Ex-ethereum CEO says digital coin market is a ‘ticking time bomb’

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The technology of the Ethereum platform is represented on a computer screen at the Ethereum DEV offices in Berlin, Germany, 14 April 2015. Ethereum is an open source platform that hosts applications and data on a decentralized network.

The co-founder and former CEO of the organization behind ethereum is worried about the surge of interest in developing new digital currencies, according to a Bloomberg report Tuesday.

The key reason is a jump in token sales, or initial coin offerings, that have raised about $600 million in the last month alone, according to a July report from Autonomous NEXT. Enthusiasm for the new cryptocurrencies created for the initial coin offerings has helped push up the value of established ones, like ethereum.

“People say ICOs are great for ethereum because, look at the price, but it’s a ticking time-bomb,” former ethereum CEO Charles Hoskinson said in an interview with Bloomberg.

“There’s an over-tokenization of things as companies are issuing tokens when the same tasks can be achieved with existing blockchains,” he said. “People are blinded by fast and easy money.”

Regulations in the U.S. for the digital coin sales are unclear, prompting most of the fundraisers to prevent U.S. residents from officially participating.

Hoskinson left the original ethereum project and has since founded his own blockchain company IOHK. He’s also a supporter of an ethereum offshoot called ethereum classic.

He is not the only proponent of digital currencies to send a warning signal about the initial coin offerings.

William Mougayar, author of “The Business Blockchain” and the organizer of a conference about digital coins in New York, called three ICOs “reckless” and has described the surge of fundraising as “greed.”

Ethereum is up about 3,000 percent this year. The digital currency surged 30 percent Tuesday to hit a high of $249, more than recovering from a 40 percent drop over the weekend, according to TradingView charts of Coinbase data.

Read the full article on Bloomberg here.