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David Vorick, 24, is one of those techies with a plan to change the world. His startup runs a data storage service called Sia, similar to those of Amazon.com Inc. and Google Inc. The difference is that Sia is totally decentralized. People who need a digital file cabinet are matched up with hosts with extra storage capacity in an online marketplace that runs on blockchain, the same technology that supports the virtual currency bitcoin. To Vorick, this isn’t just a nifty technical accomplishment but an idealistic challenge to the power of the internet’s oligarchs. “We are really passionate about making this network that is fully independent of anybody who can step in and say, ‘You’re not allowed to use it anymore,’ ” Vorick said last month at a conference in New York.

For finance types there’s something else interesting about Sia. To buy storage space—or get paid for it—you need to use the system’s own digital tokens, called Siacoin. And on sites where people trade virtual currencies, Siacoin has surged more than 1,200 percent in U.S. dollar value since May 1. The total value of this startup money was about $400 million on June 13. Other digital coins have also gone through the roof. XRP, the token for a global payment system called Ripple, has increased almost 4,000 percent in the past three months, giving it a market value of about $10 billion.

Blockchain businesses don’t always sell their tokens—they may be generated by the system itself. But more and more startups are offering tokens as a way to raise money upfront in so-called initial coin offerings (ICOs), a nod to traditional initial public offerings of securities. So far this year, 63 sales have raised $521 million, according to blockchain research firm Smith + Crown. That has already far surpassed the $260 million raised in 2016, says Emma Channing, general counsel at Argon Group, a year-old digital finance investment bank in Los Angeles. Channing expects well over $1 billion in token sales this year.

“You get more than just another crypto-asset to sit there and look at on your screen”

That’s $1 billion for ... what, exactly? Keeping explanations as simple as possible, blockchain is a way to record transactions and contracts in an online ledger. The ledger isn’t maintained by one controlling system or owner but by an expanding network of computers across the internet. Blockchains can record every time a digital coin, such as a bitcoin, is traded, but they can also keep track of increasingly more complex interactions, ­creating new ways to run everything from insurance to social networks.

Some kind of tradable token is increasingly integral to how these new blockchain businesses work. Take the Basic Attention Token (BAT), created by Brave Software, which is attempting to create a better model for online advertising and publishing. BAT is meant for use on the Brave web browser. Brave gives users more control over the advertising they see and lets them get paid for looking at ads. If users like a site, they will be able to reward the publisher using BATs. The tokens could also be used for digital purchases within Brave, such as photos or games. Brave announced an ICO in March, including a detailed explanation of how the system will work, and scored $35 million in less than a minute when the ICO opened—and finished very quickly—on May 31.

This kind of fundraising has some obvious appeal for a startup: No more going to a venture capital firm that will take a big chunk of ownership and dictate how you do things. Right now, an ICO looks relatively easy. “It seems as if there’s this enormous financial pressure of money that wants to move into this space, but there’s really limited places for it to go,” says Brian Lio, chief executive officer of Smith + Crown. But an offering that sells out in seconds may work against some of the bigger goals of a blockchain enterprise. Tokens are supposed to be used by customers. “If your token instantaneously sells out to a few institutional investors, you’re missing a big point of tokens, which is to get them to users and build a community,” says Lio.

Some of the money sloshing into new coins may be recycled gains from older digital currencies, particularly bitcoin and another called ether. The price of bitcoin has tripled since the beginning of the year, and ether has jumped more than 4,000 percent. Some early investors—“crypto­currency whales,” Channing calls them—have built up a huge store of virtual wealth. Alex Sunnarborg, a research analyst at CoinDesk, estimates that about three-quarters of the money going into ICOs comes from within the crypto-economy.

Which may (sort of) explain LGD, the digital token for the Legends Room, which describes itself as “a world class Las Vegas gentlemen’s cabaret ­r­­e-imagined using blockchain technology,” according to the website. It sold about $1 million in LGD in an ICO that closed in May, says Peter Klamka, a consultant who set up the token strategy for the business. For all those with crypto­currency burning holes in their pockets, it’s one way to answer such questions as, “How do you spend it, and what do you get for it? How do you enjoy it?” Klamka says. “You get more than just another ­crypto-asset to sit there and look at on your screen—the first real-world opportunity to actually put your arms around something.” Tokens can be used for discounts on drinks and access to a members-only room and events featuring stars of mixed martial arts. The club is set to open in July.

At Token Summit, the conference where Vorick spoke, the atmosphere verged on breathless—slide decks prepared 10 days earlier were already out of date. Still, there was skepticism about the onslaught of the investor class, including from one professional investor. “It’s really awesome to have things be instantly funded and financialized, but I think the investors should be brighter about it,” Richard Craib, founder of the hedge fund Numerai, told the audience. Numerai has a digital coin but didn’t do an ICO. It gave the token to some 16,000 data scientists who model predictions that the company uses to make investments. If a model performs well, meaning real-world gains for Numerai, the scientists who built it get more of the tokens and can exchange them eventually for dollars. Those whose predictions fail lose their tokens.

Argon’s Channing spends a lot of her time beating the drum about regulation. ICOs may seem to fall into a legal gray area, but she says the vast majority of tokens count as securities, and if they are sold to investors in the U.S., they fall under the jurisdiction of the Securities and Exchange Commission. A legal standard called the Howey Test defines an investment contract as a security if you are putting money into a common enterprise with an expectation of profit, primarily from the entrepreneurial or managerial efforts of others. The SEC has yet to wade in, but the hotter the ICO market, the greater the potential for abuse or investor losses that could spur the agency to act. Channing suspects the regulators are waiting for the right case. Meeting requirements for a securities sale will mean selling ICOs to accredited investors with a certain level of sophistication and assets.

The eye-popping gains on coins are drawing more attention to them, a classic precondition of a bubble. Lio says there will certainly be corrections to come, though the potential of the technology is real. Along with Siacoin’s higher value, Sia has seen a jump in users. But why the sudden price spike? “I can only speculate,” Vorick told the Token Summit crowd. “The price rise didn’t really correspond to any major announcement that we made.”