Some programmers look to coin offerings because they can raise money for projects that venture capital won’t fund. Specifically, coin offerings can provide funding to build open-source projects that in the end no one will own, the way that no one owns Bitcoin or Ethereum. Filecoin’s cloud storage network, for instance, would be operated by its users rather than any central company.

How do you create your own virtual currency?

It is easier than it seems. The software behind Bitcoin and Ethereum is open source, which means that anyone can take the computer code and tweak it to create a virtual currency with slightly different characteristics. There are companies that will do this for you if you are not technologically adept. Convincing people that your new coin will have value is the harder part, and many coins that are released never grow to be worth anything.

Some companies have gone the more complicated route of creating their own new software for their coins, with qualities that are very different from Bitcoin and Ethereum.

Who can invest in coin offerings?

Anyone who has Bitcoin or Ether and is willing to send their money to the creators of a coin offering.



Is this illegal?

China and South Korea have said it is illegal.

In the United States and many other countries, regulators have said some coins should be categorized as securities, like stocks and bonds. If a coin is categorized as a security, it has to follow all relevant securities law, such as registering with the authorities and ensuring that people buying the coins are properly accredited and vetted. Suffice to say, essentially no coin offerings have followed these rules.

Many people are waiting for regulators to crack down. Some are expecting that the first targets will be the exchanges where the coins are traded.

What happens if the programmers never build what they promise?

Investors don’t have much recourse. The most likely outcome will be that the investors will lose the money they put into the project, though people may try to sue.