the new cryptocurrency bubble—and why it might not be all bad
You're going to hear a lot about initial coin offerings (ICOs) in the coming months. As investors have poured more and more money into newly created virtual currencies, they have created a gold-rush mentality. In recent months, some ICOs have raised tens of millions of dollars, and in early October the cryptocurrency market as a whole was worth about $140 billion.
Some ICOs have been for serious projects trying to solve hard technical problems. Others seemed like little more than cynical attempts to cash in on the speculative boom. Celebrities like Paris Hilton, Floyd Mayweather, and Ghostface Killah have endorsed ICOs The launch video for the cryptocurrency Hilton endorsed, called LydianCoin, consisted entirely of cliches: "Purpose isn't defined by what you want to achieve but what you want to live for to achieve happiness." (Hilton has since deleted her tweet endorsing LydianCoin.)
But throughout 2016 and 2017, ICOs of all shapes and sizes have repeatedly set new fundraising records as existing cryptocurrencies like Bitcoin and ether simultaneously soared in value. Experts we talked to—like Peter Van Valkenburgh, an expert at a blockchain advocacy group called Coin Center—didn't think that was a coincidence.
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"We're probably in a bubble," Van Valkenburgh told Ars in an early September interview. But even if the current boom does turn out to be a bubble, Van Valkenburgh argues that this isn't necessarily a bad thing.
"You can look at bubbles as being socially productive," he told Ars. Bubbles "allocate capital to long shot, paradigm-shifting innovation" instead of incremental improvements to existing technologies. The dotcom bubble created a lot of failed companies.
