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Initial coin offerings are all the rage. Lots of companies have raised nearly $1.5 billion through the novel fundraising mechanism this year. Celebrities from Floyd Mayweather to Paris Hilton have jumped about the hype train. But don’t feel bad if you’re still wondering: exactly what the hell is an ICO?

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

A token sale is like a crowdfunding campaign, except it uses the technology behind Bitcoin to confirm transactions. Oh, and tokens aren’t just stand-ins for stock-they could be put in place so that instead of a share of the company, holders get services, like cloud storage space, as an example. Below, we run across the increasingly popular practice of launching an ICO and its potential to upset business as we know it.

Let’s start with Vtcoin, typically the most popular token system. Bitcoin along with other digital currencies are based on blockchains-cryptographic ledgers that record every transaction carried out using Bitcoin tokens (see “Why Bitcoin May Be Much Over a Currency”). Individual computers worldwide, connected via 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 chances to add “blocks” of verified transactions on the chain. For their work, the miners get tokens-bitcoins-in turn.

Blockchains need miners to work, and tokens would be the economic incentive to mine. Some tokens are made on top of new versions of Bitcoin’s blockchain which were modified in some way-examples include Litecoin and ZCash. Ethereum, a common blockchain for companies launching ICOs, is actually a newer, separate technology from Bitcoin, whose token is called Ether. It’s even easy to build completely new tokens on the top of Ethereum’s blockchain.

But advocates of blockchain technology say the strength of tokens surpasses merely inventing new currencies from thin air. Bitcoin eliminates the necessity for a dependable central authority to mediate the exchange of value-a credit card company or possibly a central bank, say. Theoretically, that could be achieved for other items, too.

Take cloud storage, by way of example. Several companies are building blockchains to facilitate the peer-to-peer buying and selling of space for storage, one that may challenge conventional providers like Dropbox and Amazon. The tokens in this case will be the way of payment for storage. A blockchain verifies the transactions between buyers and sellers and serves as a record with their legitimacy. How exactly this works is determined by the project. In Filecoin, which broke records recently by raising more than $250 million with an ICO, miners would earn tokens by offering storage or retrieving stored data for users.

Among the first ICOs to create a big splash happened in May 2016 together with the Decentralized Autonomous Organization-aka, the DAO-which had been essentially a decentralized venture fund built on Ethereum. Investors could use the DAO’s tokens to cast votes regarding how to disburse funds, and any profits were supposed to return for the stakeholders. Unfortunately for everyone involved, a hacker exploited a vulnerability in Ethereum’s design to steal tens of vast amounts in digital currency (see “$80 Million Hack Shows the Dangers of Programmable Money”).

Some people think ICOs might lead to new, exotic ways of building a company. If your cloud storage outfit like Filecoin would suddenly skyrocket in popularity, as an example, it would enrich anyone that holds or mines the token, instead of a set group of the company’s executives and employees. This may be a “decentralized” enterprise, says Peter Van Valkenburgh, director of research at Coin Center, a nonprofit research and advocacy group dedicated to 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 in addition to their developers. And so they can use ICOs to offer tokens to folks interested in utilizing the new service if it launches, or in speculating about the future importance of the service. If value of the tokens goes up, everybody wins.

Because of the hype around Bitcoin as well as other cryptocurrencies, demand has been extremely high for some of the tokens showing up in the market lately. A tiny sampling from the projects that vtco1n raised millions via ICOs recently incorporates a Internet browser geared towards eliminating intermediaries in digital advertising, a decentralized prediction market, as well as a blockchain-based marketplace for insurers and insurance brokers.

Still, the future of the token marketplace is tremendously uncertain, because government regulators continue to be trying to puzzle out how to treat it. Complicating things is the fact some tokens will be more such as the basis of traditional buyer-seller relationships, like Filecoin, while some, such as the DAO tokens, seem similar to stocks. In July, the Usa Securities and Exchange Commission said that DAO tokens were indeed securities, and this any tokens that function like securities will likely be regulated as such. A week ago, the SEC warned investors to take into consideration ICO scams. This week, China went to date with regards to ban ICOs, and other governments could follow suit.

The scene does seem ripe for swindles and vaporware. A lot of the companies launching ICOs haven’t produced anything over a technical whitepaper describing an understanding that may not pan out.

But Van Valkenburgh argues that it’s okay in the event the ICO boom is a bubble. In spite of the silliness of 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.