The boom of the initial coin offerings defined the blockchain industry in 2017 and the first half of 2018 as capital flowed to finance many new projects and the associated services.
Ahead of Ethereum’s five year anniversary, we interviewed Kosala Hemachandra, the founder of MyEtherWallet. As he revealed, the surge in activity in 2017 turned the one-man operation — started 10 days after Ethereum’s launch — into a serious software company.
MyEtherWallet was at the time among the most popular and user-friendly wallets, and it had complete support for ERC-20 tokens — vital for engaging with ICOs. The most well-known alternative was the Mist wallet released by the Ethereum Foundation, which was a full node wallet that required a lengthy synchronization procedure to be used.
MyEtherWallet’s transition to a “trusted brand” began in tandem with ICOs, Hemachandra said. “It was definitely 2017. I can’t think of any specific point in time, but the ICO craze was the starting point for the change.”
Lessons from the ICO era
“I definitely saw that [drop]. I did not see it in the beginning but at the same time, I knew that government organizations will definitely get involved.”
Regulator interest into initial coin offerings was signaled with the so-called “DAO report” in July 2017, which analyzed a 2016 crowdfunding initiative in the form of the Ethereum DAO. The United States Securities and Exchange Commission stressed that the DAO tokens were a security offering, suggesting that similar attempts will be prosecuted:
“As soon as the SEC started to get involved, that’s when I knew that these ICOs might not survive, [or] they might not continue to survive.”
But according to him, that scrutiny was invaluable for later projects. “I think everything that happened back then was a good lesson for all of us because those entities got involved with their full power, and now we know what they can do,” he said.
With that knowledge, new projects can design their tokens in a way to “overcome those hurdles” as government entities will “leave them alone.”
“It was a good lesson for some of these DeFi projects, because if that didn’t happen, some of these different projects might be in trouble right now because the SEC might be going after them as well,” Hemachandra said.
As previously reported that legal considerations were likely a strong factor in designing Compound’s token distribution model, focusing on acquiring it through use rather than direct payment. Hemachandra noted that since Compound Labs no longer controls the smart contracts, the protocol has an additional layer of protection against scrutiny.
But he took issue with the fact that these maneuvers are necessary:
“It’s crazy how we are trying to create a decentralized system that is still limited by centralized authorities that are putting pressure on everything that we do.”