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Crypto Tokens Are Rewriting Startup Finance Rules

While you were getting on with your life, the world of crypto-tokens and currencies has been evolving at an astonishing clip. Bitcoin broke the ice and introduced the world to the concept, but new mutations are happening fast, many built on the Ethereum platform. Consider:

  • Startups and new-technology ventures are using “initial coin offerings” to raise capital, auctioning off cryptographically secured tokens (Joon Ian Wong in Quartz). Proponents see this mechanism, which has already been used to raise $150 million this year, as a method for bypassing traditional venture funding and routing around the “take investment, scale up, cash out” mode of technology finance that dominates today. If a new venture succeeds, its token will appreciate in value, giving early adopters a nice payoff. Of course, there’s huge risk for investors, too — and the more value these new currencies have, the harder people will work to break their still immature underlying technologies. Also looming in the wings: regulators.
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