ERC-20 token sales in 2017 redirect a billion-dollar wave of capital away from venture firms and toward a mailing-list whitepaper economy

2017

Video: How an ERC-20 Token Crowd Sale Works (ICO) on Ethereum Type: ethereum · Tags: ico, erc-20, token-sale, sec, regulation, 2017, capital-formation The SEC's DAO Report arrived in July; the money largely ignored it until January 2018 The ERC-20 standard, formalized by Fabian Vogelsteller in late 2015, made Ethereum the infrastructure layer for a new capital formation model. In 2017 the model broke into the mainstream: Bancor raised $153 million in three hours on June 12; Tezos raised $232 million in two weeks beginning July 1; Filecoin raised $257 million in Protocol Labs' SAFT structure in August-September; EOS began a year-long continuous sale that would total $4.1 billion by June 2018. By year-end, ICO funding had exceeded traditional early-stage venture capital in blockchain for the first time. The chart was nearly vertical. The SEC's 'DAO Report' of July 25 2017 — technically a Section 21(a) report of investigation rather than an enforcement action — concluded that DAO tokens had been unregistered securities. The money flowed regardless. China's PBOC banned ICOs outright on September 4 2017; the ban caused a brief price dip that was erased within weeks. South Korea issued a similar ban. The regulatory signal was clear; the speculative signal was louder. The legal reckoning came slowly and then suddenly: the SEC's enforcement wave, beginning with the Munchee order in December 2017 and accelerating through 2018–2019, worked its way through hundreds of 2017-era issuers over the following decade. The Swiss-foundation, 'utility token' legal architecture that Ethereum's own crowdsale had pioneered became both the template and the liability. Buenos Aires, Tokyo, Singapore, and Tel Aviv all generated substantial ICO origination; the distribution was genuinely global in a way that traditional venture capital was not, and that fact complicated the U.S.-centric enforcement framework that followed. Facts • Bancor ICO: June 12 2017, $153M raised in approximately three hours • Tezos ICO: July 1–13 2017, $232M raised • Filecoin: August 10 – September 7 2017, $257M via SAFT structure • EOS: June 2017 – June 2018, ~$4.1B in continuous token sale • SEC 'Report of Investigation: The DAO' (Section 21(a)): July 25 2017 • China PBOC banned ICOs: September 4 2017 • Total 2017 global ICO funding: ~$5.6B (vs. ~$95M in 2016) Primary Documents • SEC DAO Report (July 25 2017) — https://www.sec.gov/litigation/investreport/34-81207.pdf