Fintech startups have raised a record $1.27 billion by selling bitcoin and other cryptocurrencies through initial coin offerings (ICOs), the initial public offerings (IPOs) of the digital world, a report has found.

Funds raised by ICOs far outstripped venture capital investment in startup companies, according to the report by equity and research firm Autonomous. It found that the level of ICO investment rose from $26 million in 2014 to the enormous sum of $1.27 billion in the first half of 2017.

“The crypto economy is growing outside of traditional venues – this has happened before with video game gold farming and virtual economies, but not on such a global scale,” Autonomous said in the report.

“The culture of the early internet is directly connected to ICOs and investor personalities in the ecosystem.”

The research firm said that real-world adoption of ICOs, which it called “token launches”, was comparable to virtual currencies in video games, “where in-game gold has value only for internal use by players.”

An ICO is a crowdfunding measure for startups that use blockchain (distributed ledger technology). Rather than seeking investment from venture capitalists or banks – and facing all the regulations that comes with this means of investment – these startups sell cryptocoins like bitcoin and ether in return for cash.

ICOs are similar to IPOs in that they allow an investor to use the software or service that the startup plans to provide. But instead of dealing with investors with a future stake in the company, ICOs deal with supporters of the project, making the investment more similar to a crowdfunding experiment.

And unlike IPOs, ICOs aren’t subject to regulations. But this could be a cause for concern, the report said.

“Unfortunately, many ICOs are fraudulent and intended to take advantage of excitement in the ecosystem by leveraging social media for promotion and a lack of enforceable consumer protection, raising legitimate regulatory concerns and attempts by select market participants to self-regulate,” it said.

Yesterday, fraudsters stole $7 million in 3 minutes by hacking into an ICO from the blockchain startup CoinDash.

But Autonomous said that a decreasing dominance of bitcoin meant that market participants were maturing, and were ready to buy assets other than “digital gold”.

The value of both bitcoin and ether has fallen sharply in recent weeks, although bitcoin was seen to jump in value slightly this morning.