What is an Initial Coin Offering and How Does it Work?
fxempire.com
fxempire.com
Despite all this smart contract stuff, few of these "ICO coins" give the holders any authority over anything. It's not like 51% of the coin holders can fire management.
Ethereum now has half the market cap of Bitcoin, despite the total failure of the DAO, the one big application of the smart contract technology. See "Use Cases Of Ethereum In Different Sectors 2016".[1] It's been six months; what's actually working?
* Branche.io - payday loans. Got as far as the initial token offering 6 months ago. Then, nothing. Did they take the money and run?
* Iconomi.net - "digital asset management platform" - site says "Coming in 2017".
* Augur.net - prediction/gambling platform. Not yet operating for real, but there's a play-money beta.
* RexMLS.com - distributed real estate listing service. Was supposed to have test listings live in April 2017. Didn't happen.
* truststamp.net - distributed identity system to detect fake social accounts. "Connect your Social Networks. The more accounts you connect, the higher your potential Trust Score! Your account information is not stored and your privacy is protected." Not working yet. If it did work, spammers could defeat it by creating interlinked fake accounts on Twitter, Facebook, etc., which some already do.
* chainy.info - store misc. info such as URL shortening bindings on the Etherium blockchain. This seems to work, but isn't used much. If it caught on like tinyurl, the Ethereum blockchain would choke on the traffic.
* uport.me - "self sovereign identity". Still at "sign up for alpha".
* dynamisapp.com - supplementary unemployment insurance that checks LinkedIn to see if you're employed. Not working. Last blog update January 2016.
* ico.inchain.io - insurance against cyber hacks. Site not responding.
* ujomusic.com - some kind of music platform. Not working yet.
* peertracks.com - distributed music royalty system. Not working yet.
* singulardtv.com - distributed video payment system. 5000 Twitter followers! Not working yet.
* beyond-the-void.net - game with Ethereum contracts for in-game currency. Beta version downloadable. At least it's running.
* firstblood.io - e-sports where you can put up money on your play. Alpha available, no beta yet.
* etherplay.io - "Play games and win tokens" - "Coming Soon".
* akasha.world - distributed social network. There's a downloadable alpha.
* vdice.io - online gambling. Like Satoshi Dice, but for Etherium. "Coming soon".
* slock.it - the guys with the DAO and the IoT door lock. That didn't end well.
* electricchain.org - buy and sell solar power over the Ethereum block chain. Lots of PR. May actually be working on a tiny scale.
* lo3energy.com - another energy trading system. Lots of PR, no operating installations.
So that's what people are actually doing with Ethereum. Not all that much. Even the online gambling startups aren't fully operational.
[1] https://www.ethnews.com/use-cases-of-ethereum-in-different-s...
Second, the smart contracts industry has barely made two years and we already have lots of successfull Dapps running on the Ethereum platform(Dex, CryptoDerivatives.Market)
About TheDAO failing, how many air planes crashed before they finally succeeded. And contributed to the current massive mprivement in logistics.
And some projects thought Bitcoin wouldn't scale for micropayments so they should move to Ethereum because they have solved it. Oh boy.
I would assume there are some big bitcoin/ether holders from the early days now who are sitting on billions in theoretical worth and the ICOs provide an inflow of cash that allows them to cash out.
If you have a big bitcoin/ether position then you can make these ICOs pop and then the momentum ends up pulling more people into ether/bitcoin which allows you to exit your position.
I'd also expect a decent amount of what is essentially wire fraud from "startups" who never intend to ship anything.
The blockchain is a revolutionary concept, but right now it's looking like little more than a wild west of fly-by-night opportunism.
Not seeing any big successes.
It's funny how tech people can't understand that innovation is a trial and error path. Ethereum is doing something that has never been done, trying to disrupt the concept of finance and you are talking here about the DAO failure of one year ago that was already fixed with an hard fork solution. Do you really believe that with the hundreds of millions and the back up of some of the most successful companies in the world they will not be able to take the invention to phase 3? You are a really pessimistic folk man.
Now, Counterparty and much moreso Ethereum have created an opportunity for anyone to mostly click through to a new asset/token and make claims about some abstract business idea. FOMO drives folks to invest in the pump-n-dump of the day. Very few of these have any real claim of value.
Please, tell your friends not to invest in these ludicrous scams.
Any money into any cyptocoin is pure gambling. Don't put any money in you can't afford to lose. If anyone is saying the word "investment" while talking about a cryptocoin, smile and nod while slowly receding in the other direction.
As a gambling vehicle, cryptocoins are one of the finest ever created. But people should at least admit to themselves that it's not investing.
That's a little bit of a No True Scotsman, but there's a grain of truth to it. Yes, abstractly cryptocoins are going to create a lot of value for the world. But that value is abstract, at least for now. It's different from the sort of value that a startup creates: at least a startup is trying to affect the world in a tangible way that can usually be explained in a couple of sentences.
EDIT: I think it's possible to invest in cryptocoin, but you have to be willing to put money in and then not touch the coins for years. What bugs me about ICOs is that it's pandering solely to a get-rich-quick mindset. That's nearly the definition of any "initial X offering."
I agree that it is different. Arguably, though, if Bitcoin gains enough traction, it would affect the world too.
But even then, the ways in which it would affect the world is unpredictable and any predictions are pure speculation.
In 2011 people where thinking that when 1BTC reaches $1000 in value, there would be mass adoption and it will be used as a currency for mundane everyday purchases. Well that didn't happen and it doesn't seem like Bitcoin will ever be use in that way.
This hasn't caught on mainstream yet but the infrastructure is there, and it's growing.
And you are not paying with BTC. If it's a debit card then you have to have fiat in a bank account. I guess they exchange BTC to USD when you top up your shift card.
I paid $10 for the card. $0.00 annual fee $0.00 Domestic transactions
BTC is converted to fiat at the time of purchase, also with no fee, no need to "top up" the shift card..
Shift appears to use Coinbase for its BTC->Fiat needs. Coinbase charges exchange fees [0]. Or am I not understanding how the card works?
[0]https://support.coinbase.com/customer/portal/articles/210959...
But also conversion from BTC to USD is not for free. Whoever is doing the conversion is charging a fee.
Probably as part of exchange rate where they add a markup. So you don't see an explicit fee in your statement but they use little worse exchange rate and that is their cut.
Also whoever is their payment processor (whoever they partnered with to print those debit cards as they don't have license to do it themselves) is charging some fees.
Coinbase charges a 1.49% fee when transferring to/from my Bank changing between USD and BTC.
GDAX, which is owned by Coinbase, does not appear to charge me this fee.
I don't see evidence of the Shift card charging it either.
Look at the history: circa 2000 E-Gold was the go-to currency for illegal activity online. In 2008 E-Gold got shut down.
A few months later the bitcoin proposal surfaces and coincidentally solves the "problems" with E-Gold by making it impossible to shut down, impossible to indict the owners, and easier to hide money flows if you are sophisticated enough to write programs to move your money through webs of anonymous proxy accounts.
Bitcoin was designed from the beginning to be ideal for illegal activity and the features that make it good for illegal activity also make it expensive, inefficient, and poorly suited to legitimate commerce (non-repudiation is basically a deal breaker).
Throw in the risk created by price fluctuations and the whole thing is just totally impractical for real world use at scale.
But hey, I was saying the same thing back then too, and I could be a millionaire now, so you probably shouldn't take my advice.
>EDIT: I think it's possible to invest in cryptocoin
smiles about 1000% gains and walks away
I realized that pg has some bitcoins, so it's a stretch to say he's just gambling and not investing. But Bitcoin and Ethereum seem to attract huge numbers of get-rich-quick people that try to convince others the flip is real investing.
Bitcoins will have to overcome massive challenges if it's to become something more than a vessel for speculation and black market purchases. It needs to scale to several orders of magnitude more transactions (none of the proposed scaling methods so far come even close). Then you need to convince the broad public to switch to an unregulated currency (not everybody is a crypto-anarchist/libertarian).
Maybe it'll make it, maybe it won't. And if it does we'll be left to wonder if it's fair that a small share of early adopters end up owning a significant share of the world's money (the new 0.1%). At any rate I'd strongly encourage you to diversify your 1000% gains if you haven't done so already...
you sure? what happened to the estimates related to payment channel proposals: http://diyhpl.us/wiki/transcripts/scalingbitcoin/hong-kong/o...
In general it's a pretty complex technology that introduces a big number of new variables in the mix.
Look at the example in your paper:
>You're probably buying a coffee only once, right? Well, maybe the coffee is $5, and you put $50 into the channel and leave it open. Then someone else comes to the coffee shop and she does the same thing. But she has a channel with the grocery store. There's me, coffee shop, Alice, grocery store, they all have channels. When I go to the grocery store next time, I don't have to open a channel. Payments are routed.
[...]
>I am guessing the mean is going to be 3, but it will probably be an exponential distribution. Most people will probably have 1 channel, and then some might have 100s of channels open.
Note the use of "I am guessing". And what happens if I'm not willing to put $50 in the channel to leave it open because it's a one time thing and there's no point for me to do that? I'd say that most of ebay and other "peer to peer" purchases are like this. Would you put 10 times the amount of the transaction in a channel to some alibaba seller just for the sake of being a good bitcoin-izen?
In general I find the idea of people opening only 3 channels a year to be a tad optimistic if bitcoin is to replace Visa.
So it remains to be seen how well it'll work in practice. Maybe it'll work great, but maybe it'll be a huge mess. At any rate I wouldn't say that bitcoin scaling is a solved problem.
If you put $2 into buying a powerball ticket, you have a ~1:290 million chance at becoming a millionaire and a ~1:50 chance at breaking even.
If you put $2 into bitcoin at any point in history and held for 2 years, you have a 0% chance at becoming a millionaire and a 100% chance at breaking even.
If you left $2 sitting in your wallet for 2 years, you lost $0.05-0.10 depending upon who you believe
That does not compute. What do you mean here exactly? Clearly if you invest $2 in BTC and the value of bitcoins increases 500,000% you're a millionaire. Conversely if it crashes and becomes worthless you've lost everything.
But more generally I wasn't arguing statistics, just pointing out that it's just a big gamble, like the lottery. It's extremely difficult to predict the future of bitcoin so investing in it is not entirely unlike playing the lottery.
I believe there are ways to have an edge in cryptocoin speculating - it is unfair to say that it is all gambling. I cannot say I am very good in this game, there are people at the chats who are way less nervous and emotional and who must have made fortunes, but I have quit my programming job and now live from it.
> How is investing in the stock market not a gamble?
The companies that make stock market in aggregate make money.
There's a huge area in between, and where you place a particular activity on the continuum is largely a judgement call.
In fact the majority of ICOs are not even open to Americans.
With potential ROIs like that (all across the board) I am certain that Wall Street cowboys are all over this market.
But at least we have the SEC to protec..oh we don't.
"The EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities or features on the EOS Platform."
And:
"We believe that EOS means different things to different people. We have received numerous amazing interpretations of what EOS stands for or what it should stand for so we have decided not to formally define it ourselves."
[0] https://eos.io/faq.html, last week's mirror: https://archive.fo/m3D1T
At least they're honest about it.
Or, they expect legal action and they see it as a possible disclaimer.
The special thing about Ethereum here is that they act like a participant in the gold rush to some degree. I actually thought they produce coins and try to find a meaningful use for them, just like bitcoin. But in fact they provide an infrastructure for coin producers. That's really interesting, imo. Since no matter how it goes, they will profit from it, and can easily exit any time when they feel the profits are diminishing too much.
If I were them, I'd create a regulatory company and take a cut for "Ethereum-approved ICOs."
Btw, Given is the number of Ethereum founders is small, you're probably referring to some of many devs working for the foundation as contractors.
Sorry but ethereum has no use case, nor is technically ethereum's architecture makes distributed computation possible or even is decentralised. There is not one single dapp that is decentralised and working.
Sure there is. ENS, for one example. Plenty of gambling apps for another (I don't find them particularly _compelling_, but they are there and they do work)
Also, it can be used to resolve any resource you want - although you're shifting the goalposts, since that wasn't originally a requirement.
Also this is worse than the current system we have in the world because it wastes more energy in doing so!
It claims it is a decentralised naming system, though looking deeper you will find it is just clever marketing and underneath is it is only ethereum-platform based naming for anything like your address etc. will only work in eth browsers, not all etc. which I have already mentioned in my OP.
The "etc" is important here, because it refers to richer resources such as content hashes. With this, you could load the entire "frontend" for a website from a decentralized datasource, e.g. Swarm. Meanwhile, the backend could be the Ethereum blockchain/smart contract methods.
If the root multisig was deleted, would it be 'decentralised' in your book?
> It claims it is a decentralised naming system, though looking deeper you will find it is just clever marketing and underneath is it is only ethereum-platform based naming for anything like your address etc. will only work in eth browsers, not all etc. which I have already mentioned in my OP.
It doesn't claim to be DNS. DNS is not the only naming system.
Given my assumption, can you explain why I can't do this:
1- Have a great idea for a decentralized marketplace app (think OpenBazaar)
2- Store 21 million BazaarCoin in a MySQL database and give these coins some purpose in my app (eg. used to buy stuff)
3- Setup APIs so people can easily trade them (use public-key crypto to track ownership)
4- Make all my code open source and also provide read-only APIs so anyone anywhere can quickly audit the database of coins.
5- Have various exchanges setup USD/BazaarCoin trading pairs
6- Explain all this in a white paper and organize an initial-bazaarcoin-offering to "bootstrap the network"
Where does the blockchain fit in to add value?
Blockchain prevents all that: your code is committed and public
The two most popular blockchains, Ethereum and Bitcoin, can't "handle too much traffic". They both suffer from severe congestion the moment people start using them actively. Distributed databases that have existed for a while scale much more efficiently.
Blockchains do not prevent this.
> you decided you didn't want to play anymore
If the coins have value, users are incentivized to keep the app running to preserve their wealth and to preserve the value of having a network of users participating in the decentralized app. Because all the code is open source and all the data is readily available, I can easily sell off the write keys to the highest bidder. There will be bidders because the BazaarCoins and userbase has value. If it does not have value, then there is nothing lost in me burning the write keys.
The blockchain does not add value here.
> you might be tempted to create a bunch of coins on your own mysql database to pay yourself
I cannot do this without hurting the network. The data is all readable so people will know. If I'm lying about the data being available, I will be sued or worse: arrested for fraud (because I'm selling something that is not in the contract).
The blockchain does not prevent this either, by the way. If anything, it is worse: for example, the Ethereum Foundation broke their promise of honoring "code is law" by reverting transactions on the blockchain and paying people who should not have been paid. In the real world, this is fraud.
> because authorities seized your servers
Bingo! I agree with this argument. The blockchain allows anyone to use the app and disregard authority.
That most alt coins are crap is, I think, common sense. Such agresssive investment into something with such limited present-day value (i.e. The PE ratio, as it were) smells off. If cryptos are like other markets, they'll need to show more short term value soon, or crash.
Agreed, if taken by count. But there's a few that offer real distinctiveness IMO: Litecoin (scrypt, segwit), Monero (cryptonight, ring ct), Myriad (multi-PoW), Peercoin (PoS), CounterParty (colored coins/tokens). I'm not super up-to-date so there are bound to be more modern ones too.
We all heard Litecoin loud and clear win the race to segwit and it lit a fire under Bitcoin. In fact, many of these coins serve as inspiration for features included or considered for inclusion in bitcoin. So if nothing else they offer real world testing grounds (not merely testnet) for cryptocoin features.
> Your position is just absurd to say that Ethereum and what is buildable on top of it are valueless.
As noted elsewhere, I don't think Ethereum is worthless. But there are a lot of junk assets on there. Are there more junk Ethereum assets than there are junk altcoins? Well, IMO, the only investment altcoins solicit is computational capacity of PoW to secure their blockchain. Some altcoins do a premine and in general I think those are often as shady as some of the junk Ethereum assets.
I think this is not accurate. It's more likely accurate to state that their use is not tested in courts. But if you could show corporate communications indicating "such and such mechanism will be how we track obligations to shareholders or creditors" and establish that the tokens were not paid back per the operations of the token mechanism, then in all likelihood a court would agree and find evidence of damages and/or criminal wrongdoing.
Lawyers strike me as a particularly pedantic crowd (similar to programmers) and I would suppose if pressed about such tokens they'd say "this is a grey area because there's no precedent here yet." But AFAICT intent trumps everything else. If you make a new contract that's not called a contract but smells like a contract and get everyone to agree to it but not write their signature on paper, you have not dodged responsibility.
OTOH regulators like SEC might balk and throw their hands up at things like this and claim that they're not securities or that it's out of their scope. But district attorneys, attorneys general -- they probably wouldn't back down from a case like this if it happened to constituents that they think are important enough to stand up for.
More interestingly, there seems to be no real answer for the question you have asked. What is the real value, if the courts and legalities are what people need in this situations, and those things are already in place? Sometimes it really seems like the enthusiasm of most honest people coming into ICOs is fueled by the fact that they don't understand this. They don't comprehend what stocks are really about: making sure that the state can aid in contract enforcing.
Think otherwise? Please prove me wrong. There just don't seem to be any real industrial value in ICOs, we already have stock technology.
Psychology?
Telling about something increases interest...
I have a website https://icofomo.com
Which currently has raised $123,317,760.00 in bitcoins and $68,709,765.86 in ethereum. Almost $200,000,000 raised for something that doesn't even exist yet, all so that the founders can create it.
It's basically $200,000,000 into a kickstarter. What the absolute frell is going on there I have no idea.
Money laundering? Flight capital? Under the table payments for services rendered in some other area?
I have no insider knowledge. It's just a speculation. But if even 10% of this actually exists in some liquid sense this is serious money. The number of participants in these markets is far lower than Kickstarter and yet the money in question here is massive.
I've read a few of these ICO white papers. They are largely jokes, total buzzword salad with little in the way of novel developments. There are a few ICOs that might actually be worthwhile experiments but the majority are ridiculous.
"If something makes no sense from a business perspective, maybe it makes sense in some other way."
I've heard that saying from multiple sources. Apparently it's a saying in the investigative world. It is said of perpetually money-losing yet eternally floated businesses, businesses that don't actually do anything yet seem to be moving a lot of money around for services rendered, and absurd-looking "investments" that raise money from weird sources.
Chinese or Russian flight capital is one very good possibility. There are a lot of very rich and often corrupt people who want to get money out of those countries without tipping off authorities and skirting currency controls and (in Russia's case) embargoes. One way of moving money illicitly is to basically execute a pump-and-dump or Ponzi scheme against yourself. The losing side is the sender, the winning side is the receiver. You lose some in the transfer but that's cost of doing business.
Vancouver recently enacted a foreign property speculation tax to curtail its ridiculous flight-capital-driven property bubble. There are rumblings of similar measures elsewhere. Perhaps other avenues for flight capital are being experimented with. There are hundreds of billions of dollars waiting to be expatriated from these countries.
Someone is always paying attention, especially when this kind of money flies around. I again have no inside knowledge but I can nevertheless say with 100% certainty that intelligence agencies and police agencies are watching.
In any case stay away. Stay far away from scams. A lot of people get deluded into thinking they can skim from these, but if you aren't an insider and don't know the timing you'll get fleeced.
Edit:
I've long heard the rumor that some obscenely big ticket sales of crummy WTF "art" are money laundering. "If something makes no sense..."
Tezos asks a vital question. Can cryptocurrency governance be decentralized? Can we do better than the anarchy of management for Bitcoin and Ethereum with chain splits being the solution to dispute?
I for one gambled some of my portfolio I am willing to lose to find out and spent a lot of time researching their code, and team before doing so. I am as interested in seeing Tezos fail (and thus further indicate anarchy and splits are unavoidable) and seeing my ETH/BTC holdings continue to rise as I am in seeing Tezos succeed and overshadow everything by proving it can rapidly evolve and incorporate the best features of other coins without forking.
Because to me it seems absolutely ridiculous. For comparison, Docker has so far raised around 180 million in 5 funding rounds. It has somewhere between 300-400 employees.
Money as it exists today and how we attribute value is pretty ridiculous. Blockchain tech today is the 90s internet, poised to crash hard then later be integrated into the lives of everyone.
What does this mean, really? What is decentralized governance and how is Bitcoin's governance not decentralized? Isn't anarchy decentralization by definition?
I guess some of this is from Etherum and Bitcoin early investors who have been their holdings appreciate?
The numbers are staggering given that I think institutional and professional investors are not in this market?
What might illustrate this is the famous pizza that was purchased with bitcoin in 2010, which would have been valued 23M USD today.
So this is only 10 Pizzas that were not bought with bitcoin in 2010.
I had been wondering what the appropriate comparison was for ICOs, which don't confer ownership, dividends, etc.
The difference I guess is that these are tradable immediately, whereas with Kickstarter, you have to hope they produce something tangible you can eventually sell on eBay.
Long before the term ICO was coined (no pun intended), there were multiple markets for bitcoin securities dating back to 2012 - possibly earlier. I am referring to business ventures here, not clones of the bitcoin repo with a modified PoW mechanism or similar. There were many scams for every one legitimate venture. Many legitimate ventures eventually mutated into scams. Investors that started out as bitcoin maximalists were often crying to the SEC for help getting their bitcoin back. Some of those ventures run to this day.
The market was chump change back then. Tens of millions maybe. With ERC20 and ICO mania, we have front row seats for failure on a grand scale. The exuberance is terrifying to me given what I experienced years ago with bitcoin securities. For that reason I stopped making investments in May and started doing some real diversification. For many investors, ICOs will be their first taste of "a fool and his money are soon parted." For many projects who have conducted an offering, ICOs will be their first taste of what it's like when the SEC come knockin'.
I'm quite sure there will be some success stories a few years down the line, but they will be accompanied by a plethora of scams and all the media attention that comes with bad news. I think this form of funding is a vague peek into the future of project funding. Ethereum is not necessarily the specific answer, and the ICO framework will have to burn to the ground a few times before it evolves into something useful.
We're now capable, thanks to these consensus systems, of creating tokens that have certain properties. For instance Bitcoin is a specific kind of token which is scarce - hence will work more like gold. Other tokens (perhaps Ether or Dogecoin) instead are not scarce at all, and new tokens continue entering the system all the time.
What's interesting about these systems is that we're converting money from the "real world" into this "speculation world". And purely because of speculation, real money is essentially being converted into this digital world.
In a very abstract way, we're essentially converting FIAT real-world money into these digital tokens that are hackable and can take on a myriad of different attributes.
To me this smells like the future - even though we're still far from it. Capitalism and the banking system we have created for ourselves is certainly not going to cope with the technological automations and the sheer amounts of jobs we're going to lose (hence automate) quickly.
Universal basic income is only part of the solution - but something like a world of tokens that behave in very different ways might be part of the solution as well. Even though we might not see the possibilities nowadays, to me it's very exciting to see how something can gain value simply because of speculation.
Perhaps in the future we'll have to redefine even what "money" is, or what "valuable" means. Again, if we're thinking about fully-automated societies, perhaps the idea of having a scarce token that only banks can create (our FIAT system) is not ideal. Perhaps the future is any kid creating his own token with some funky properties for his own videogame, and living off the "likes" he gets on some social network.
There's a rich history of this in the securities world. Note that many times across multiple countries, joint-stock companies' stock ended up becoming interchangeable with government- or metal-backed currency. John Law's currency scheme for France was a sale of stock and bills, not modern cash [1].
You talk as if we were never able of issuing digital tokens before. All you need is a MySQL database and Apache. World of warcraft has tokens, Counterstrike has tokens (skins), Airmiles has tokens, Microsoft has tokens.
Tokens are not new. Having them on the blockchain is new. And what does that give you? censorship resistance. This is the first time that these tokens can be issued and traded with very little regulatory oversight. This is because in theory, anyone can be a transaction validator, and in theory you can have pretty good privacy on the blockchain.
However, existing financial instruments (and tokens) will always be more efficient on a centralized platform, because it cuts through coordination and communication costs. But when you centralize, now you need to govern and report to authorities. So you cannot do transactions that are great for the blockchain: buying drugs, political donations, capital flight, funding activism, etc.
I think it is likely this is the future - and there is little to no mention of "asset backed tokens" which is the core of the ICO offering, essentially buying against future revenue cheaper.
The text as written on this site describes a conspiracy to commit tax and securities fraud. I have no idea if it will ever be prosecuted as such, but that is what is being proffered here.
The subtext is that a bunch of finance quants read Cryptonomicon and think the blockchain is the answer to their dream of becoming the gangster bosses of the anarcho-capitalist hellscape from Snow Crash.
I know the transition to this model seems impossible and this is what most people in the blockchain-space blissfully ignore.
> The subtext is that a bunch of finance quants read Cryptonomicon and think the blockchain is the answer to their dream of becoming the gangster bosses of the anarcho-capitalist hellscape from Snow Crash.
This made my day, it's a shame it's too long to tweet
Real resistance to gaming requires continuous adaptation. Google "red Queen's race." All closed form systems would fall.
I'd rather live in Snow Crash than Brave New World.
[1] https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years
https://twitter.com/jonst0kes/status/880806655067291649
(Sadly, twitter's threading model is now so broken that you have to do lots of clicking to get to the good back-and-forth dialogue in there.)
Anyway, I'm sort of toying with the idea of doing a kickstarter for a big explainer book on blockchain, cryptocurrencies, and DLT in general, which would basically be like my CPU architecture book ("Inside the Machine"), but for this topic. (I'm spending all my spare mental bandwidth right now on understanding this tech, mostly so I can think through shorting this space eventually, but I'm not convinced it's worth my time to try to explain it to the general public... a kickstarter would help me price that. I dunno though, I've never even backed anything on kickstarter so I'd have to spend a bunch of time figuring out how to set up a successful campaign, first.)
But to sum up, people I've talked to in this space think the ICO thing is a frothy mess, but it's also set to get worse as the general public gets more opportunities to buy in. A lot of these ICOs are built on top of ETH, and the path to USD liquidity is through ETH, so despite the platform's issues it seems likely that ETH is going to get much of the benefit of this bubble (and much of the negative impact when the bubble pops).
I'm keeping an eye on the upcoming ETH exchange-traded trust, and I think there will be an ETH ETF that will eventually launch and get bid up.
Anyway, writing a book is an actual job for some people, and not a hobby, a passion project, a speculative endeavor, a side gig, or a way to boost your leverage in compensation negotiations with potential employers. Seeing as how it's an actual job that entails a bunch of really hard work that I don't have to do and, frankly, don't particularly enjoy more than N number of other things I'm doing right now and that I'm good at, I'm not interested in doing it unless it can replace some subset of the paid work I'm currently doing that I enjoy (and learn from).
How is this fundamentally different than pre-orders? It seems to me like these ICOs are selling future access to some software that hasn't been built yet. Game companies sell pre-orders to the public all the time to finance the development of the software.
(I don't have any money in cryptocurrencies, but the ICO seems like a good way to fund a seed round for certain types of software, as far as I can tell)
When you buy a new coin you get the right to use that coin in some future micro-economy. What rights and expectations go along with that purchase? What if the micro-economy doesn't value the coin the way you originally thought? What if it never materializes?
Both pre-orders and ICOs can be scams. The difference with ICOs appears to be an added layer of misdirection that could perhaps enable more successful scams.
It's like pre-ordering a game where they don't tell you the genre, won't tell you what platforms it runs on, and don't have any concept art drawn.
Oh, and the fine print says they make no promises to actually make a game, and if they do, they don't have to give you a copy.
I understand that I could create a FrogCoin by cloning Bitcoin or Ethereum. And then I sell investors... what exactly?
Individual coins? Are coins not mined in this scenario?
Would FrogCoin be tied to some real world asset that makes them inherently valuable and/or practical?
Or are ICOs just gambles that maybe FrogCoin will be the winning currency? It can't be that stupid? Right?
Today, most of the ICOs are made on the Ethereum blockchain, it's a way to crowdfund distributed/decentralized application and protocol. It's not about currencies anymore.
The tokens that are sold are "API keys" that will be needed to use the protocol / application.
Lots of things are good candidate to decentralisation : VPN, cloud computing, cloud storage, social media plateform, Quora, Reddit, HN, any service that make the bridge between users and take a HUGE commission : Uber, Airbnb ...
I don't know if any of these decentralized application will ever succeed but the business model / crowdunding model is evolving and in some area, like open source projects it makes lot of sense to create / use decentralized services.
I get the trustlessness of 'smart contracts', but with tokens-as-API-keys I still have to trust that your company's products will work and that those API keys will continue to work.
Or, is the idea that the code my API key gives me access to is also defined and executed on the blockchain? That would reduce the trust I would need to have in the company pre-selling the API keys. At the same time, buying access to immutable code where functionality can't be enhanced and bugs can't be fixed is kind of lame too.
On second thought, I don't think that helps all that much, since that could just be an API endpoint on the company's server instead.
Maybe the actual benefit is just interoperability with other crypto-currencies?
The people doing an ICO do it to raise a bunch of money, much like a kick starter campaign. The people buying an ICO buy it for a quick buck and a lot of times they end up selling these coins from the ICO for 10x, see BATs.
The allure for people starting a company is that you can raise millions and give 0% of your company away. Some people will scam, it's true maybe a lot will, but some will undoubtedly start something big and will want to do more than just scam.
I think it's technically just fraud: they take your money, convert it into worthless acorns, then when nothing happens, the acorns can't be traded for any value.
1) Get into the ICO race and be quicker than others so you get tokens. There is always massive demand to participate in ICOs so most people aren't quick enough to get their transactions in.
2) Wait until the new worthless token is listed on some speculative exchange which allows trading of these tokens (Poloniex). In the meantime hype the token on social media like Reddit to increase FOMO. Once it's listed those people that didn't get into ICO will rush in to buy tokens as they anticipate the price to go up by 10x.
3) The ICO investors cash out their coins from this initial spike of new money rushing in after listing on exchange.
4) Rinse and repeat.
So I think I wouldn't count such usage as it's all speculative until there is some mainstream application which actually uses smart contracts or public blockchain.
Most transactions on blockchains (Ethereum or Bitcoin) are just moving tokens between addresses on exchanges (either by bots or by gamblers who do it manually) or moving tokens to ICOs to create new tokens and then trading between different kind of tokens in order to gamble and hopefully make some money from it.
I think it's just fraud: taking people's money with no intent or ability to return anything.
A system which enables scamming like that is a horribly broken system, and the occasional success story does nothing to change that fact.
Contrast this to an IPO, where you have to more or less lay all your cards on the table before you can sell your stuff to the public.
>A system which enables scamming like that is a horribly broken system I agree, lots of people are going to get scammed, and the market/ the ICO structure is going to evolve, that's natural. People are already digging and you can already see very well documented due dilligence about ICOs.
I don't think it's a broken system, it's just a young system that is evolving quickly.
ICOs conclude once the coins or tokens are tradable in the open market.
This is a part that has eluded me thus far: how are the new coins tradable on the open market? I'm genuinely asking - most exchanges don't support all crypto coins, and certainly not the dozens of new ones being created. How does one invest in an ICO and then 'cash out'? I see the ROI stats on some of these ICOs but I'm curious as to if those investors are basically sitting on that ROI hoping it doesn't evaporate before they can sell. Can anyone provide insight here?
Everything is a pyramid. The question is just for how long it lasts. I mean there was a pyramid called monarchy that ruled the planet for a few centuries. There's capitalism which will be replaced by something else, maybe 20 years, maybe 500 years from now. Instead of worrying about the pyramid-ness of something it's much smarter to decide whether or not it is currently under- or overvalued and what the trend will be.
And here starts my opinion: I think crypto coins are currently way overvalued. They exist for longer now than most people spend in university. And yet a real market value hasn't been established yet. The one possible true market value, micro transactions, seems to have been overcome by simple small step technological evolution. It was a huge thing around 2010 that nobody could do, but now it's common to pay sub-dollar prices on all kinds of things online.
Also opinion: The reason why people are willing to spend so much money on ICOs is that they hope the bitcoin dream will repeat itself. And as is often the case: if the dream is strong enough, it seems to get fulfilled, because so many people pour their money and energy into this hope. But I don't see what there is besides the hope.
Many people will be disappointed when they find out there wasn't much besides their own self-illusions.
A real market value, in the sense that "something is worth what someone will pay for it", has been established. There's just a lot of people scratching their heads about it.
What's the real market value of diamonds? Or gold? In the apocalypse, you can't do anything with either, but I think you'd have a hard time making the case that there's no "true market value" to these goods, even if you find their utility dubious.
Yes, you concluded correctly that I see a strong relationship between market value and utility. I'm not sure if market value is the correct word for it, though. English is not my native tongue. There are two values a product has. One is trade value, the other is what you call utility. I believe the trade value of crypto coins exceeds their utility a lot. And I believe they have nearly no utility at all, because otherwise it would have shown by now what the utility is. I also believe it's totally possible that trade value can be kept high without utility for a long time, thus "people are willing to pay a big price for it for a few years" is not a proof of utility to me.
For example, this happened with Basic Attention Token (150 people only did the ICO if I remember correctly), but also with Status, Bancor etc. So when you have 10 000+ people trying to buy a token, and only a few hundreds achieve to buy it because the network does not scale yet and a bunch of people with a lot of money can afford 1000$+ transaction fees, these tokens skyrocket once they hits exchanges.
If democratizing access to ownership offerings for the purpose of quick sell off is the major benefit of ICOs, what does this do for serious businesses? Why would they choose an inherently less stable and less secure (cf. DAO hack on Ethereum) medium if it primarily benefits the investors and not the company?
Beyond that, it remains to be seen what IRL innovations can be enabled by ICO, whether more easily or necessarily vis a vis traditional fundraising vehicles.
I was at a social event recently and some remarkably non-technical people were talking about bitcoin. It reminded me an awful lot of the wall street adage about the shoeshiner/waiter/driver talking stocks...
WARNING: This site has been identified to potentially trigger vomiting for people with morals. Viewer discretion is advised.
I'm not being facetious; I just had a hard time getting answers from the website.
FX trading and daytrading are two forms of legalized gambling for the upper class, so it makes sense that the same crowd will be interested in cryptocurrency. Such people are generally aware they are speculators and participating in a high-risk activity, so, fine. But what I worry about is the "dumb money" that follows. I saw Twitter ads for a "Bitcoin IRA" today. If you're putting your retirement savings in Bitcoin...
On the other hand, I'm very interested in Hyperledger (IBM Blockchain) [1] which gets scant attention here. Indeed this thread already has more comments than all of the Hyperledger threads combined.
Hyperledger is strongly influenced by ethereum and bitcoin. But instead of being slow (10 minute transactions), expensive (you're bidding for miners time), and anonymous (anonymous), Hyperledger is fast, cheap and identified.
And apparently boring.
I have $0 in Bitcoin or any other cryptocurrency and I was there in 2009 when Satoshi was marketing Bitcoin to those of us at the P2P Foundation. I have to say ICOs may be the killer application for a semi-perfect medium of speculation like Bitcoin.
The rounds aren't really "initial" after the first one though, are they.
1) Tax avoidance 2) "Safe" jurisdictions (so they don't have to worry about any repercussions in case they just run away with the money)
Lol! Financial crisis, anyone?
For fucks sake, even kickstarter etc is full of scams that never deliver - and they work within a legal system, with clear lines of identity and responsibility, and build things that are much easier to understand ahead of the time.
It's obvious that the ICO buyers are half clueless people who can't evaluate the risks, and half folks exploiting the former by buying early and trying to flip the tokens once the market opens up.
Sure, there's certainly some teams that are trying to build legit things with ICOs. But when you have two funding systems, where one is completely open, and the other requires certain guarantees (identity, legal responsibility), the first is always going to be full of scammers.
Exactly. It always cracks me up when people tout the completely deregulated nature of cryptocurrencies as a good thing.
Well, I'll acknowledge that there are real downsides, but I think it might be feasible to (over time) build opt-in layers on top of the existing layers which serve some of the same purposes as some regulations and handle some of those issues.
States are good and important and all, but if we can build something that makes some of the roles of the state unnecessary/redundant, that would be cool I think.
I don't know, maybe this is largely an aesthetic preference?
Some industries already self-regulate precisely to preempt regulation by a government agency, as in: "we're well-behaved amongst the rules we made for ourselves, so please don't step in and start making rules we cannot control".
inb4 downvotes
That said I wouldn't fault you for believing that a lot of the $xM raised in x ICO just turned out to be largely the creator seeding the pot and a minority of other people buying into something "big". You could even take out a loan, there's nearly zero risk other than the operator of the ICO running with the scratch.
I honestly thought there was like a few of ICOs to date, and that the whole thing is like a month or two old. Does anyone track these things? A continuously updated list would be great!
It's becoming especially more concerning now that we have one man companies raising hundreds of millions of dollars in couple of hours/days. This can't end well.
I agree that many ICOs are scams, but I disagree with your statement for the following reasons:
1. Most large ICOs have not been scams, but several have failed (see theDAO). Because you choose a short time horizon (launched in the last year) it excludes both successes like the Ethereum ICO and failures like theDAO.
2. We say "They all" however most of the larger ICOs have not been scams. I only need to provide a single counter-example: look at the Brave ICO.
>It happens over and over again with no memory of the past failures, apparently.
I'd be interested in seeing some examples? What ICOs over 5 million USD in the last year were scams? For the record I don't doubt you can find some.
The money raised will be invested and you will see then the result of the investment.
It's funny how people think about the future looking at the past.
Cryptocurrency is great. ICOs are almost universally scams.
Extremely complex and abstract "products" based on an incredibly complex and unproven systems and yet managing to raise millions of dollars almost daily? I don't know what is a scam and what is just extreme optimism in the long term performance of those blockchain startups but it feels more like playing in a virtual casino than investing in a startup.
How many of these ICO investors/gamblers would be able to explain in details what the startup they're funding is doing and how they're planning to generate revenue in the long term? Not many I bet.