In the land of initial coin offerings (ICO), a world that is starting to look a bit like Xanadu, an estimated $4.9 billion was raised. This number was buttressed by several sources. WSJ.com reported in December that ICOs had topped $4 billion. Crunchbase augmented that this month saying another few hundred million has been added in the past few weeks.
It is interesting to note that two ICOs, Filecoin and Block.one, accounted for around $1 billion. If you think about that for a minute it is pretty incredible. Two companies that have yet to deliver a fully fledged product raised a lot of money.
Block.one was described as “having no purpose”. It has raised around $700 million on a rolling basis. That amount puts in serious competition with the mundane world of initial public offerings. Block is developing the EOS platform that wants to become the first decentralized operating system with their token providing bandwidth and storage. One of the founders announced several months back their intent to use $1 billion for EOS projects (subject to change).
Filecoin has a bit more more promise, perhaps. The first ICO listed on Coinlist, a crowd sale platform built by AngelList and Protocol Labs, Filecoin is the creation of the Protocol Labs team and they raised $200+ million in the blink of an eye: $135 million took a mere hour to raise. In brief, Filecoin wants to disrupt the cloud storage industry by enabling anyone and everyone to lease out their digital storage in exchange for tokens – a process made easier due to the advent of Blockchain. Kind of a frontal attack on AWS and Dropbox. Now all Filecoin needs to do is execute and they have plenty of money to do so.
So how does this compare to VC funding?
Globally, funding hit $164 billion in 2017, according to a report by PwC/CBInsights. In the US, VC activity saw $70+ billion during the year. So venture is still bigger but ICO’s are growing faster.
So what is the catch?
Regulation, regulation, regulation.
Part of the ICO boom has been fueled by the rave like crypto-party of an unregulated sector of finance. That is slowly coming to a halt. In the US, the SEC keeps firing warning shots and the industry keeps dodging them as the internet is a pretty cool tool to move things around. But the more professional types are recognizing that regulation can be a good thing – if done right. Globally, some countries, like South Korea and China, have just shut things down. At least until they can get a better handle on things.
With movements like the Code of Conduct coming out of Zug, Switzerland, and policy makers stepping up their game with some willing to embrace financial innovation, 2018 could be a spectacular year in the making for digital assets and the potential for tokenized securities.