To Coin A Craze

Silicon Valley's cryptocurrency boom

- Richard Waters

The ambition that gave birth to the InterPlanetary File System is as immodest as the name.

The brainchild of a Silicon Valley start-up called Protocol Labs, IPFS aims to give anyone the chance to buy and sell unused computer storage space. There is even a made-up unit of exchange for this proposed market: a digital currency called Filecoin.

Speculators do not seem concerned that this spot market for global computing resources is still only a plan embedded in a piece of open source software. Or that, if it catches on, it will be competing with corporate giants such as Amazon, the leading cloud computing provider. Despite these obvious obstacles, Protocol Labs raised more than US$250m in an open online sale of its invented currency that ended last week.

So-called initial coin offerings, or ICOs, like this have turned into the year's most striking financial craze. More than US$1.8bn has been raised by software developers from the sale of new currencies with names such as Tezzies, Atoms and Basic Attention Tokens.

In unofficial online markets where these and other digital tokens are traded, the mania has hit even more bizarre levels. The value of Ripple - at five years, a cryptocurrency veteran - soared this year on a wider boom that was led by bitcoin. Ripple's notional value, including coins held by the company for later sale, jumped from US$500m at the start of the year to more than US$35bn, before falling back to US$19bn.