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Forbes on ICOs: The craziest bubble ever

On April 24, Martin Köppelmann, 31, Stefan George, 29, and Matt Liston, 25, placed their laptops on a long wooden dining table ringed by high-backed wooden chairs and three-armed candelabra at their Airbnb in Gibraltar. It was an old-fashioned setting for a 21st-century moment. The three were about to launch a Kickstarter-style crowdsale, based on a concept they'd been developing for two years: a user-driven prediction market based on a coming "Cambrian explosion of machine intelligence" called Gnosis.

Their goal: raise $12.5 million. But instead of dollars, they would accept money only in the form of a new cryptocurrency, Ether, that didn't exist two years ago. It was a new form of crowdfunding called an "initial coin offering," or ICO. Supporters would not receive a finished product down the road, as in a typical Kickstarter project. Instead, for every Ether (or fraction thereof) sent to Gnosis' wallet, the "smart contract" would automatically send back a different type of money, a GNO coin, that would give people special access to the platform plus act as equity in the network.

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Theoretically, as Gnosis became more popular, demand for GNO coins (also known as tokens) would rise, boosting the shares of existing GNO token holders. The founders had designed their crowdfunding as a Dutch auction, which starts with a price ceiling rather than a floor. Within 11 minutes, Gnosis had raised the $12.5 million, led mostly by programmatic pooled "bidding rings," and sold only 4.2% of its allotted 10 million tokens. The final price, $29.85, gave their project--which had little more underlying it than a 49-page white paper and a few thousand lines of open-source computer code--a valuation of $300 million. In two months, GNO coins were trading at $335 each, and Gnosis was suddenly worth $3 billion, more than the market cap o...

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