ERC-20 and the 2017 ICO boom

Wonder

1. Why does a single standard function set allow any wallet to support thousands of different currencies?
2. What mechanism allows a project to raise millions without shipping software, relying only on a document?
3. How did US regulators respond to a wave of unregistered token sales?

Explore

1. In November 2015, Fabian Vogelsteller and Vitalik Buterin proposed EIP-20, later known as ERC-20. This standard defined a small set of functions, including transfer, approve, balanceOf and totalSupply. By enforcing this interface, any smart contract implementing it became compatible with every existing wallet and exchange. The complexity of building a token moved from creating a new blockchain to deploying a simple Solidity contract on Ethereum.
2. This interoperability reduced the cost of launching an asset to near zero. Projects no longer needed to justify a new chain; they could issue a token for governance, utility, or speculation within hours. In 2017, this led to the Initial Coin Offering (ICO) boom. Thousands of projects raised billions of dollars, often before writing significant code. The market treated these tokens as investment vehicles rather than functional software.
3. Specific examples illustrate the scale. Tezos raised approximately $232 million in its 2017 sale. Filecoin secured about $257 million for its storage network project. EOS conducted a year-long ICO that ended in 2018, raising roughly $4 billion. These figures dwarfed traditional venture capital rounds of the era. Investors bought into white papers and roadmaps, assuming future utility would validate the initial price.
4. Regulatory scrutiny followed the capital flows. In July 2017, the US Securities and Exchange Commission (SEC) published a report on The DAO incident, concluding that digital assets could be securities under existing law if they met specific tests. This signaled that token sales were subject to federal oversight. Enforcement followed: after fraud cases in late 2017, the SEC’s December 2017 settlement with Munchee, which had halted its sale and refunded buyers, was the first action over an unregistered token sale with no fraud alleged.
5. The market corrected sharply in 2018. Many ICO projects failed to deliver their promised features or disappeared entirely after raising funds. Some were outright frauds, using the anonymity of crypto addresses to siphon investor capital. The ease of creation via ERC-20 meant that the barrier to entry for both legitimate developers and scammers was equally low. Investors who bought based on hype faced total loss when projects stalled.
6. Despite the failures, the infrastructure built during this period persisted. Major protocols like Uniswap and MakerDAO used ERC-20 tokens for their governance and stablecoins. The standard survived because it solved a real technical problem: fungibility within a complex state machine. Open a block explorer and inspect any major token contract to see the standard functions in action, confirming that the interface is the same one finalized in 2017.

Key facts

Exercise nine, six, three, one

Fact check

Dates, figures and claims checked against the published sources listed below.

• F. Vogelsteller & V. Buterin, EIP-20: Token Standard (November 2015)
• US SEC, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO (July 2017)
• US Securities and Exchange Commission, In re Munchee Inc. (December 2017)