Why 2025 Will See the Comeback of the ICO

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As a seasoned researcher who has witnessed the crypto landscape evolve since the early days of Bitcoin, I can confidently say that the future of decentralized capital formation is brighter than ever. The lessons learned from the ICO boom and bust have been internalized, and we are now poised to embrace a new era of innovation and opportunity.

2025 is expected to witness a significant transformation in American financial regulations and a decrease in global crypto skepticism. This change could pave the way for a new era of decentralized funding, a concept that gained prominence in 2017 under the name “Initial Coin Offerings” (ICOs).

In the 2010s, it wasn’t until Ethereum introduced smart contracts that Bitcoin and altcoins found a significant use case. This innovation allowed early-stage teams to gather funds from supporters worldwide. Ethereum essentially kickstarted a globally decentralized computer system, leading to the birth of DeFi, NFTs, and other crypto essentials. Remarkably, this groundbreaking project was funded with less than $20 million from a global community.

After our initial success, numerous other projects adopted similar strategies, leading to a shift where fundraising from a decentralized community typically provided more benefits for both the project and its entrepreneurs than traditional venture capitalists. This decentralized investor base offers free marketing advocates, beta testers, and code developers – essentially unpaid labor that contributes directly to the project. Furthermore, the quicker liquidity window offered improved risk-reward opportunities for early-stage investors.

Regrettably, Initial Coin Offerings (ICOs) gradually faced restrictions and were often deemed “non-compliant” with regulations that remained somewhat ambiguous. By the year 2020, they had almost come to a standstill, and 88% of ICO tokens were trading at prices lower than their original issue price.

Looking ahead to 2025, significant factors will align, paving the way for the resurfacing of intriguing investment prospects. However, these opportunities may exhibit distinct features unlike those observed during the Initial Coin Offering (ICO) 1.0 era.

The ingredients of ICO 2.0

1. Updated regulatory stance

As a researcher delving into the realm of token investments, I anticipate that value accrual will serve as a cornerstone in understanding why individuals are choosing to invest this time. The entrepreneurs and investors within this sphere have evolved and are now collectively acknowledging that the primary objective for most tokens is profit generation.

The emphasis for KYC/AML will center around entry and exit points like exchanges and layer 2 bridges. It’s crucial to pay particular attention to the moment when profits are converted back into fiat currency, which should provide a suitable level of oversight that appeals to reasonable regulatory bodies.

2. Market turnover

It’s evident that some mid-sized businesses, particularly those in the media sector such as newspapers and magazines, are experiencing a steep drop in performance. However, they have a significant opportunity to reinvent themselves by adopting community-based and decentralized structures. For instance, implementing a token economy could motivate citizen journalists to strive for higher professionalism within this model.

3. Crypto’s progression

2017 saw a wave of Initial Coin Offerings, or ICOs, with races for clicks taking place on roughly designed user interfaces and pre-launch rounds of SAFT agreements being distributed to only a select group of venture capitalists. This was followed by years of anticipation before the live network launch. Given these circumstances, it’s not surprising that the majority of ICO projects ultimately failed. The survival of the fittest is a characteristic of any emerging technology, with most ventures eventually succumbing, but those that do survive often prove to be highly valuable (a similar trend can be seen in the field of Artificial Intelligence, where over 90% of current projects are expected to disappear).

1) Currently, crypto offers smooth onboarding processes and user-friendly applications, which is significant. However, what truly stands out is the community’s exceptional talent for identifying and exposing falsehoods and unscrupulous actors more effectively than any government regulation has done so far. The transparency provided by open, decentralized ledgers serves as a powerful cleanser in this regard.

Implications and predictions

So what does all this mean for the crypto community?

The upcoming surge of decentralized financing is expected to far surpass the around $20 billion invested in Initial Coin Offerings (ICO 1.0) during 2017 and 2018. In the years ahead, it’s likely that we’ll witness a massive influx of capital – potentially reaching hundreds of billions – being poured into Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), Rolling Window Assets (RWAs) and numerous other cryptocurrency building blocks.

In the upcoming year, mergers and acquisitions (M&A) are expected to play a substantial role in the formation of capital within the blockchain sector. This could involve established businesses delving into cryptocurrency by acquiring strategic positions, such as the Stripe-Bridge deal, or Ethereum Virtual Machine Layer 2 solutions consolidating as they recognize that only a few will become influential players. Overall, we anticipate M&A deals worth billions of dollars in the crypto space over the next twelve months.

Moreover, mid-sized Web2 firms and traditional companies are now considering a shift in their business strategies since they can implement token-incentivization under less adversarial conditions. Notably, businesses in sectors like energy, media, art, and cellular communication are starting to take token-incentivization seriously as a means to transform their value chains into open marketplaces, quickly gain customers, and reduce labor costs.

I’m equally hopeful that regenerative financing, which combines business and charitable objectives, will become a common practice. Furthermore, I’m thoroughly intrigued by the potential of cryptocurrency to revolutionize the way we balance financial gains with social goals, offering more engaging solutions than we’ve previously encountered.

It’s likely that we’ll witness innovative methods for selecting ICO participants emerging, such as rewarding liquidity providers, choosing based on reputation derived from on-chain activity, or using specific proof systems. The result of these strategies should lead to a more equitable distribution between retail and institutional/VC investors.

In the end, just like in the world of cryptocurrency, we can expect unwavering innovation and fresh concepts to keep emerging, leading to an increase in early-stage investment chances. It’s evident that numerous dynamic teams recognize artificial intelligence (AI) as having a natural transaction platform within crypto, and are thus readying themselves accordingly. These AI agents will employ token-supported crowdfunding strategies, combining debt and equity concepts, to finance their initial stages.

In summary, I am hopeful that the crypto community has grasped the lessons from their journey so far. With a multitude of chances for investment arising next year, I urge everyone in the crypto sphere to be transparent and vocal about potential risks, helping shape this industry towards open opportunities, honest launches, and projects that prioritize delivering value to token holders.

Fair launches are a superior path forward and we should all work towards more equitable and transparent fundraising practices. There are still many issues to resolve and there will be some spectacular failures as we move forward, but decentralized capital formation is crypto’s original killer app, and it deserves to continue to evolve.

It’s important to note that the opinions expressed within this article belong solely to the author, and they may not align with those held by CoinDesk, Inc., its proprietors, or any of its related entities.

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2024-12-26 18:39