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A pile of Bitcoins are shown here after Software engineer Mike Caldwell minted them in his shop on April 26, 2013 in Sandy, Utah. Bitcoin is an experimental digital currency used over the Internet that is gaining in popularity worldwide. George Frey Getty Images

Ever since Bitcoin first appeared on the scene several years ago, fans of the cryptocurrency have been searching for a way to apply the idea that might capture the public imagination and broaden the use of the technology beyond just geeks and programmers.

Now, some believe that application has appeared with the rise of the "token" economy, in which companies or startup ventures fund their operations by handing out units of cryptocurrencies. Some companies have even done what are known as "initial coin offerings" or ICOs, in which they distribute tokens instead of shares to investors.

The cryptocurrency market is seen by some as a bubble with hugely inflated prices. Some observers say bitcoin and other similar ventures are similar to Linux , an open-source alternative to Microsoft's Windows operating system that has never really achieved mainstream success.

But entrepreneur and investor Balaji Srinivasan, a partner at Silicon Valley venture capital firm Andreessen Horowitz, believes that token-based systems "may eventually create and capture more value than the last generation of Internet companies."

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In an essay published recently on the blogging platform Medium, Srinivasan and his partner Naval Ravikant, co-founder and CEO of a popular online VC community called AngelList, said they believe the token economy has the potential to become "a Kickstarter on steroids."

The two men, both of whom have been investing in bitcoin-related technology for several years, argue that using tokens as a financing option has the potential to improve the liquidity options that companies have by several orders of magnitude, as well as increasing the size of the available audience that might want to invest in such ventures.

All of this is possible because of an explosion in the cryptocurrency market over the past few years, they argue, in which Bitcoin has survived internal strife but also given birth to alternative currency systems and platforms such as Ethereum.

Initial coin offerings or ICOs are one way of using these new currencies, Srinivasan and Ravikant say. Canadian messaging-app maker Kik recently announced that it is launching its own cryptocurrency called Kin, and plans to offer units of it to supporters through a crowdfunding campaign. The currency is based on Ethereum's blockchain technology.

Kik plans to issue 10 trillion Kin tokens to developers and users via a separate non-profit foundation called the Kin Foundation, which will ultimately hold 60% of all the Kin tokens and be run by a group of independent directors.

Srinivasan and Ravikant warn that some uses of cryptocurrency tokens, including some ICOs, may be subject to regulation by governments if they are seen as equivalent to doing a traditional equity offering or IPO, in which investors receive shares of the company. But they argue other uses of tokens for crowdfunding could essentially be unregulated.

Token supporters say they aren't really equity but more of a digital IOU, which entitles the holder to redeem their tokens in return for access to a platform like Ethereum's.

That access has value because it can be used to generate Bitcoin-style currency through a computer-intensive process known as "mining," and those coins can in turn be exchanged for other more familiar currencies like U.S. dollars. One bitcoin is currently worth about $2,300.

Some skeptics say token-based fundraising has the potential to turn into a huge boondoggle if it is unregulated, with unwary investors being fleeced of their savings with little to show for it.

Ravikant and Srinivasan, however, argue that tokens will allow companies to raise money much more quickly for new ventures than existing systems do, and will also allow for startups to build valuable services without having to rely on advertising as their only revenue source.

Large technology companies like Google and Facebook offer "have sometimes come under fire for making billions of dollars while early adopters only receive the free service," their essay says . "After the early kinks are worked out, the token launch model will provide a technically feasible way for tech companies to spread the wealth and align their user base behind their success."

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Bitcoin Fans Say Cryptocurrency Tokens Are the Future of Tech Funding - Fortune