Ethereum, the red-hot rival to bitcoin, has been on a tear since the beginning of last year, but one of its founders thinks the cryptocurrency is in a bubble ready to pop, according to reporting by Bloomberg’s Camila Russo.
Ethereum is up 1,700% over the last year, and that spike has occurred in tandem with the growth of the hottest new trend in fundraising: initial coin offerings.
Approximately $US500 million has been raised by the new cryptocurrency-based capital raising method, according to Business Insider’s Oscar Williams-Grut. It is a trend that has sparked excitement across Wall Street.
But the cofounder of the company behind the cryptocurrency, Charles Hoskinson, told Bloomberg that initial coin offerings will spell disaster for the currency’s future.
“People say ICOs are great for Ethereum because, look at the price, but it’s a ticking time-bomb,” Hoskinson said. “There’s an over-tokenization of things as companies are issuing tokens when the same tasks can be achieved with existing blockchains. People are blinded by fast and easy money.”
A number of startups have used ICOs to raise capital. Gnosis, a prediction market for digital currency Ethereum, raised $US12 million in just 10 minutes in April. Brave, a new web browser startup set up by the founder of Mozilla, made that look pedestrian, raising $US35 million in less than 30 seconds selling “Basic Attention Tokens” last month.
“Hoskinson joined the ethereum founding team in late 2013 and left in June 2014 as he advocated for a for-profit entity while others in the team led by Vialik Buterin wanted to keep it as not-for-profit,” Russo wrote.
Ethereum was conceived by Vitalik Buterin, a young programmer who was told about bitcoin by his father and decided to create a platform for smart contracts; which bitcoin is not designed to do.