A man shows Sri Lankan coins.REUTERS/Dinuka LiyanawatteLONDON – Startups around the world are raising hundreds of millions of dollars by issuing new digital coins, a trend that has made people both excited and concerned.
Over half a billion dollars has been raised through so-called "Initial Coin Offerings" (ICOs) since the start of the year, according to Richard Kastelein, a partner at the Cryptoassets Design Group, a company that helps launch ICOs.
It's an incredible amount considering that ICOs were unheard of just five years ago.
The speed at which companies are raising money is turning heads too. Gnosis, a prediction market for digital currency Ethereum, raised $12 million in just 10 minutes in April. Brave, a new web browser startup set up by the founder of Mozilla, made that look pedestrian, raising $35 million in less than 30 seconds selling "Basic Attention Tokens" last month.
"The space itself started heating up in the back end of last year," says Jan Isakovic, the CEO of new ICO platform Cofound.it. "It really caught fire since April of this year. We believe this is only going wider and wider."'We’re selling tickets to a movie but still fine-tuning the last third'
To raise money through an ICO, a company issues a new digital currency that can either be spent within its ecosystem, a bit like Disneyland dollars, or used to power part of the business, like the fuel you put in your car.
"The Cofound.it token will be used on the platform by startups applying to join the platform," says Isakovic. His business raised $14.8 million through an ICO last month and is building a platform that to connect ICO-funded companies with experts who can help grow the business.
"They will use token to pay expert evaluations on the platform. If you want to work with the project you have to put a certain amount of Cofound.it tokens in escrow. It’s like an internal currency."With token crowdfu...