New digital currency 2,000pc price rise in a week

A new digital coin is polarizing the cryptocurrency community after a massive price run-up stoked speculation that it could be a pump and dump.

The coin, called Steem, surged 20 fold in value in the past week, from around 25 cents a coin on July 8 to around $5. It quickly established itself as the world's third-largest cryptocurrency, behind Bitcoin US:BTCUSD and Ethereum.

In the span of less than a week, Steem has gone from the 10th largest cryptocurrency by market capitalization to crack the top three, surpassing Ripple and Litecoin, which have experienced their own boom-andbust cycles.

Cryptocurrencies are notoriously volatile. It's not uncommon to see investors pile in to a new digital currency, hoping to ride a speculative wave to a quick profit. Often, the gains are unwound just as quickly, as buy- ers rush for the exits.

Ethereum, the secondlargest cryptocurrency, saw its value increase from about 50 cents a coin last summer to a peak north of $20 a coin in June, before tumbling back to $12 a coin. But Steem stands out because of the pace and magnitude of its rise, and for its unique business model.

Steem's creators designed the digital currency to be a part of a social-media platform, called Steemit, that rewards users who publish content based on its popularity. Its founders say Steemit will attract users by rewarding them for behaviors that other social media companies, like Reddit and Facebook, use. Steem's creators tout it as a revolutionary social-media platform that subverts the business model of Facebook and Reddit, allowing its users to profit from the content they create.

"People should be getting paid for the work they do. People are showing up for free and putting countless hours of their time into these platforms that make money from them," said Ned Scott, one of the creators of Steem. Users who publish posts on Steemit, which loosely resembles Reddit, are rewarded with Steem tokens. The more popular the post, the larger the reward. Users who recommend content are rewarded, too, depending on the content's popularity.

But the cryptocurrency also trades on the secondary market, where speculators have appeared eager to drive up its price. A single Steem token was worth about $4, according to Coinmarketcap.com. Critics say Steemit's business model is, at best, convoluted, and at worst, nonsensical. In a Reddit thread, users debated whether Steem was the first step in a socialmedia revolution, or a scam.

"I don't know why it has value," said Tone Vays, head of research at BraveNewCoin, a company that provides data and analytics about the cryptocurrency market.