Ever since the ethereum initial coin offering, ICOs have become an incredibly popular way for startups in the blockchain space to introduce themselves to the broader world. These companies release a token or cryptocurrency via an ICO in order to crowdsource funding. However, the more time that goes on and the more ICOs there are, the more some analysts and investors speculate that the entire scene is a bubble waiting to pop. Wikipedia founder Jimmy Wales has become the latest in a long line of naysayers. He suggested in an interview with CNBC that ICOs are "absolute scams."
Wales Calls ICOs a Fad
While ICOs have become a highly popular way for new companies to make money and have raised about $2.4 billion so far this year, Wales nonetheless cautions investors against participation in any future offerings of this kind.
"I think blockchain is a super interesting technology, but there are a lot of fads going on right now. There are a lot of these initial coin offerings which are, in my opinion...absolute scams, and peope should be very wary of things that are going on in that area," Wales explained in the interview.
Part of the reason that Wales and others have been skeptical of ICOs is because they are largely unregulated. This means they do not provide any protection to investors in case there is fraud or other loss of assets, which in other cases could be reimbursed.
The People's Bank of China declared ICOs illegal in the country last month, and South Korea's government has since stepped in to speak out against the offerings and to ban them as well. In the U.S., the SEC has recently charged two companies that have organized and run ICOs with fraud. (See more: SEC Warns Investors About Scam ICOs.)
Blockchain is a Different Story
Wales described his opinion on blockchain very differently, however, saying that it will "be with us for some time to come." Blockchain is the technoogy that makes cryptocurrencies like bitcoin possible. It operates as a distributed ledger that records every bitcoin transaction in a public space, offering new levels of security and anonymity to investors.
Blockchain has spread quickly across many industries outside of the cryptocurrency space as well, although that has not been enough to win over some more reluctant investment figures. JPMorgan Chase CEO Jamie Dimon, for example, called bitcoin "worse than tulip bulbs," referencing the tulip bulb bubble in the 1600s. (See more: Jamie Dimon Calls Bitcoin a 'Fraud.')
Still, other major Wall Street executives are warming up to the idea of operating with bitcoin, with Goldman Sachs CEO Lloyd Blankfein indicating his firm was "still thinking about bitcoin" in a recent report.