The meaning in the madness of initial coin offerings
- Wed, 15 Nov 2017 14:33
MARKETS and manias go together. The latest frenzy is for all things crypto. The price of the best-known digital currency, bitcoin, has risen by nearly 700% this year and is now about $ 7,500; one enterprising firm recently quadrupled its share price simply by adding the word “blockchain” to its name.
But nowhere do alarm bells ring more loudly than in the realm of “initial coin offerings” (ICOs), a form of crowdfunding in which firms issue digital “coins” or “tokens” in return for a payment (typically in ether, another crypto-currency). ICOs have raked in more than $ 3.2bn this year, rivalling the money flowing to internet startups from early-stage venture capital. Although most of these tokens are supposed to be used in exchange for the companies’ products, as in a corporate loyalty scheme in the offline world, investors scent something different: the chance to be in at the birth of another bitcoin.