Initial coin offerings are very popular. A large number of companies have raised nearly $1.5 billion using the novel fundraising mechanism just this year. Celebrities from Floyd Mayweather to Paris Hilton have jumped on the hype train. But don’t feel bad if you’re still wondering: precisely what the hell is surely an ICO?

The acronym probably sounds familiar, and that’s on purpose-an ICO does indeed work similarly with an initial public offering. As opposed to offering shares within a company, though, a good is instead offering digital assets called “tokens.”

A token sale is sort of a crowdfunding campaign, except it uses the technology behind Bitcoin to make sure that transactions. Oh, and tokens aren’t just stand-ins for stock-they may be put in place so that rather than a share of your company, holders get services, like cloud storage area, by way of example. Below, we run along the increasingly popular practice of launching an ICO and its potential to upset business as we know it.

Let’s start out with Vtcoin, the most famous token system. Bitcoin and other digital currencies are based on blockchains-cryptographic ledgers that record every transaction conducted using Bitcoin tokens (see “Why Bitcoin Could Be Much Over a Currency”). Individual computers around the globe, connected via the Internet, verify each transaction using open-source software. A few of those computers, called miners, compete to resolve a computationally intensive cryptographic puzzle and earn the opportunity to add “blocks” of verified transactions to the chain. With regard to their work, the miners get tokens-bitcoins-in turn.

Blockchains need miners to work, and tokens will be the economic incentive to mine. Some tokens are designed in addition to new versions of Bitcoin’s blockchain that have been modified in some manner-these include Litecoin and ZCash. Ethereum, a well known blockchain for companies launching ICOs, is really a newer, separate technology from Bitcoin, whose token is referred to as Ether. It’s even possible to build new tokens along with Ethereum’s blockchain.

But advocates of blockchain technology say the strength of tokens goes beyond merely inventing new currencies from thin air. Bitcoin eliminates the demand for a dependable central authority to mediate the exchange of value-a charge card company or even a central bank, say. In theory, that could be achieved for other activities, too.

Take cloud storage, as an example. Several companies are building blockchains to facilitate the peer-to-peer buying and selling of space for storage, one that could challenge conventional providers like Dropbox and Amazon. The tokens in cases like this will be the means of payment for storage. A blockchain verifies the transactions between buyers and sellers and works as a record of the legitimacy. How exactly this works is dependent upon the project. In Filecoin, which broke records recently by raising more than $250 million via an ICO, miners would earn tokens by providing storage or retrieving stored data for users.

The first ICOs to produce a big splash happened in May 2016 together with the Decentralized Autonomous Organization-aka, the DAO-which had been essentially a decentralized venture fund built on Ethereum. Investors could use the DAO’s tokens to cast votes on the way to disburse funds, as well as any profits were supposed to return to the stakeholders. Unfortunately for everyone involved, a hacker exploited a vulnerability in Ethereum’s design to steal tens of huge amounts of money in digital currency (see “$80 Million Hack Shows the Dangers of Programmable Money”).

Some people think ICOs may lead to new, exotic methods of building a company. If a cloud storage outfit like Filecoin would suddenly skyrocket in popularity, for example, it might enrich anybody who holds or mines the token, rather than a set group of the company’s executives and employees. This would be a “decentralized” enterprise, says Peter Van Valkenburgh, director of research at Coin Center, a nonprofit research and advocacy group centered on policy issues surrounding blockchain technology.

Someone needs to build the blockchain, issue the tokens, and look after some software, though. So to kickstart a whole new operation, entrepreneurs can pre-allocate tokens for themselves as well as their developers. Plus they can make use of ICOs to market tokens to the people enthusiastic about using the new service in the event it launches, or maybe in speculating regarding the future price of the service. If the value of the tokens rises, everybody wins.

With all the current hype around Bitcoin and also other cryptocurrencies, demand has become very high for some of the tokens hitting the market lately. A small sampling in the projects that vtco1n raised millions via ICOs recently contains a Web browser directed at eliminating intermediaries in digital advertising, a decentralized prediction market, and a blockchain-based marketplace for insurers and insurance brokers.

Still, the future of the token marketplace is extremely uncertain, because government regulators are still trying to puzzle out the way to treat it. Complicating things is that some tokens tend to be more like the basis of traditional buyer-seller relationships, like Filecoin, and some, like the DAO tokens, seem more like stocks. In July, the Usa Securities and Exchange Commission claimed that DAO tokens were indeed securities, and therefore any tokens that function like securities will be regulated as such. A couple weeks ago, the SEC warned investors to take into consideration ICO scams. In the week, China went thus far regarding ban ICOs, as well as other governments could follow suit.

The scene does seem ripe for swindles and vaporware. Many of the companies launching ICOs haven’t produced anything over a technical whitepaper describing a concept which may not pan out.

But Van Valkenburgh argues that it’s okay in the event the ICO boom is really a bubble. Inspite of the silliness of your dot-com era, he says, from it came “funding and excitement and human capital development that ultimately generated the important wave of Internet innovation” we enjoy today.