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Technology |Analysis

Boom in Bitcoin and Ethereum brings surge in initial coin offerings

  1. Several countries have banned "ICOs"
  2. Paris Hilton and Floyd Mayweather join cryptocurrency scene
  3. 'Wolf of Wall Street' Jordan Belfort calls ICOs “the biggest scam ever”

Talk (32)



"what about organized crime?"
Andrew Laery

Andrew Laery

"In recent weeks, why has Ethereum (an..."
Linh Nguyen

Linh Nguyen

"Hi Chris. There may be far more inter..."

Chris Johnson

"I think Peter makes a good point. Add..."

Well-known investors and celebrities are rushing to buy into new virtual currencies, but critics and evangelists alike warn of a potential bubble. 

A single Bitcoin is now valued at $7,000, up exponentially from its under-a-dollar modest start less than a decade ago. That has would-be millionaires exploring their options, a phenomenon reflected in Google Trends, which shows that searches for “Bitcoin” alone have spiked in recent months.

The rise in the value of Bitcoin, and so-called cryptocurrencies in general, has led to the explosion of a relatively unregulated trading market. Similar to the more-familiar sales of stock in a company going public, called an initial public offering, or IPO, this new field is holding initial coin offerings, or ICOs.

Hundreds of startups are entering the crypto-space launching tokens to raise money for projects where the verification certainty of blockchain is central to their business.

Coin Market Cap, a cryptocurrencies ranking site, estimated there’s more than a thousand cryptocurrencies available. Together they are valued at more than $190 billion.

This ‘Wild West of financing‘ as leading law firm Simmons & Simmons described it, has already made a lot of people rich — as this piece from The Guardian reports —  but such investment in cryptocurrencies and ICOs is not universally endorsed. Even those involved say the current boom in the market can’t last.

The volume of hot money pouring into ICOs prompted the man whose story led to the movie The Wolf of Wall StreetJordan Belfort, to call them “the biggest scam ever.”

“People think money solves problems. It doesn’t,” Ameer Rosic, founder of educational platform Blockgeeks, told WikiTribune. “Human beings, intellectual capital, timing, having people work together in unison, builds businesses. Money sometimes is even seen as a disability.

“The technology [that ICOs run on] is not mature enough to support a trillion dollar ecosystem. It’s not mature enough to support millions of users using it every single second.”

The market attracts a lot of scammers because it’s lucrative and unregulated, but that doesn’t mean ICOs can’t or don’t work. Ethereum was crowdfunded and is arguably the “most successful and pure ICO that has delivered beyond its promises,” William Mougayar, author of The Business Blockchain, told WikiTribune.

However, most projects will fail, said Vitalik Buterin, Ethereums’ co-founder, who warned that the ICO market is a bubble and unsustainable. Buterin didn’t respond to request for comments but will be added when he does.

“There are two types of scams,” Mougayar told WikiTribune. “The ones that are real scams that are run by dishonest people, and ones that are run by incompetent teams, or teams that have positioned their projects with high or unrealistic expectations that will be difficult to meet.”

Typically, when a cryptocurrency startup wants to raise money, it does so by selling its own digital assets or “tokens” at a discount. Like stocks in the public market, the investment is based on speculation that these tokens will increase in value. But unlike equity investments, it’s highly risky because companies don’t necessarily offer investors a stake in their business.

But before getting deeper into these initial coin offerings, let’s look at cryptocurrencies in general.

Bitcoin in the wake of the financial crash

It’s estimated that 92 percent of all currency in the world is digital. But unlike traditional money, which is exchanged using trusted intermediaries such as banks, cryptocurrencies are exchanged peer-to-peer on the internet without a central structure, and they can only be exchanged online. Cryptocurrencies run on a technology called blockchain, which is designed to ensure authenticity of transactions.

Bitcoin was the first use of blockchain when it was created in 2009 in the wake of the global financial crisis by an elusive figure under the pseudonym of Satoshi Nakamoto.

The most general description for blockchain is that it’s a decentralized and shared ledger of records, or “blocks,” which are secured using cryptography. Every transaction is open and controlled by no one, and each block is maintained and updated in several places simultaneously. Blockchain, as described by The Economist, is “a machine for creating trust.”

“Blockchain is to Bitcoin what the internet is to email: a big electronic system, on top of which you can build applications. Currency is just one” – Sally Davies –

Nakamoto’s reason for creating Bitcoin according to his White paper posted on was that “the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments.” But because this trust-based model has inherent weaknesses, Nakamoto said, he engineered a system based on cryptographic proof.

Financial Times tech reporter Sally Davies offered an apt analogy.

“Blockchain is to Bitcoin what the internet is to email: a big electronic system, on top of which you can build applications. Currency is just one,” she said in this explanatory video.

The inception of initial coin offerings

A clear correlation exists between the rise in the value of cryptocurrencies such as Bitcoin and Ethereum and the surge in initial coin offerings, said Huy Nguyen Trieu, co-founder of the London-based fin-tech education startup, the Center for Finance, Technology and Entrepreneurship (CFTE).

But he said excitement is driving the market more than savvy investing: “You’re starting to see this market being much, much bigger where you have a lot of new people getting into it, so it’s a raw bubble in that sense.”

“People are having so many friends who know absolutely nothing about cryptocurrencies, nothing about investing in startups,” he told WikiTribune.

The market also surged after celebrities, including socialite Paris Hilton and boxer Floyd Mayweather, crashed onto the crypto-scene. Musician Ghostface Killah of Wu Tang Clan recently backed the venture Cream Capitol, as reported by CNBC, and is one of its co-founders.

Ethereum is the leading blockchain platform for ICOs, according to, with more than a 50 percent market share. As a result, it has been prone to phishing — says this analysis by the founder of a cyber-security firm — and Ponzi schemes, according to this report from The Atlantic.

Ethereum’s blockchain features ‘smart contracts,’ as this report shows, which is computer code that can automatically accomplish tasks when specific conditions are met. Ethereum also has its own tokens called “Ethers,” but its pre-eminence is its open software platform which enables developers to build applications on top of it.

Startups have taken to the Ethereum platform in particular for crowdfunding their ICOs. This is because the platform can automatically calculate the amounts of money raised, verify and confirm transactions, and distribute new tokens.

This year, initial coin offerings have raised more than $2 billion, according to Forbes. New companies can generate millions in a matter of minutes. Gnosis, a prediction market, raised $12 million in just 10 minutes in April, industry zine reported.  Tezos, a self-proclaimed “digital commonwealth” blockchain, broke the record when it raised $232 million in the largest ICO ever.

“For me, there’s no project which is worth $100 million dollars on a sheet of paper,” CFTE’s Nguyen Trieu said. “If you’re a normal VC [venture capital] investor, you will never, ever invest on a first round for $100 million.”

Backlash and Backers

The central bank of Russia last month called for a ban on all cryptocurrencies exchange within its borders. President Vladimir Putin said that “the usage of cryptocurrencies carries serious risks” and that buyers could be involved in unlawful activities.

Russia’s decision came after China and South Korea imposed similar bans, though China’s one is temporary, according to Chinese officials. Lack of regulation is the main reason for these bans. In China’s case, the nation needs more time to develop and implement appropriate regulations, reported.

In September, the U.S. Securities and Exchange Commission charged businessman Maksim Zaslavskiy and his two companies “with defrauding investors in a pair of so-called initial coin offerings.” Authorities said that the coins being sold “don’t really exist” and that the companies had been selling unregistered securities.

ICOs do have upsides. Business Blockchain author, Mougayar, said one benefit is that “anyone can participate in the potential upside if the network, application, platform or protocol are successfully adopted by users and developers”.

“That upside is both financial from a wealth appreciation point of view, but it also has a beneficial component from a usage vantage point because of the utility created by these new business models.”

“There isn’t enough intellectual capital, or smart people who do their due diligence and take their time to focus more on the technology – Blockgeeks’ Amir Rosic

But Mougayar warned that many of these ICOs won’t succeed, and “their value could go down to zero.”

Rosic of Blockgeeks told WikiTribune that though he’s bullish about ICOs, right now they’re a “race to the bottom,” meaning aggressive competition drives down their value. His rule of thumb for investing in ICOs is to ask whether a token is genuinely needed by the issuer to raise capital. He said 99 percent aren’t — why not just use the Ethereum token? — and if there’s a working product to show it might be worth investing.

“The whole ICOs space right now is going through an evolution, but the money [coming in] is outpacing the reality of the technology, and there’re a lot of new players coming into the space who are obsessed with the gains,” he said. “All of this is creating a system in which there isn’t enough intellectual capital, or smart people who do their due diligence and take their time to focus more on the technology.”


Sources & References

Simmons & Simmons – Elexica service

Bitcoin illustration – graphic by: Flickr/ Tiger Pixel.Used under CC BY-NC-ND 2.0.

This story was created with contribution from the community via the story’s TALK page. Collaborators include Toni KunicPaul Rauschelbach, Derek Clark, Mike SynnottEden SGJason Crawford, John Heaver, Peter Ekman, Geoff Goodfellow, Jonathan Cardy.

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United Kingdom
Linh is a staff journalist at WikiTribune with a background in the humanities. She covers the Middle East, Asia, conflict and technology. Though based in London, she has freelanced across Asia, the UK and U.S.

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  1. Other

    In recent weeks, why has Ethereum (and for that matter Ripple, Litecoin, etc) not followed the same pricing pattern at Bitcoin? While I understand they are different Crypto’s (and Ethereum has had a number of perceived ‘setbacks’ in China/Russia/etc), my reading thus far suggests Ethereum is a more adaptive (but not necessarily better) technology than Bitcoin so theoretically it should have better potential/upside. Maybe the current market is being flooded with people not wanting to ‘miss the boat ‘and jumping only into Bitcoin as it is the only Crypto they are aware of. Or are other Crypto’s, like Ethereum, not really considered as a real store of value?

  2. This is mostly about paid promotions by celebrities and their legal requirements to disclose info about them.

  3. SEC “Statement on Potentially Unlawful Promotion of Initial Coin Offerings and Other Investments by Celebrities and Others”:

  4. Hi Jonathan. Not all cryptocurrencies are about making banks irrelevant, or dodging tax and regulation. People use them in different ways for different things. However, they do share the same trait of cutting out the middle-man which government often has. You’re right, there will still be a market for banks, but as this technology is still very new, the best answer I can give is only time will tell.

  5. Yes Geoff. The innovation of Bitcoin is the blockchain technology on which it runs, which, as you noted, removes the need for central third-party institutions. Some banks may be nervous, but others are finding ways to utilise it as you can read here: (paywall)

  6. Is it really about making banks irrelevant, or is it about dodging tax and regulation? I thought that digital currency was about sidestepping all the controls that governments have introduced to cut down on money laundering and the finance of terrorism. That said the proliferation of new crypto currencies is clearly a speculative bubble of ponzi schemes. There may well be a market for a one or more secure digital currencies. But there will still be a market for banks, afterall the end target of much money laundering is laundered money sitting in a legitimate security or account.

  7. Bitcoin is making banks nervous. Here’s why Technology blogs and financial news networks are buzzing about blockchain, a cryptographic, distributed trust technology. The key innovation is how it reduces the need for central third-party institutions to serve as central authorities of trust — banks, courts, large corporations, stock markets and even governments, for example.

  8. You need to be really, really careful on this story. There have been so many warnings about ICOs being scams that you will really make WikiTrib look terrible if you say something like “Many but not all ICOs are scams” if it indeed turns out that they all are scams. In order to show that they are not all scams all you need to do is find ONE that clearly is not a scam and look at it in depth just to be sure. The Financial Times Alphaville has had a whole series making fun of the industry as an obvious scam. Check out the details there, and take heed. The FT and the Wall Street Journal are the 2 best financial journalism outlets in the world – if you are going to contradict them have your facts nailed down and all your ducks in a row. The latest I’ve seen – from apparent ICO friendly news outlets is Stephanie Avakian of the US SEC saying some pretty nasty stuff “SEC Cyber Unit May Take Point Monitoring ICOs” at and similar at Try to contact her, or at least get an official copy of the speech.

    1. Rewrite

      I think Peter makes a good point. Additionally, I’m concerned the the highest profile story on this fledgling news site is about something that’s not only directly questionable, but the very buzz around this topic has been criticized. ICOs live or die on hype and this article, at first glance, appears to be deliberately adding to the hype.

      This article has the potential to make Wikitribune look like a sock puppet rather than a new, legitimate source of quality news.

      There are far more interesting stories about blockchain technology than ICOs.

      1. Rewrite

        Hi Chris. There may be far more interesting stories about ICOs than blockchain, but this one was written because the community asked for a story on it.

        I see your point that it appears to be following the hype, but in this case, the community said the hype needed clarification.

  9. Good article today from Fred Wilson, a VC who is overall optimistic about cryptocurrencies but says that most ICOs today are scams: This is a balanced & informed take, I think, from someone who knows a lot about the industry and is optimistic about the technology—unlike politicians or Wall Street incumbents.

  10. I’ve seen the CEO from doing quite a few interviews on places like Bloomberg. Seems to be knowledgable and willing to share.

  11. “ICOS” or “ICOs”? You definitely need to define what an ICO is. As I understand it, an ICO is a substitute for an initial public offering (IPO) of securities – a new company or a previously private company sells “something” in exchange for crypto-currency. The “something” might be something like a coupon to buy another something from the company later (in which case the “something” wouldn’t be a security and the ICO wouldn’t be subject to regulation). Or the “something” might be a promise to pay back funds similar to a bond or shares, in which case it would be a security and subject to regulation. You should talk to the US SEC or the FCA about this – what would be regulated and what wouldn’t be? My guess is that they don’t quite know enough about it yet to have a definitive statement, but they should be willing to give general statements. I suppose that a 3rd possibility is that the “something” might be another crypto-currency. This would definitely raise the possibility of a pyramid scheme. The premise would seem to be that an infinite amount of crypto-currencies could be issued, and that it all would have some value – thus we could all get rich! As far as “All ICOs are scams” – that has yet to be shown one way or another. You should try to get hold of one of the more respectable issuers and talk with them about what made there ICO successful and what makes theirs different from all the others Something related – but it’s all pretty much rumor so far. The Israeli binary option is shutting down and this “king of scams” is pretty much dead in the water after so much bad publicity over the last year or so. The rumor is that the binary option firms are rebranding or moving to new centers (e.g. Ukraine, Romania) or moving into ICOs. The ultimate question that ICO issuers have to answer investors is “Why should we trust you? What is the promise that you are selling and why should we believe it?” Also “why are the protections offered by regulated IPOs not needed in this market?” Any ICO issuer that can’t answer these questions, and have the answers backed up with some audited financial statements, is a scam.

  12. This might be outside the scope of your article, but I’ll go ahead anyway. Insofar as CryptoCurrencies are deployment instances of the BlockChain structure, I’ve recently started looking into how it might apply to the next phase of development of The Internet. Widespread adoption could change the “client/server” paradigm we are used to, to a more peer to peer arrangement. That might equate to more and more gig economy work like uber and airbnb replacing ‘proper’ jobs on the workplace. Regulation looks like it is also a thorny problem there. BlockChain deployment is not limited to CryptoCurrency. This article from Harvard Business Review gives some examples of other possible spheres of activity. Meanwhile back closer to alternatives to centrally (governmental)controlled FIAT currencies you might find this BBC documentary on the access to money facilities in Kenya in the absence of a banking infrastructure interesting (it’s on iPlayer for another 14 days)

  13. Think need to answer question — why are we talking about this now? Why do they matteR?

  14. Thanks Mike, I added it onto the page as per your suggestion.

  15. Hi Cassie, it matters now because lately a lot of high-profiled people have been calling it a scam. Most recently, ‘Wolf of Wall Street’ Jordan Belfort described it as the “biggest scam ever.”

  16. Hi Paul, the October 10th Russian comments is defo worth considering. And those are great questions, which I reckon can be narrowed down further to help drive the subject of the piece. Can you elaborate more on how they can be linked to ICOs and scams?

    1. Rewrite

      Hi Linh, wondering why there are no threads on this Talk page

  17. Let me know if I can help. I’m not an expert on cryptocurrency but I have a computer science background and I know the basics. I also might be able to point to people or resources.

  18. Thanks for the extra info Toni. I’m curious to know what it means to you that there’s no technological barrier?

  19. Yes, that’s a very important distinction to make. 🙂

  20. Hi Derek. I agree that not all are ICOs are scams, and the piece aims to highlight that. Regarding interviews, which CEO do you suggest I get in touch with?

  21. There is virtually no technological barrier to creating one’s own cryptocurrency, for example Bitcoin and Etherium are open source: – One can use this source to start their own “fork” of an existing cryptocurrency in 5 minutes. Another bit of info: China banned ICOs entirely, Canada is working on regulation.

  22. I suggest that there be an elaboration of the October 10th Russian comments on crypto-currencies, and their contradictions. How can crypto-currencies be regulated and still function as anonymous and de-centralized (similar to encrypted communication regulation)? Can a state run crypto-currency be valuable to consumers? Have all crypto-currencies become primarily investment vehicles, or is there still significant commerce using some of them? What does that mean if there isn’t really anything but an exchange market for “coins” (where the “scam” allegations come from)?

  23. I’d suggest that many of them are scams, but that there are also many that aren’t. I think it’s unreasonable to simply lump them all together when there are 1000’s of projects, which is what most of the naysayers do. Perhaps try to get an interview with the CEO of one of the bigger projects that actually has a working product.

  24. It isn’t — ICO stands for Initial Coin Offering, which is when the organization creating a new cryptocurrency sells their coin initially, before it hits the market.

  25. Consider defining “ICO” in the first paragraph. I clicked into this not knowing that an ICO was a cryptocurrency.

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