Even if you're skeptical , the ICO, or initial coin offering, has been one of the hottest trends in tech this year.
Startups that raised money through ICOs have accumulated a record $2.2 billion this year alone, according to Coinschedule.com.
Unlike a stock IPO, where companies sell shares, an ICO lets investors buy digital "coins" used on cryptocurrency platforms. Companies built on blockchain, a digital database for recording financial transactions, raise money by selling these tokens, which can be used to pay for goods and services on their platform or can be stashed away as an investment.
So what's causing the ICO craze this year?
Charles River Ventures' Rafael Corrales, an early investor in Blockchain, a bitcoin wallet maker with $70 million in funding, narrowed it down to three main drivers:
Corrales said the ICO space still has a lot of problems, like the lack of proper regulation. And he pointed out that the fact that startups are raising a lot of money at once, instead of in separate stages, like more traditional startups do, is concerning. Still, he expects the ICO craze to continue until some credible regulatory body like the SEC or IRS comes down hard on a select group of people that they will try to make an example of.
But in aggregate, he says the exuberance in the space is a good thing because it lays the groundwork for the industry to mature. And eventually, he hopes to see the next big tech company come out of this space, much like the 90's dot com bubble led to the creation of Google and Amazon, among others.
"It's just noisy right now because of a Cambrian explosion that's happening. But I do think there will be a handful of important companies and innovations that will come out of it," he said.