The first entry in our series of ICO case studies is Filecoin – the biggest ICO ever.
What does it take to launch the biggest ICO in history?
Well, it takes a good idea, and it takes an educated, experienced team to work on making it a reality. It takes respect for, and full adherence to, relevant rules and regulations. It requires a substantial consumer appetite, an expert media relations campaign to make this appetite insatiable – and, of course, the internal capability to satisfy it.
In other words, it takes Filecoin.
What is Filecoin?
Filecoin is a blockchain-based decentralised data storage network. This means that participants can share server space on the blockchain. If you let someone use this space, you get some Filecoin in return.
How much you get depends on the marketplace, where uploaders and hosts can bid for the best deal. Users have a variety of options available to suit their particular needs: they can prioritise speed, redundancy, or cost when making their orders.
Who was behind it?
Filecoin was developed by Protocol Labs, a highly respected team with extensive experience in deploying open-source technology. This team led innovative projects such as the decentralised web protocol, IPFS, CoinList, and libp2p – among others – and leverages these technologies to the cryptocurrency’s benefit. IPFS’ peer-to-peer file transfer and storage infrastructure has been particularly valuable.
How much did it raise?
As of June 2018, Filecoin has had the largest ICO. Between August and September 2017, the company raised $52 million in its presale – which offered selected investors (including Andreessen Horowitz, Union Square Ventures, and Sequoia Capital) securities that would eventually be allocated as tokens – and $205.8m in its second round: $135m of this was raised in an hour. These funds were raised in dollars, Bitcoin, Ethereum, and Zcash.
Why was Filecoin’s ICO a success?
Consumer demand
Secure data storage is in high and ever-increasing demand: in 2018, we will produce more data than the past 5,000 years combined. Capacity must rise to meet this demand – and decentralisation may offer a viable means of doing just that. By using blockchain technology to co-ordinate a peer-to-peer network of storage nodes, Filecoin provides a potential solution to the longstanding problem of finite server space.
Reputable leadership team
Protocol Labs isn’t run by slouches. Led by Juan Benet, the company has years of experience in its particular field – and better still, is actively using its other projects to provide Filecoin with a robust foundation.
Effective PR and media relations
Beyond the technology itself, the cryptocurrency has been distinguished by a well-orchestrated media hype campaign. Early coverage in Wired and TechCrunch was later followed with a clever investor-centric strategy, where the price of initial coins would be set at $1 and increase with each subsequent investment. This forced investors to get involved as early as possible and drove up the price: attracting yet more investors in turn.
Strict regulatory compliance
Filecoin is also notable for its strict regulatory compliance: only accredited investors with a yearly income of over $200k – or a net worth over $1 million – are allowed to subscribe for its tokens. We’re still at an early stage of cryptocurrency’s lifespan, and it’s easy to think of it as a lawless wasteland. But the legislative noose is tightening around the crypto market, and a recent Securities and Exchange Commission (SEC) ruling mandated that ICOs will have to comply with registration laws. Those that don’t comply will be subject to injunctions.
Where other cryptocurrency providers are adjusting to the rules, Filecoin is already playing by them – giving their project some much-needed extra investor confidence.
What can we learn?
Very often, launching an ICO is a stupid idea: the groundwork hasn’t been lain, the diligence hasn’t been given its due, the operation has been co-opted – or in some cases, taken over entirely – by malignant fraudsters. Sometimes, however, not launching one is equally stupid.
Filecoin is an example of the latter phenomenon. The company committed to its idea, used its extensive experience, played by the rules, marketed the hell out of its (very marketable) product – and was duly rewarded.