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ICO, or Initial Coin Offering, is currently the most popular way to get your blockchain startup off the ground, period.

According to a quarterly report by CoinDesk, blockchain-based startups were funded with a total of $797 million in the second quarter of 2017 alone. That's more than triple the amount that similar startups raised from venture capital.

SEE ALSO:China bans ICOs for being full of fraud and pyramid schemes

The ICO is somewhat similar to an IPO, only instead of stock, the company sells cryptocurrency tokens, often based on the Ethereum platform. These tokens aren't the same as company shares, but they do typically carry benefits to owners, and they can easily be traded for other cryptocurrencies.

CoinDesk lists Bancor, Status, TenX, and MobileGo as the largest ICOs, worth $153 million, $95 million, $83.1 million, and $53.1 million, respectively. On the VC side, the biggest deals listed in the report are R3 ($107 million), Canaan ($43.6 million), Blockchain ($40 million) and Axoni ($20 million).

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It's easy to see why blockchain-based startups are crazy about ICOs, instead of going the traditional route and raising VC money. ICOs are relatively easy to do, aren't well regulated, and most of them have been very successful, especially in the last couple of months. Most importantly, once you raise the money, you have a lot less to answer for to token holders as opposed to shareholders (though this depends on terms and conditions and varies from ICO to ICO).

But ICOs are in trouble precisely because of these traits. Recently, China banned ICOs as well as trading with tokens which originated in an ICOs. South Korea followed suit with a warning that fraudulent ICOs will note be tolerated, and Hong Kong and Russia's regulators warned that lack of regulations in relation to ICOs has opened the doors for scammers.

And while some ICOs, especially those that originate in China, have been postponed after these warnings, there are still dozens of ICOs lined up for the month of September alone.

And the next quarter might be even bigger for ICOs. Tezos, the largest ICO ever, was completed in July, netting $232 million. By CoinDesk's count, $650.19 million was raised in ICOs in the first half of Q3 2017. All in all, startups have raised $1.19 billion through ICOs since the craze started in early 2014.

A July report from CB Insights said more than $750 million was raised via ICOs in Q2 2017, with blockchain businesses raising only $232 million in that same period.

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TopicsBitcoinCryptocurrency

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