When people talk about cryptocurrencies, most of the time it's bitcoin. Occasionally it's Ethereum. But there are hundreds of other alt coins out there to sate your speculative desires, each with its own compound name and unique raison d'etre, ranging from the utilitarian to the grandiose to the purely trollish. There's ConCoin, a bitcoin for inmates. There's Theresa May Coin for, uh, fans of Theresa May? Naturally, there's a PonziCoin.
The crypto space has been crowded for a while, but with the newfound popularity of initial coin offerings – like IPOs but for tokens meant to be used on prospective blockchain services – a hot market has turned fucking scorching. ICOs have raised more than half a billion dollars this year, and the mood isn't likely to dampen, despite some recent stumbles. See, for instance, the FAQ page on CoinLaunch.co, a new platform devoted to helping any old schmuck raise millions of dollars by selling decentralized digital accounting tools:
DEFINITION of 'Initial Coin Offering (ICO)': An unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin.
When literally the first sentence in the FAQ highlights a lack of regulation in the space, you might want to tread carefully.
Thankfully, Pantera Capital is here to hold our hand as we plunge headlong into the roiling cauldron of greed and wonder that is the ICO space. Billing itself as the “first U.S. Bitcoin investment firm,” Pantera has invested in blockchain-related technologies since 2013. Now, according to filing with the SEC, it's launching a hedge fund designed specifically with new coins in mind: Pantera ICO Fund LP. They've raised $25,365,000 so far.
While it's hardly a surprise that someone would take the opportunity to jump into ICOs with both feet, it warrants mentioning that all this ICO stuff is, to put it lightly, untested. It's not clear yet whether regulators will see ICOs as securities offerings or something else. Also things get hacked a lot in the coin world.
And it's worth remembering that ICOs aren't just about creating fun vehicles for heedless speculation. Each ICO ostensibly exists to raise money for a service that would be paid for with the token offered. Civic, for instance, raised $33 million toward an ID-verification technology. Bancor netted a record-breaking $153 million promising to create an exchange that will do away with exchanges. A project called ZrCoin pulled in $3.7 million for the highly sought-after purpose of creating zirconium somewhere in the Ural mountains.
Of course, it doesn't really matter to Pantera ICO Fund whether any zirconium actually does get minted in the Urals. All that counts is investor returns. What's disappointing, however, is that PIF evidently decided against an ICO to raise funds itself. Only when we have a PanteraCoin in our digital wallets will we be convinced that the firm truly believes in this whole ICO thing.
h/t Dan Primack