![]() A group of Bay Area programmers this year used an I.C.O. That’s an I.C.O.)ĭespite the obvious risks of these ventures, investor appetite has been ravenous. Oh, and instead of a friend, imagine it’s a stranger on the internet who might be using a fake name, who might not actually know how to build a casino, and whom you probably can’t sue for fraud if he steals your money and uses it to buy a Porsche instead. Now imagine that the value of the chips isn’t fixed, and will instead fluctuate depending on the popularity of the casino, the number of other gamblers and the regulatory environment for casinos. ![]() In exchange, you get chips that can be used at the casino’s tables once it’s finished. (If you’re having trouble picturing it: Imagine that a friend is building a casino and asks you to invest. These tokens grant investors access to a product or service that will be built with the money raised in the I.C.O., such as cloud data storage or access to a new social network. Many cryptocurrency start-ups have raised money through an initial coin offering, or I.C.O., a type of fund-raising campaign in which investors buy into a new venture using Bitcoin or another cryptocurrency and receive virtual “tokens” instead of stock or voting rights in the company. In addition, it has given rise to an entire category of start-ups that take advantage of cryptocurrency’s public ledger system, known as the blockchain. The success of these currencies has minted a new class of “crypto-millionaires” and spawned hundreds of other digital currencies, called altcoins. Even with the recent declines, the price of Bitcoin has more than tripled this year another cryptocurrency, Ethereum, has gained more than 2,300 percent. Its market value by midday Friday was about $100 million.īut there remains no bigger mania among tech investors than cryptocurrency, which some see as an eventual replacement for traditional, government-issued money. The value of Dogecoin fell more than 50 percent last week. This week, after Chinese authorities announced a crackdown on virtual currencies, the value of Bitcoin briefly tumbled 30 percent before partially recovering. “I’m worried that this time, it’s on a much grander scale.”Īlready, there are signs of trouble on the horizon. “What’s happening to crypto now is what happened to Dogecoin,” Mr. Palmer, 30, is one of the loudest voices warning that a similar fate might soon befall the entire cryptocurrency industry.
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