The blockchain ecosystem is characterized by the extensive use of crowdfunding to fund innovation. Initial coin offerings and other innovative forms of distributed funding allow funds to be raised quickly to fund blockchain innovation (as well as to pump bubbles).
This distinguishes blockchain technology innovations from innovations in other fields, which are more dependent on traditional funding sources (e.g., venture capital).
Through initial coin offerings, the development team sells tokens to fund the work of building the software solution. A portion of the tokens is typically distributed between the development team and the initial investors. After the 2017 bitcoin price collapse, initial coin offerings were scrutinized by regulators in the United States, and some of the initial coin offerings were deemed to be in violation of securities regulations.
Subsequently, other forms of decentralized finance began to use cryptocurrency pegs, such as bitcoin, to fund the development of new applications.
