Echo is launching a new feature called Sonar. Can it create a market for "Compliant ICOs"?

Echo, founded by Jordan Fish aka Cobie, today announced the launch of a new product called Sonar. Unlike the previous "close-circle" community round products, this tool will support anyone to conduct a public token sale on the platform. With more and more VCs supporting retail investors for early-stage investments, it also demonstrates a shift in the current investment market trends. Will the emergence of Sonar lead this model to a broader scope and replicate the hype of the 2015 "ICO" craze?

What is Echo

Echo was founded by crypto KOL Jordan Fish, better known as Cobie @echodotxyz, in March 2024. Cobie was previously the Growth lead at Lido and hosted the popular Web3 podcast UpOnly. Echo's core revolves around the "lead investment recommendation mechanism," where users can act as lead investors, create investment communities, share projects with members, and take a cut from it.

Since its launch, over 30+ crypto projects have raised funds through Echo, including well-known projects like Ethena, Morph, Usual, Hyperlane, Dawn, Monad, Initia, MegaETH, among others. Within one year, over $100 million has been raised through Echo, with MegaETH raising $10 million in two separate rounds through the Echo platform in December 2024. The first round raised $4.2 million in 56 seconds, and the second round raised $5.8 million in 75 seconds, marking the largest fundraising activity currently conducted by Echo.

Initially, Echo's architecture resembled an "elite club" of crypto investors, tending to select high-potential projects recognized by a small circle. The CEO of The Block, Larry Cermak, and Aave founder Marc Zeller have already created their Echo communities. To join, users need to answer questions, undergo relatively strict KYC verification, and meet certain conditions to access specific investment opportunities. Currently, 67 community leaders have created communities on Echo.

Not the Enemy of VCs, but the Distribution Platform for VCs

In January of this year, Echo stated that some VC firms had attempted to prevent founders from offering better terms to the Echo community or outright block community sales unless it was done in the form of a later-stage high valuation issuance. Alexander Pack, co-founder of Hack VC, commented on this, saying, "While technology investing is generally a positive-sum game, capital allocation is a zero-sum game," implying that by allowing projects to be funded by the community, VC profits would be squeezed.

Dragonfly's partner Rob Hadick also shared his views on this in the media, suggesting that such platforms actually complement venture capital funding by helping projects build a stronger community, maintain a cooperative relationship with investors, and stating, "However, venture capital firms that cannot provide real value may feel threatened by the emergence of these platforms. For those venture capital firms that do feel the pressure, they either adapt or close."

More and more "value-creating" VCs are also joining this camp, with Paradigm, Coinbase Ventures, Hack VC, 1kx, and dao5 all creating groups on the Echo platform. In addition, the recent emergence of the thriving ecosystem known as "Agency" has also posed a significant threat to these VCs. As Rob mentioned, VCs who have been unable to find their position at this stage are beginning to gradually fade from the historical stage.

As the current market, where the "attention economy" is continuously consumed, moves towards the next stage, will it be able to embrace a phase of "value resurgence"?

A Flashback to 2015, Could Sonar Bring Back the "ICO Craze"?

In response to this, another hot ICO platform of the moment, Legion, co-founder Matt O'Connor, stated that "the relatively relaxed regulatory environment in the United States at the moment may promote the revival of public token sales," and mentioned that "once the ICO regains momentum, they may shift their focus away from the memecoin craze." In the current market environment, projects that are truly focused on product development are decreasing, while a significant amount of wealth is accumulating behind the scenes.

However, at the time, Echo was not yet able to address the issues of a more extensive market, and even the project team themselves stated, "We do not like this structure." Therefore, including Cobie, the founding team began planning a more traditional "ICO" platform early on. In February, founder Cobie revealed plans to develop an ICO platform, stating, "There is currently no good way to conduct initial sales. Your best option is probably CoinList, but it is heavily restricted for several reasons." Three months later, this product was launched.

Sonar is a tool that allows founders to host token sales on their own terms. Sales can be conducted in the desired format (auction, options swap, point system, variable valuation and allocation scale, etc.), and the chain of choice can be Hyperliquid, Base, Solana, or Cardano, among others. It provides various configurable compliance tools and integrates with Echo's electronic identity passport (existing Echo users can register and use Sonar with one click). As a result, the issuing team can also choose the regions where they want to sell (e.g., prohibiting UK residents from purchasing, or setting longer lock-up periods for users in a certain region).

Sonar aims to combine the community-driven sales of the ICO era with the current need for policy compliance, seeking to address the regulatory and privacy issues faced by ICOs. It introduces a more flexible "sales model" to replace the previously prevalent "LaunchPad" format. The project encourages teams to build their own communities and communicate directly with investors, rather than relying on Echo's platform community. This approach allows investors to conduct deeper research on a project, rather than having a project pushed to other disinterested and uninformed users. However, this model also faces the risk of information asymmetry.

Comparison of IPO, ICO, and Sonar, Chart: BlockBeats

In the final paragraph of the Sonar release document, Echo officially stated that their goal is to "get as close as possible to the market dynamics of the ICO era while providing compliance tools for founders who do not want to go to jail."

First Project Launched — Plasma

Alongside Echo's release of Sonar, Plasma announced that they will use Sonar for the partial sale of their official token $XPL. Plasma is a new blockchain designed for stablecoins, running parallel to the Bitcoin network and fully compatible with the EVM, allowing developers to build Ethereum-like applications on Plasma.

Plasma will offer 10% of its XPL token total supply in Sonar's sale, aiming to raise $50 million. This 10% corresponds to 1 billion XPL tokens out of a total of 10 billion XPL tokens, priced at $0.05 per XPL. According to the team, the fully diluted valuation of the XPL token in this offering is $500 million, consistent with the valuation from Founders Fund's investment in Plasma last week, which included equity and warrants.

Prior to this, Plasma raised $24 million in seed and Series A funding rounds, with investors including Peter Thiel, Cobie, Tether CEO Paolo Ardoino, Bitfinex, USDT0, and Bybit.

To participate in the XPL sale on Sonar, users must deposit stablecoins (USDT, USDC, and USDS (formerly known as DAI)) into the Plasma vault on the Ethereum blockchain. The allocation will be determined based on each participant's time-weighted share of the total vault deposits. After the deposit period ends, holdings will be locked until the launch of the Plasma mainnet Beta, at which point XPL tokens will be distributed.

The XPL token presale will open on June 9, with the actual sale starting a few weeks later. Global users, excluding residents of the UK and individuals from sanctioned jurisdictions, are eligible to participate, with US participants facing a 12-month lockup period and most other participants facing a 40-day lockup period.

With the gradual passage of stablecoin regulations, increasing mainstream capital recognition of crypto firms led by Coinbase, and the SEC's "friendly" stance, among other market trends, the concept of "compliant" ICOs may gradually return to the public eye. Platforms like Sonar may bring a unique vitality to the overly saturated "LaunchPad" landscape.