, a token-funded project built on Ethereum. The agency found that DAO tokens were securities and that federal securities laws can apply to token sales, whatever technology is used to issue them.
The test the report applied is the one US law uses for an investment contract: money invested in a common enterprise with an expectation of profit from the efforts of others. After the report, a project selling tokens to US buyers had to treat registration, an exemption, or the exclusion of US buyers as live questions. The glossary entry for ICO summarizes the terms.
| Feature | IPO | 2017 ICO | Later models (IEO, DeFi) |
|---|---|---|---|
| Who sells | A company, through underwriters | A project team, directly by smart contract | An exchange (IEO) or a protocol distributing tokens (DeFi) |
| Disclosure | Registered prospectus reviewed by a regulator | Whitepaper written by the team | Exchange due diligence (IEO); open-source code and docs (DeFi) |
| What buyers get | Shares with legal rights | Tokens with rights set by code and whitepaper | Tokens, often with governance or fee rights |
| Who can buy | Investors through brokers, under securities rules | Anyone with a wallet, unless excluded | Exchange account holders (IEO); protocol users (DeFi) |
| Gatekeeper | Regulator, exchange and underwriter | Usually none | The listing exchange (IEO); none (DeFi) |
Exchange projects of the ICO era
Every new token needed somewhere to trade. EtherDelta, launched in July 2016, was an early order-book DEX for ERC-20 tokens, with an off-chain order book and on-chain settlement. In November 2018 the SEC settled with its founder for operating an unregistered exchange.
The 0x protocol, whose whitepaper appeared in February 2017, proposed shared infrastructure instead of a single site: signed orders passed through independent relayers and settled on-chain. Other teams pitched institutional ideas such as smart order routing across exchanges and private crossing networks for large trades, often to be financed by token sales of their own.
Omega One and the OMT token, 2017–2020
Omega One was a project that emerged from the ConsenSys ecosystem in 2017. Its announcement described it as "a cheaper and safer way to trade cryptocurrencies and tokens", and the company later used the tagline "The smarter way to trade cryptocurrencies". It planned an ERC-20 token, OMT, meant to give holders tiered membership, trading-fee discounts and access to a dark pool.
The OMT token sale was postponed several times, and public records do not show a completed public sale. In May 2018 the company signed a memorandum of understanding with the Government of Bermuda. Its crossing network, Omega Dark, officially launched on March 20, 2019 with a provisional (Class M) license under Bermuda's Digital Asset Business Act, and the company billed it as the first regulated dark pool in digital assets. At launch it was accepting applications to its early access program. Its CEO had previously designed bond and hedge-fund FX trading platforms, and a former CFTC commissioner was among its regulatory advisers. The company went quiet around 2020.
How venues of this kind match orders is explained in the guide to crypto dark pools; the Bermuda licensing regime is covered on the regulation page.
How the ICO era ended
The boom did not stop on a single date. Through 2018 the pressure came from two directions at once. Regulators moved from warnings to cases: the reasoning of the DAO Report was applied to individual sales, and the SEC's November 2018 order against EtherDelta's founder showed that the venues trading those tokens were in scope too. Projects that had sold tokens to US buyers faced questions about registration and disclosure.
At the same time, token prices fell across the market during 2018. Treasuries held in ether lost value, teams that had planned to fund years of development from one sale found themselves short, and new sales struggled to attract buyers. Many sales were postponed or canceled.
What survived was the infrastructure the era had built: ERC-20 tokens, wallets and early decentralized trading contracts. The fundraising models that followed reused those parts, but put either a gatekeeper or a working product in front of the token. The dates sit on the crypto market structure timeline.
What replaced the ICO
The first replacement put an exchange between the issuer and the buyer. In an initial exchange offering (IEO), a centralized exchange ran the sale on its own platform and listed the token afterwards. Buyers gained a filter of uneven quality.
The more lasting shift came from DeFi. On June 15, 2020 Compound began distributing its COMP governance token to the people using its lending protocol, a model known as liquidity mining. Protocols handed tokens to users of a live product, often as a reward for supplying capital to liquidity pools.
Short answers
ICO era FAQ
What was the ICO boom of 2017?
The ICO boom of 2017 was a period in which many crypto projects raised money by selling newly created tokens directly to the public, mostly as ERC-20 tokens on Ethereum. Token sales raised roughly $5 billion that year, with estimates ranging from about $4.9B to $5.3B.
How did an ICO work?
An ICO worked through a smart contract. A project published a whitepaper, deployed an ERC-20 token contract and opened a sale in which buyers sent ether to a contract address and received tokens in return. After the sale closed, the team sought exchange listings so the tokens could trade.
What did the SEC DAO Report say about tokens?
The SEC's DAO Report, published on July 25, 2017, found that tokens sold by The DAO were securities and that federal securities laws can apply to token sales regardless of the technology used. The report signaled that ICOs offered to US buyers could need registration or an exemption.
Why did the ICO boom end?
The ICO boom ended through a combination of regulatory enforcement and falling token prices in 2018. The SEC applied securities law to individual token sales and to trading venues, and lower prices shrank project treasuries and buyer demand. Fundraising then moved toward exchange-run sales and toward distributing tokens to users of working protocols.
What is the difference between an ICO and an IPO?
An IPO sells shares in a company through underwriters, with a prospectus registered with a securities regulator, and the shares carry legal rights. A 2017 ICO sold tokens directly to anyone with a wallet through a smart contract, usually with only a team-written whitepaper, and the tokens' rights came from code rather than corporate law.
What happened to the Omega One OMT token sale?
Omega One, a project that emerged from the ConsenSys ecosystem in 2017, planned an ERC-20 token called OMT for tiered membership, fee discounts and dark-pool access. The OMT token sale was postponed several times, and public records do not show a completed public sale. The company launched its Omega Dark venue in March 2019 and went quiet around 2020.
Sources
- Crunchbase News: 2017's ICO market grew nearly 100x
- CoinDesk: 2018 ICO funding passes 2017's total (Apr 2018)
- SEC: Report of Investigation on The DAO, Release 34-81207 (2017)
- SEC: press release 2018-258 on EtherDelta as an unregistered exchange
- 0x: protocol whitepaper (2017)
- The Block: Compound governance tokens begin trading (Jun 2020)
- CryptoNinjas: ConsenSys introduces the Omega One execution platform (Jun 2017)
- MainBloq: Omega One, trade execution and the OMT token (Jun 2018)
- Royal Gazette: Bermuda digital asset licensing and Omega One (Oct 2019)
- PR Newswire: Omega One launches Omega Dark (Mar 2019)
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