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An Explanation of Initial Coin Offerings

Initial coin offerings have come out of nowhere in 2017 to become the talk of Silicon Valley and Wall Street. Programmers raised over $2 billion in the first nine months of the year by selling their own virtual currencies to investors. That is nearly 1,000 percent more than the amount raised using coin offerings in 2016.

What is an initial coin offering?

Coin offerings are a way for start-ups or online projects to raise money without selling stock or going to venture capitalists — essentially a new form of crowdfunding.

The programmers raise money by creating and selling their own virtual currency, generally with rules similar to well-known virtual currencies like Bitcoin. The new tokens are usually designed so that they can be used only on a computing service the programmers are building.

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