Ethereum co-founder says initial coin offerings are a "ticking time bomb"

In May alone, cryptocurrency "Ether" rose by as much as 700% in value amid a craze for initial coin offerings but one of its developers said they were a "ticking time bomb".

After starting out at just $8 each, in June the digital currency fetched just under $400 for a year-to-date gain of roughly 4,900%.

Ether was issued by block-chain based platform Ethereum to finance itself via what is known as an initial coin offering, an unregulated tool that was being increasingly used for fundraising by firms in the space.

And now other firms were using that same route, resulting in a wave of ICOs.

With millions being made in just minutes, it was estimated that Ethereum digital coin sales had raised over $1.3bn for venture capital firms.

The platform, designed in part by Vitalik Buterin, a programmer involved with cryptocurrency giant Bitcoin, was basically an incorruptible public ledger of data that manages transactions online. These transactions can be anything from informational assets like cryptographic contracts to transferring value from one person to another with no central intermediary.

The Economist explained ICOs as "essentially digital coupons, tokens issued on an indelible distributed ledger, or blockchain, of the kind that underpins bitcoin, a crypto-currency. That means they can easily be traded, although unlike shares they do not confer ownership rights."

In other words, they provided an outlet for personal wealth that was beyond restriction and confiscation.

But, how great was the risk? Charles Hoskinson, another of the developers of Ethereum said in an interview with Bloomberg, "people say ICOs are great for Ethereum because, look at the price, but it's a ticking time-bomb".

With the use of cryptocurrencies it was possible to avoid several guidelines which would be otherwise impossible to do in traditional sales of securities.

Perhaps most importantly, that included determining the source of the funds involved in the sale to cut down on the likelihood of money laundering and ensuring that investors were accredited. That was something the SEC is not likely to allow much longer.

So while it seemed likely that the platform and the bubble itself wouldn't burst any time in the immediate future, with everything from death hoaxes about the founder, rumours of infighting, growing concerns over hackers and regulatory threats, its stock had already dropped from its high of around $400 a share to $243.39.