A technician inspects bitcoin mining machines at a mining facility in inner Mongolia. Credit:Bloomberg Bitcoin's value has exploded over the past year, rising as much as 700 per cent. A single bitcoin is now worth more than $US4600 ($5800), and the market value of all bitcoins stands at about $US75 billion. This rise has spurred all sorts of rivals, imitators and offshoots, including now in Australia. Most experts agree the crypto-currency realm is exhibiting all the characteristics of a speculative bubble. "We're seeing at least one ICO per day at the moment," says John Henderson, a partner at Sydney tech investment firm AirTree Ventures. "Some have all the hallmarks of a great scam. Some are simply crowdfunding under a different guise, taking advantage of speculation and hype. Many will go to zero."

Importantly, Henderson is far from a bitcoin sceptic. As an early investor in Coindesk, a bitcoin research and data service, he sees considerable value in crypto-currencies and related technologies. "Ethereum is a fundamental innovation, and I'm bullish on a number of decentralised applications which have taken funding via ICOs," he says. It's just that right now, euphoria is trumping rationality. Before we go any further, if you haven't paid attention to (or have purposefully avoided) the bitcoin/blockchain/ICO phenomenon, here's a quick refresh.

What is it? Bitcoin has been around since 2009. The key difference between it and traditional "fiat" currencies like the Australian dollar, is that bitcoin exists on a distributed ledger known as a "blockchain". That's basically a list of all bitcoin transactions, that nobody controls, that no one can counterfeit, and that (thus far) hasn't been hacked, because it lives on millions of computers around the world. Because it can't easily be manipulated by central banks or governments, Bitcoin initially found favour among "hard money" enthusiasts, who worry that an ever-expanding money supply will eventually trigger a financial crisis. Bitcoin also appeals to anyone seeking to move money across borders (relatively) anonymously. This includes – but is not limited to – money launderers, drug dealers and other criminals. It also appeals to "digital natives, people who live on the internet, who identity with internet money, and don't identify strongly with their country's money", says Asher Tan, the CEO of Coinjar, a Melbourne-based bitcoin "wallet" that helps people exchange bitcoins for traditional money.

New bitcoins are created only when transactions on the blockchain (i.e., buying and selling of other bitcoins) are verified. This is known as bitcoin "mining" – a whole cottage industry has sprung up around it. The success of Bitcoin has caused a boom in other crypto-currency platforms. These include "smart contract" platform Ethereum; Tezos, which raised about $230 million through an ICO last month (in part to invest in other ICOs), and WhopperCoin, a digital currency created by Burger King in Russia (obviously a media stunt, but one that seems fitting). Removes middlemen, cuts costs Which brings us back to Power Ledger. The tokens it has created will be used to gain access to its energy trading system. Why it needed to create a crypto-currency for this to work is not fully clear, but CEO David Martin says it removes middlemen and cuts out transaction costs.

"You could use a traditional exchange of money, but that brings with it cost issues," he says. Next week Australia will get another ICO, this time from Horizon State, a start-up behind online voting platform MiVote. "These tokens hold what is effectively an economic value within an ecosystem, which powers the product or system in question," founder Jamie Skella says. If that sounds a bit circular, well, it is. Underlying utility The surge in bitcoin's value, which started all of this, comes despite the fact that bitcoin's underlying utility remains debatable. While it has been used as a form of payment in some investment deals, relatively few merchants who sell things to consumers in the real world accept it.

There is little doubt blockchain – which is being used by the big banks, the ASX and others to speed up and reduce friction in transactions – is a big innovation. But no one has been able to explain what any crypto-currency using it actually achieves. If you aren't engaged in secret cross-border transactions, normal money still seems to work. As people who are better versed in this world than me have said, bitcoin still looks like a solution in need of a problem. And if the biggest crypto-currency of them all still has this question hanging over it, then what does it say for the rest of them?