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Initial coin offerings are very popular. Many companies have raised nearly $1.5 billion via the novel fundraising mechanism this year. Celebrities from Floyd Mayweather to Paris Hilton have jumped on the hype train. But don’t feel bad if you’re still wondering: exactly what the hell is undoubtedly an ICO?

The acronym probably sounds familiar, and that’s on purpose-an ICO does indeed work similarly with an initial public offering. As an alternative to offering shares in a company, though, a strong is instead offering digital assets called “tokens.”

A token sale is sort of a crowdfunding campaign, except it uses the technology behind Bitcoin to make sure that transactions. Oh, and tokens aren’t just stand-ins for stock-they are often create in order that rather than a share of a company, holders get services, like cloud space for storing, for example. Below, we run down the ever more popular practice of launching an ICO and its possibility to upset business as we know it.

Let’s start out with 以特币, the most popular token system. Bitcoin along with other digital currencies derive from blockchains-cryptographic ledgers that record every transaction performed using Bitcoin tokens (see “Why Bitcoin Might Be Much Greater than a Currency”). Individual computers worldwide, connected over the internet, verify each transaction using open-source software. Some of the computers, called miners, compete to eliminate a computationally intensive cryptographic puzzle and earn the opportunity to add “blocks” of verified transactions on the chain. For his or her work, the miners get tokens-bitcoins-in turn.

Blockchains need miners to run, and tokens will be the economic incentive to mine. Some tokens are made in addition to new versions of Bitcoin’s blockchain that were modified in some way-these include Litecoin and ZCash. Ethereum, a popular blockchain for companies launching ICOs, is a newer, separate technology from Bitcoin, whose token is known as Ether. It’s even possible to build brand new tokens in addition to Ethereum’s blockchain.

But advocates of blockchain technology say the effectiveness of tokens surpasses merely inventing new currencies from thin air. Bitcoin eliminates the necessity for a trusted central authority to mediate the exchange of worth-a charge card company or possibly a central bank, say. In theory, which can be achieved for other activities, too.

Take cloud storage, as an example. Several companies are building blockchains to facilitate the peer-to-peer buying and selling of space for storing, one that could challenge conventional providers like Dropbox and Amazon. The tokens in cases like this are the means of payment for storage. A blockchain verifies the transactions between sellers and buyers and functions as a record of the legitimacy. Exactly how this works is dependent upon the project. In Filecoin, which broke records last month by raising more than $250 million by using an ICO, miners would earn tokens through providing storage or retrieving stored data for users.

One of the primary ICOs to generate a big splash happened in May 2016 with all the Decentralized Autonomous Organization-aka, the DAO-that was essentially a decentralized venture fund built on Ethereum. Investors could use the DAO’s tokens to cast votes regarding how to disburse funds, and then any profits were supposed to come back to the stakeholders. Unfortunately for everybody involved, a hacker exploited a vulnerability in Ethereum’s design to steal tens of millions of dollars in digital currency (see “$80 Million Hack Shows the Dangers of Programmable Money”).

Many people think ICOs can lead to new, exotic methods of developing a company. If a cloud storage outfit like Filecoin were to suddenly skyrocket in popularity, for example, it will enrich anybody who holds or mines the token, instead of a set selection of the company’s executives and employees. This could be a “decentralized” enterprise, says Peter Van Valkenburgh, director of research at Coin Center, a nonprofit research and advocacy group focused on policy issues surrounding blockchain technology.

Someone has to build the blockchain, issue the tokens, and look after some software, though. In order to kickstart a brand new operation, entrepreneurs can pre-allocate tokens by themselves and their developers. And so they may use ICOs to offer tokens to people thinking about using the new service whenever it launches, or even in speculating as to the future value of the service. If the price of the tokens goes up, everybody wins.

With all the current hype around Bitcoin and other cryptocurrencies, demand has been very high for some of the tokens striking the market lately. A tiny sampling of the projects that vtco1n raised millions via ICOs recently contains a Internet browser geared towards eliminating intermediaries in digital advertising, a decentralized prediction market, along with a blockchain-based marketplace for insurers and insurance brokers.

Still, the way forward for the token marketplace is tremendously uncertain, because government regulators continue to be considering how to address it. Complicating things is the fact that some tokens are more like the basis of traditional buyer-seller relationships, like Filecoin, while some, such as the DAO tokens, seem similar to stocks. In July, the U.S. Securities and Exchange Commission said that DAO tokens were indeed securities, and that any tokens that function like securities is going to be regulated as such. A couple weeks ago, the SEC warned investors to take into consideration ICO scams. In the week, China went thus far concerning ban ICOs, as well as other governments could follow suit.

The scene does seem ripe for swindles and vaporware. Many of the companies launching ICOs haven’t produced anything more than a technical whitepaper describing an idea that may not pan out.

But Van Valkenburgh argues that it’s okay in case the ICO boom is actually a bubble. Inspite of the silliness from the dot-com era, he says, out of it came “funding and excitement and human capital development that ultimately triggered the major wave of Internet innovation” we enjoy today.