Category Archives: Cryptocurrency

For the first time ever, the U.S. Commodity Futures Trading Commission (CFTC) has given permission to a private company to exchange and clear any number of cryptocurrency derivatives.

After three years of work, New York-based startup LedgerX was today granted a rare derivatives clearing organization (DCO) license allowing it to clear and custody financial instruments backed by bitcoin, ether and any number of blockchain-based cryptocurrencies.

The instruments, designed to mitigate investment risk, are the latest signal that the cryptocurrency markets are maturing, with the total value of the asset class crossing $115bn earlier this year.

But the guidance from the agency in charge of ensuring the integrity of all futures and swaps markets in the US could have bigger implications than just letting a single company finally open for business.

LedgerX co-founder and CEO Paul Chou told CoinDesk:

"It means a lot, not just for the industry, but globally, because the CFTC will set the example of what a well-licensed clearinghouse and exchange based around digital currencies will look like."

As part of the DCO license, LedgerX will be required to surveil the institutional investors it works with and create increased transparency about those customers for the regulatory agency. Eligible participants include broker dealers, banks, futures commission merchants, qualified commodity pools and qualified high net worth investors.

With the granting of this license, these groups will now be able to enter into complex contracts with one another, with values derived from the underlying cryptographic asset.

As a result, Chou believes the creation of these assets will mark a pivotal moment for cryptocurrency markets, giving investors more sophisticated ways to hedge, and possibly, helping to stabilize long-volatile cryptocurrency prices.

"We have a lot of in-progress talks with customers that are looking to work with retail customers that want to buy derivatives on bitcoin, binaries, all these exotic options," he said.

Though frequently described as a bitcoin exchange and clearinghouse, LedgerX's license did not require an overly broad definition of cryptocurrency. Rather, the permission is open to any of a series of instruments derived from the cryptographic primitives used to build a number of protocols.

Similar to how G5 currencies are typically viewed as safe investments due to their relative stability, Chou imagines three to five cryptocurrencies will be deemed "viable" candidates for the exchange and clearinghouse, based on market capitalization and functionality.

Initial coin offering (ICO) tokens sold to raise funds will not likely be considered for inclusion on LedgerX, given their gray area between CFTC-regulated commodities and SEC regulated securities.

Rather than of having to reapply for each currency and each derivative contract LedgerX will "self-certify" that the new opportunity is compliant.

"Instead of evaluating different governments," as with the case of a G5 currency, said Chou. "Youll be evaluating different technologies or approaches underneath these digital currencies."

The CFTC decision comes at a time when many in the cryptocurrency industry have been anxiously awaiting clear guidance including other regulators.

In March, another lengthy cryptocurrency regulatory application was refused by the Securities and Exchange Commission (SEC), citing among other things, a lack of "surveillance-sharing agreements," and a requirement that "markets must be regulated."

Currently under review by the SEC, the application would let Tyler and Cameron Winklevoss list a bitcoin-tied exchange-traded fund (ETF) on the BATS BTX Excahnge.

Given LedgerX's lengthy requirements to report on its customers and the regulatory body's history of co-regulating certain instruments, Chou believes today's decision could provide just the answer the SEC, and other agencies in Asia and Europe have been waiting for.

"I think the CFTC will set an example both for other regulators here in the U.S., but also globally as well," he said.

After years of working and waiting, progress had been moving swiftly leading up to today's news.

It was just earlier this month that the CFTC formally registered LedgerX as a swap execution facility (SEF) after operating with a temporary license for about two years, making the New York-based firm only the second cryptocurrency outfit to be regulated under the provision.

A close observer of the developing story might have even found a clue to the story back in May, when LedgerX announced it had raised an $11.4 million Series B led by Miami International Holdings and Huiyin Blockchain Venture Investments.

It turns out, the money for the startup that had already raised a $1.5 million seed round and an undisclosed Series A was intended to meet capital requirements implemented by the Dodd-Frank Act. In order to ensure agreements can be fulfilled in case of an emergency, the act requires that a DCO hold operating costs to run its business for a year.

Going as far back as September 2015, former CFTC commissioner Mark Wetjen has been sitting on the board of LedgerX parent company Ledger Holdings, and since January 2016, Chou has served on the CFTC technology advisory committee.

In a statement, Wetjen said:

"These are exciting times to have a new digital asset class emerge. I hope that the effort LedgerX put forward in the U.S. can set the stage for a global approach to this new digital asset class."

By moving the trading and settling of cryptocurrency assets into one, heavily observed operation, Chou expects he'll be able to generate revenue from an entirely new source: data analytics to an unprecedented depth.

In addition to charging other exchanges for his service, Chou expects the CFTC's heavy surveillance requirements will result in cryptocurrency markets data that can be cross-referenced with points from previously existing data sets.

When the platform formally launches later this year, these services and more will only be available to eligible contract participants. But, Chou described his business model as "multi-stage," eventually serving those who were previously unable to afford such services.

"At first we're going to target a lot of institutional customers that want to invest in this asset class," said Chou, who added:

"Then later, pretty much everybody."

Flames on hot rod via Michael del Castillo

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Get in now, folks. This ones hot and moving fast!

For a limited time you can buy the newest, rarest, most sought-after cryptocurrency to hit the markets since at least 20 minutes ago.

Thats right.

Im proud to present, finally, after literally minutes of thought and hard work BlancoCoin!

There are only four in existence.

Three Im keeping for myself.

The other one Im ready to break into 4.2 million equally sized pieces and sell to you.

Now, heres the thing. Theres no set price.

Yes, all 4.2 million units of the ONE BlancoCoin Im selling today will go to the highest bidder.

Call now. Or use our kind-of secure and completely incomprehensible trading platform!

Its OK if you dont understand it.

What counts is you show everyone how smart, innovative and outside-the-box you are and just blindly buy BlancoCoin now and bid it up to the sky.

Remember, trying to spend BlancoCoin is pointless. Its an investment in your future!

Hi, this is the REAL Ray Blanco.

What you just read above is preposterous nonsense. We both know it.

But sadly, thats how the cryptocurrency storys playing out right now. Its a farce.

Lots of good folks are throwing their hard-earned money after cryptocurrencies.

As a tech researcher and writer, Ive seen this before. Internet stocks. 3-D printing stocks. Virtual reality. Immunotherapy.

You can ride frenzy for huge gains, sure. Huge gains, after all, come from all kinds of ideas.

Just like my readers could (right now) be up 731% on a driverless tech play, 208% on an off-the-radar chipmaker, 218% on a breakthrough pharma company, 296% on a life-extension tech company I mean, the list goes on.

The thing is those arent fundraising events, which is what most of the cryptocurrency market boils down to.

The gains I list above are from real things, products, sales and deliverables.

The cryptocurrency game doesnt work like that. If its new, its hot. If its complicated, people want it more. Heres what I mean

You know what an IPO is, right?

It stands for initial public offering.

Thats when companies go public, big banks make tons of money and regular folks get their butts kicked and lose money.

If you like those, youre going to love ICOs. Those are initial coin offerings.

An ICO is essentially the same as an IPO but for cryptocurrencies!

Now you can get you butt handed to you and lose a bunch of money WITHOUT big banks being involved.

Now, heres the best part. You can invest in an ICO without there being a real, live cryptocurrency behind it.

You know who makes all the money in that case? The people behind the ICO, thats who.

Not you. Want to make real money? Launch your own cryptocurrency.

My point: Cryptocurrencies are a vomit comet of volatility.

Volatilitys fine. Its your friend if you know how to use it in your favor when you trade.

But volatile markets driven by speculation and a get rich quick approach are recipes for disaster.

Thats the thing about hysteria, bloodthirsty speculation and investing mania.

No one listens. No one cares. Chasing the story is all that matters. Shiny objects have a way of doing that to peoples thinking.

Then the bottom falls out, folks get smashed and everyone says, Next time well be more careful.

Humans are funny like that. Because were NEVER smarter the next time.

My point is, please try to keep your head while all those around you are losing theirs.

If youre throwing money at ICOs and cryptocurrencies, youre likely blinded by greed right now.

Case in point if you had even an inkling of interest in my BlancoCoin farce above, youre EXACTLY the person I want to reach today.

Step back a second, take a deep breath and think clearly before you buy a cryptocurrency.

Do you know what youre getting into?

Are you prepared to feel the joy and the pain the excitement and the night-sweat fear sometimes several times a day?

If not, I recommend you stick to the real tech you can explain on a napkin.

There could be 731% (or more) in gains waiting for you. My readers are living proof.

To a bright future,

Ray Blanco for The Daily Reckoning

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Incredible New Cryptocurrency Introducing BlancoCoin! - Daily Reckoning

Cryptocurrency Ethereum has emerged from the shadow of its better-known rival Bitcoin thanks to its skyrocketing price -- that has also made it a tempting target for hackers.

Thieves earlier this month stole $10 million from an electronic wallet provide by Coindash, a company that specializes in the kind of blockchain technology used in digital currencies. Another $32 million recently went missing after hackers exploited a vulnerability in an e-wallet from startup Parity.

The price of Ethereum slumped following news of the heists, tumbling more than 15 percent from $258.52 on July 18 to $218.82 on Friday, according to CoinMarket Cap.

Coindash, which was using a so-called initial coin offering to raise funds, plans to compensate victims of the hack. To help stabilize the price of Ethereum, it will also offer bonuses to anyone who holds it for at least six months. According to Parity, there were three accounts compromised in the attack and that the thief is attempting to launder the money through exchanges.

"If anything, it makes people more aware of the pitfalls of coding," said Luis Cuende, CEO of Aragon, an Ethereum-based corporate management tool, adding that the underlying code that powers the cryptocurrency wasn't affected by the attack.

The concept behind Ethereum was initially described by computer programmer Vitalik Buterin in 2013 based on his research on Bitcoin. A year later he joined forces with another programmer to create Ethereum, now the second-most popular cryptocurrency after Bitcoin.

New investors in Ethereum may not be aware of the risks of losing their funds to hackers, said Simon Yu, CEO of CakeCodes, which offers cryptocurrency rewards to computer game players. He said accounts should be secured with private keys whose combinations are known only to the account holders.

Cryptocurrencies have long been dogged by concerns about their security, particularly after the collapse of Bitcoin exchange Mt. Gox in 2014. The company's former CEO, Mark Karpales, is currently on trial in Japan, where the corporation was based, on embezzlement and data manipulation charges. Karpales has blamed the company's collapse on hackers.

South Korea's largest Ethereum and Bitcoin exchange was breached in late June in a theft estimated at 1.2 billion won ($1.07 million). A Pennsylvania man also recently confessed to stealing $40 million worth of Bitcoin.

Despite the risks, investors continue to have faith in digital currencies even as their prices fluctuate wildly. Ethereum, which started the year valued at $8.17, has in a matter of months soared 2,600 percent. Over the same period, Bitcoin prices have surged from $1,027 to $2,638, a gain of more than 150 percent.

The S&P 500, the stock market index most closely tracked by professional money managers, has this year posted a gain of 10.3 percent.

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While some sceptics may have misgivings about the technology, cryptocurrency and blockchain has disrupted financial services and will probably be around for a lot longer. This is the view of Heinrich Springhorn, business analyst at MobileData, who says: There is some instability due to a hearing in Japan regarding a bitcoin exchange that was shut down due to suspected embezzlement. However, this does not take away from the potential of what cryptocurrency, and essentially the blockchain, can mean to transacting worldwide. This realisation can make a real difference for operations in Africa, he says. MobileDatas standpoint is that to apply this methodology in Africa and transact more freely, companies must be willing to participate in a decentralised model of transacting. One of the biggest set-backs at the moment is that there are only a small number of stock and service providers worldwide that accept cryptocurrency such as Bitcoin, and it is still far away from becoming main stream, Springhorn says. If a cryptocurrency should become mainstream, the potential exists that it could cause instability in financial enterprises. The reason for this is that the banking institutions will lose their locus of control over currencies and consumers will transact outside of their control. The decentralised nature of cryptocurrency means the reality facing markets is that there is no intermediary with the power to limit any fraud or embezzlement. This means there is no way for the assets to be seized in these cases, Springhorn explains. The companys assessment of the market is that for widespread adoption of this model to occur in Africa it will require a mechanism for on-the-fly exchanging of the cryptocurrency to a value of the fiat money. This is on the basis that services and stock providers do not accept cryptocurrencies as payment. If the service and stock providers do accept cryptocurrency as payment, then the transaction engine used will write an entry into the decentralised ledger and the transaction will go through the blockchain. In addition, there are socio-economic concerns with regards to cryptocurrency, as many end-users do not have access to the technology needed to transact with cryptocurrency,Springhorn adds.

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Decentralisation mooted for African cryptocurrency - IT-Online

Crypto-One-Stop-Solution (COSS.io), the multi-faceted Singapore-based cryptocurrency company has announced a couple of new incentives for users today. The first concerns zero-fee trading starting now and which will last until August 31st 23:59 SG time (GMT +8).

COSS exchange services and crypto-asset trading information can be found here.

Additionally, the company has announced a promotion worth 2 ETH. All registered accounts on COSS up and until August 31st 23:59 SG time (GMT +8) will be automatically participating in the COSS LUCKY DRAW. What will happen is a random number generator will pick 10 winners from all registered COSS users awarding them with 2 ETH each.

The draw takes place LIVE on COSS.ios Facebook page. The winners will be announced on Friday, September 1, 2017, at 2 pm SG time.

The company is excited as in a couple of weeks they will be conducting a token sale to commence on August 8th. In short, the COSS token to be generated from the token sale is a revenue-generating cryptocurrency, developed on the Ethereum blockchain as an ERC20 token. The token enables owners to receive revenues in the form of fees charged by the COSS system for cryptocurrency transactions.

The core functionality of the COSS platform consists of the three major counterparts: a wallet, an exchange and a merchant platform supporting multiple crypto and fiat currencies.

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Cryptocurrency exchange COSS eliminates trading fees until end of August - CryptoNinjas

When investors think of unstoppable trends, marijuana stocks might rightly come to mind. But in terms of percentage returns, nothing has even come close to cryptocurrency ethereum, which has risen by right around 2,270% for the year, as of July 17, 2017. By comparison, it's taken the S&P 500 roughly 35 years to log a return of about 2,000%.

Ethereum's massive gains, and that of its bigger rival bitcoin, are primarily the result of a weaker dollar and growing media and investor interest in cryptocurrencies.

Image source: Getty Images.

For instance, earlier this year, we witnessed Japan make bitcoin a legal form of tender, as long as it complies with the country's anti-money laundering regulations. This nod of confidence comes with a growing list of retailers and service providers, such as Overstock.comand Microsoft, that in some way accept bitcoin as payment.Even select marijuana dispensaries have turned to cryptocurrencies as a bridge between consumers with debit and credit cards and financial institutions that want nothing to do with the cannabis industry.

Weakness in the U.S. dollar, which recently hit a 10-month low, has also fueled buying in digital currencies. Though a weaker domestic currency helps drum up interest in exports, domestic investors typically dislike dollar declines. A devaluation in the dollar usually means investors will seek out a better store of value, which traditionally has been gold. Gold is a finite resource, and thus its scarcity provides the perception of safety and value to investors. However, mined cryptocurrencies like bitcoin also have a finite limit (21 million coins in bitcoin's case), offering the perception of scarcity and value.

The fact that these currencies aren't backed by the government, and that the public still doesn't understand them very well, has also arguably fueled interest and momentum.

But as the old proverb goes, "What goes up must come down."

Image source: Getty Images.

Following what was a better-than-5,000% run higher in a matter of months at one point, ethereum has seen its value crash in recent weeks. Since touching an all-time high of $407.10 back on June 12, ethereum has given back more than half of its value.As of 7:15 p.m. EDT on July 17, it was going for less than $189 per coin, and it had dipped as low as $130.26 during this past weekend. From peak to trough, we're talking about a 68% loss in value in less than five weeks, or more than $20 billion in market cap erased.

What on earth is going on, you ask? Some of this recent drop could be nothing more than simple profit-taking. Keep in mind that we're talking about an asset that appreciated by around 5,000% at one point this year. Considering how few businesses accept ethereum as payment, investors would have been foolish not to lock in some of their gains. But profit-taking is far from the only reason ethereum has been taken to the woodshed over the past month.

Another issue concerns the uncertain future of bitcoin. On Aug. 1, bitcoin is set to undergo a software update. The issue at hand is that those who are responsible for the upkeep of bitcoin behind the scenes have split into two factions, and are thus planning to adopt two separate and competing software updates. According to Bloomberg, these factions are debating whether bitcoin should evolve as a currency to serve more mainstream applications or remain as a libertarian test to monetary theory.

Though the incentive to reach a consensus and calm investors is obviously high, there remains a very real risk that bitcoin could subsequently split into two separate cryptocurrencies if a consensus is not reached. This instability has carried over to ethereum, which is regarded by some pundits to have a better underlying technology and broader use than bitcoin.

Finally, as CNBC pointed out, start-ups could be behind the recent plunge in ethereum. Sky-high returns have allowed start-ups the opportunity to cash in their ethereum coins for an equivalent amount of U.S. dollars, thus increasing selling pressure on the cryptocurrency.

Image source: Getty Images.

Perhaps the biggest issue yet to be decided with cryptocurrencies like ethereum and bitcoin is whether decentralization is a friend or foe.

In one sense, decentralization is a great thing. Having numerous miners across the globe effectively keeps these cryptocurrencies from succumbing to the will of cyberattacks. If there was a central network behind bitcoin, as an example, it could become an easy target for criminals.

Then again, a lack of centralization on cryptocurrency trading exchanges is arguably bad news. Competing exchanges and a lack of trade centralization are what drive volatility and reduce the uptake of these currencies by businesses.

In short, there's a lot left to be hashed out in the coming weeks for bitcoin and cryptocurrencies in general. While they represent an alluring alternative for consumers who dislike the traditional monetary system, use options are still pretty limited, and translating cryptocurrencies into U.S. dollars often has a lag time that can result in losses for investors and businesses. There are numerous issues that need to be tackled before ethereum, bitcoin, or any cryptocurrency for that matter, really has a shot at thriving over the long run. For the time being, I suggest sticking with a tried-and-true wealth creator like the stock market and keeping cryptocurrencies like ethereum out of your investment portfolio.

Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Sean Williams has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Don't Look Now, but Cryptocurrency Ethereum Is Crashing ...

Whether it be Bitcoin or Ethereum, every cryptocurrency has suffered massive losses over the past several days. Prices have dropped to as low as 64 percent, bringing the entire cryptocurrency market cap down to $70 billion from $110 billion.

Above: Cryptocurrency market capitalization. Source: Coinmarketcap.com/charts

Image Credit: coinmarketcap.com

Ethereums price has gone from $400 right down to $151 in about a month, leading investors to panic sell. On the other hand, Bitcoin, which dominates the cryptocurrency market is down about 36 percent from its high (its currently trading around $1,894). Investors are finding it hard to hold onto cryptocurrencies at such a low price especially amateur investors who bought them at a much higher price.

So what is causing the prices to dip so low? Could they go any lower? Could the market rebound from here?

Here are a few possible causes for the recent price tumble:

1. August 1st is looming

The infamous crypto civil war is around the corner. The debate on whether or not to increase the Bitcoin block size has been going on for a few of years now, with disagreement between the miners and nodes.

On August 1st, we could see a split, with part of the Bitcoin network supporting a change in protocol and the other part sticking to the current protocol. The result could be a massive devaluation of Bitcoin. This particular concern is making investors nervous, and some are liquidating their BTC into fiat, which could be the cause for this free fall.

As the Bitcoin price falls further, it will take down most of the major currencies with it. It is safe to say August 1st is not only Bitcoins independence day, but also a big day for all the blockchain based currencies.

2. Post-ICO startups are cashing out

Many blockchain-based companies have managed to raise millions of dollars in ETH through initial coin offerings (ICOs) without even having a product. Nearly $700 million was raised in total last month through ICOs on the Ethereum platform.

Needless to say, most of these so-called startups are not worth the money they have raised. For instance, the BAT ICO raised $25 million in less than a minute, Cosmos raised $16 million, Status raised $95 million, and Bancor raised $153 million. One thing these companies are good at is marketing and writing fancy white papers.

Serious startups may hold onto Ethereum when they receive their funds, but those that are looking to make a quick buck could immediately cash out. This trend could also cause honest companies to liquidate their ETH and hold their funds in fiat (because, well, less volatility).

This could be one reason the Ethereum price is feeling downward pressure. EOS, for instance, which raised $200 million worth of ETH earlier this month, has apparently been offloading its ETH to Bitfinex. EOS is not alone; TenX, which listed Vitalik Buterin as an investor, raised 200,000 ETH ($67 million at the time) in its token sale, has sold nearly 30 percent of that ETH cache already. It is not clear whether TenXs ETH are being sold on open exchanges or directly to individual investors, but they are going off TenXs smart contract address.

From a startups perspective converting ICO funds (ETH) into fiat isnt a bad thing at all, as Jeremy Epstein explained recently on VentureBeat. It helps them stay away from a highly volatile market and focus on their project.

Still, given that many ICO project developers have no incentive whatsoever to deliver on their promises following a big fundraise, we need an ecosystem to regulate these irrational multimillion-dollar seed funding rounds and it needs to be set up quickly. The system must ask for provable business models. The projects must have use cases, users, flowing revenue, and even profits. Also, a working prototype would be nice.

3. Were seeing market manipulation and amateur panicking

The cryptocurrency market is as unregulated as it can get. Things that would result in jail time on the stock market are legal here. In such a scenario, its no surprise that big players are manipulating the markets for their own gain. Its no longer rare for people to run bots to buy and sell cryptocurrencies.

Amateur investors, on the other hand, want to make quick profits. Once the price starts falling, these investors tend to panic sell. The combination of market manipulation and panic selling may be a reason behind the current price fall. One might argue that the market is going through its long term growth correction, but there is a chance it could be in for a deeper fall. The market could swing either way.

Cryptocurrency is here to stay. While most of the current coins might disappear in the years to come, a few of these startups hold the potential to disrupt the entire financial system as we know it.

Some analysts are very bullish on this market and say it is still in the nascent stage with very few investors. Once the cryptocurrency market goes mainstream, the market cap will grow and so will the prices of coins.

Anupam Varshney is cofounder of Bitcoinprice.com and has written extensively on the Bitcoin situation in various countries, including India, South Africa, and Canada He also runs a Bitcoin meetup in Delhi.

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Launch Dates for These New Cryptocurrency ITOs Have Been Announced Investopedia OpenLedger has released the dates for the Initial Token Offerings (ITO) of four different projectsOCASH, eDev.one, GetGame and Apptradebeing built on its platform. In June, Denmark based Open Ledger Aps received a seed funding of $1.6 million ...

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Launch Dates for These New Cryptocurrency ITOs Have Been Announced - Investopedia

If youve ever had a company or friend offer to pay you with Bitcoins or another type of digital money, youve encountered cryptocurrency, also called crypto-money or cryptoassets.

Cryptocurrency is a digital currency that is created through the use of encryption software. This approach is a solution to security and control issues that prevented a purely digital currency from being successfully developed in the past. If you hear someone talking about one of these currencies, its almost certainly in a cryptocurrency format. This type of digitally created and secured money is currently in a period of very cool experimentation, so lets take a look at how it work, why its popular, and where cryptocurrency is heading in the future.

How does a currency exist in a totally digital format? What is it based on? While the process varies a little between different cryptocurrencies, they all follow the same general system.

First, cryptocurrency chooses a base unit and how much that particular unit is worth when compared to other currencies (often, the U.S. dollar is used as a baseline). Some cryptocurrencies are more imaginative than others at this point. They try to represent debt registries, contracts, or the act of currency exchange itself. It can get a little weird, but ultimately the unitin some way relates to the value of other currency, as is true of all currencies in the world.

Units of cryptocurrency are then created, typically when a transaction occurs. The units are carefully formed and preserved through algorithmic encryption, then linked together in vast chains of data, where the currency can be tracked and exchanged.

However, at this point, cryptocurrency is still too vulnerable and too easy to fake. The currency units need to be timestamped and processed to make them more concrete and harder to copy. A third party developer can do this, but most cryptocurrencies prefer to crowdsource the process to those with the right hardware and software to mine the currency.

Mining uses algorithms to go through each transaction, encrypt the cryptocurrency, and add it to a digital ledger, essentially verifying it and cementing its position online. This process may also be referred to as consensus protocols orconsensus platforms, depending on the currency. This process is meant to make the currency impossible to duplicate, though whether its successful is up for some debate.

Some cryptocurrencies are highly centralized, with someone usually the organization that created the process/software making decisions about how much currency is created and how it is used. Other types are very decentralized, controlled only by how and where people are willing to use them.

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In the coming months a startup based in Waterloo, Ontario, is set to kick off a grand monetary experiment, one that will put to the test a new model for business that could prove to be either the webs next great economic engine, or a multibillion-dollar bubble thats as combustible as the Hindenburg.

The concept at stake is cryptocurrency , a form of digital money that exists independent of traditional banks or governments. Over the past few months, the market for cryptocurrencies has rocketed to more than $100 billion (and fallen back to $60 billion) amid extreme enthusiasm and volatility. So-called token sales, or initial coin offerings , also known as ICOs , have raised hundreds of millions of dollars, creating substantial fortunes out of little more than ones, zeros, and pitches. The movements critics compare it to the tulip-bulb manias of centuries past and say it will end the same way.

Advocates, however, believe cryptocurrencies could represent an important way for tech companies to raise cash. Instead of users trading their time, attention, and energy for free services, while a few supermassive landlord corporations reap all the profits (hello, Facebook ( fb ) ), cryptocurrencies could enable participants to be remunerated for their contributions on the platforms, with yet-to-be-invented moneys. Imagine users getting paid by the like.

So far, while their nominal value has soared, cryptocurrencies have mostly been a vehicle for speculators . But in the coming months, for the first time, a mainstream company with an established user base will try its hand at launching a crypto token to its 15 million monthly active users, potentially multiplying by a factor of five overnight the number of people using digital currency, according to estimates by the Cambridge Center for Alternative Finance . The company is Kik, the maker of a chat app favored by American teens , which intends to mint tokens enabling users to transact through its network.

Kik will join more than a hundred early-stage projectswith names like Brave , Civic, and Tezosin hosting token sales in order to fund themselves . But Kik hopes to be among the first to get people to use the tokens for something other than trading, flipping, or speculating.

Ted Livingston, founder and CEO of Kik, had the idea for a cryptocurrency in the back of his mind in 2014 when he launched Kik Points, a video-game-like in-app virtual money. The company shuttered the pilot program last year, but Livingston was pleased with it: The points traded hands an average of 300,000 times per day, more than three times the average number of transactions per month on Bitcoins network during that time. Kiks customers mostly used the points to buy stickers and smileys, but the company intends its new Kin tokens, the batch of to-be-released computer coins, to enable users to do everything from tipping peers, to ordering pizza, to paying for premium content.

Kik plans to mint a total of 10 trillion Kin tokens, selling a trillion to the public, holding on to 3 trillion for itself, and setting aside 6 trillion for a nonprofit that will manage a rewards program for loyal users. Its a new way to compete, its a new way to monetize, and its potentially a new way to exit as well, Livingston says.

If past ICOs are any indication, Kiks will bring in a substantial sum no matter what. What industry watchers will be eyeing, however, is whether Kin will actually catch on, fueling a mini-economy within and outside the app. If it works, the experiment could signal to the world the viability of the much-hyped and, until now, mostly theoretical token-based business model.

Success will pave the way for other traditional companies to do it, says Jake Brukhman, cofounder of CoinFund, which advises companies, including Kik, on blockchain tech. Indeed, crypto enthusiasts have proposed companies such as Twitter ( twtr ) , Snap ( snap ) , and Reddit as leading candidates for eventual token sales.

Either that, or the movementwhich depends on widespread adoption to justify multibillion-dollar valuationscould implode and leave many aspiring entrepreneurs and investors in the dust. For the Internets next big thing, that would be a little more than Kin, and less than kind.

A version of this article appears in the Aug. 1, 2017 issue of Fortune.

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Cryptocurrency Gets Its Biggest Test Yet - Fortune