Filecoin Suspends ICO After Raising $186M in One Hour | Hacker News Reader

Filecoin Suspends ICO After Raising $186M in One Hour

financemagnates.com

287 pointsianopolous360 comments

I listened to this YC podcast[1] twice with Juan Benet. Listening to Juan talk about a lot of historical information and the correlations he drew was fascinating. When he tried to explain the need for Filecoin to Dalton, I just didn't hear it. Dalton kept asking him over and over what the point was and he kept giving non-answers (at least in my opinion which doesn't mean much to be honest). I understand the goal of the protocol and the incentive structure behind the protocol, but I don't see a clear vision with the product.

[1] - https://blog.ycombinator.com/ipfs-coinlist-and-the-filecoin-...

> When he tried to explain the need for Filecoin to Dalton, I just didn't hear it. Dalton kept asking him over and over what the point was and he kept giving non-answers

His favorite response was "...and a whole bunch of other things".

On a more serious note, it's very early days for the filecoin and related group of projects that they intend to fund, so the answer to Dalton's question is : "we don't have the answers yet. There are a whole bunch of theoretical use cases and the most promising seems to be decentralized storage. The reason we are raising money through this ICO is simple : people are ready to invest dumb money and we are more than happy to take it. We have legitimacy because we are backed by the most well known VCs who are eager to 10X their money within 3 years and we have a whole bunch of protocol design/specs."

It's kind of self fulfilling : promise a grand vision, take hundreds of millions and hopefully deliver any working product sometime in the future.

But seriously, what are they going to do with that much money? How many developers do they actually need to scale up and what milestones are they trying to hit?

When people say "its early days" I mentally replace it with "I don't know"

https://www.google.com/search?q="its+still+early+days"

Based on your post I went and looked up that question/answer portion, and I think the back and forth is illuminating in it's lack of either communication or actual capability:

TL;DR: It's a solution in search of a problem, like so much good, early technology.

Dalton Caldwell [31:07] – What is the burning, and it’s okay if it’s not consumers, but what is the thing that, with Filecoin, that is gonna make, whether it’s business or consumers, people get really excited about using it?

Juan Benet [31:19] – Filecoin is not representative of the entire industry. Filecoin is one example. With Filecoin, the point is being able to, this is a whole different argument that I think makes sense with or without a peer-to-peer winter or summer. The thoughts around Filecoin are about thinking about the massive latent storage that’s out there and putting it to good use. There’s exabytes of storage that are not in use right now, and that if you were to add them to the market, you would drive the price down significantly......That’s, I think, fundamentally different about this type of thing than normal consumer products. They solve a lotta problems for a lotta people.

Dalton Caldwell [33:41] – You said financial, though. Again, they’re doing it for financial reasons. Again, what I’m looking for is what is the incentive for someone to get involved, whether it’s a business or a consumer, the reason you would put a miner on the network?

Juan Benet [33:53] – For Filecoin specifically, the reason why somebody would add storage to the network, the primary motivator will be money....

That's a bit convoluted, but it isn't so bad, is it? Lots of unused storage, bitcoin showed you can use cryptocurrency to create a network of capabilities (there: hashing stuff, here: of storage), additional uses are possible when getting the mechanism right.

I don't think it's good or bad, but it shows that there isn't a slam dunk product-market fit here and they are searching for what the value is.

I think by the way, that's absolutely vital to progress, and I am glad someone has convinced VC/Money to fund something potentially breakthrough (whether I think it is or not).

I don't see how a new blockchain is necessary in order to utilise unused storage space. Protocols like this work just fine without them, especially if having a centralised orchestrator (filecoin themselves) isn't an issue. Which in this case, I can't see why it would be.

I think the idea is the blockchain part allows people to be compensated at a price determined by the market for opening up their storage

Only that you do not need a blockchain for that. All you need is a market place, and that works perfectly fine without a blockchain. It's a needless complication imho.

exactly my point. Market dynamics existed long before blockchains.

But maybe we both miss a thing here. Maybe this is less about file storage and market place, but more about having an alternative way to mine cryptocurrency, which has its own value as long as speculation is ongoing. Well, maybe that's a bit obvious given the hype around the IPO.

That would mean filecoin is less about the use of decentral file storage, but more about giving people a different way to create something that looks like bitcoin that does not involve buying sold-out gpus, unlike ethereum, and storing files is more comfortable than having a gpu make noise all the time anyway.

so it's yet another way for people to play pretend-stock-market but using a different model of wasting computational resources? That's about what I expect from cryptocoins at this point.

Not really wasting in this case. There is at least that.

true, at least it's just storage space instead of spinning thousands of servers at 100% all the time and wasting huge amounts of electricity. At least, assuming that people don't start creating miner farms with huge amounts of space like they do with GPUs at the moment. I don't know how filecoin ties to the storage requirements of the customers though so that might be handled by market forces.

Come don't ruin it like that

storing files is a lot cheaper (energy-wise) than having a GPU continually crunch hashes, too.

Is bitcoin a needless complication of cash?

I mean what would motivate you (or a corporation) to put those hard drives that are there with no use to work while you wait for new clients or something, is like renting disk space, I don't know why it doesn't click on HN.

my question isn't whether utilising under-used hard drives is valuable - it's why on earth blockchains are necessary. You could provide all this functionality with client software connecting to a company's orchestration service. It doesn't add any value.

The lack of "a company" (read: censorship, speech codes, political influence, etc) can be considered to be a value. Decentralization is a Good Thing.

Decentralization is good when it solves actual problems. I think the problem most people here have with FileCoin is that it's a little bit too much like "Bitcoin but with file storage instead of CPU cycles" without really explaining what the problem is. Who is willing to pay for decentralized storage? Besides criminals and enthusiasts, I can't find a good use case.

Why besides?

Centralized orchestration of storage = maybe you can raise $10M.

Decentralized blockchain orchestration of storage = you can raise $200M... in the first hour.

Is it me or is the elephant in the room like "get paid to put pirated movies, games, music, software on the network"

Obviously, no one is going to admit it because then your network is tainted but every file sharing outfit ultimately ends up do pirated.

I've been mining lbry and it seems lot more ahead of these others. https://lbry.io/

You can't create a business out of pirated content (anymore). You can maybe create such a network, but not gain money or stay out of prison.

Filecoin to my knowledge has or will have no capabilities of sharing files. It's dumb end-to-end encrypted decentral storage (which is a good thing!).

so you have file storage and a currency. you need a dao to manage the index/search.

dao=data access object?

You can't implement indexing and search over end to end encrypted data file chunks. You would have to work with the hash of complete files and a localizer, and you want that in the initial design.

Distributed org creates account rents massive file store builds index and use contracts to enforce rental fees.

Thats auper nice

For OpenBazaar, built on IPFS, we've gone the route of federated search with an open API. A DAO could be interesting but a lot more work for little gain.

Eventually I'd like to open source code that lets any user create their own index/search server and potentially charge for usage if they want.

Filecoin is being built on top of IPFS (ipfs.io) which, in principle, could be used as a really robust network for sharing pirated content.

However, the IPFS team is aware of this problem, and is building in measures to allow nodes to opt out of storing globally available blacklists of known bad objects (i.e. pirated content or illegal content)

In practice, this is definitely a really hard problem to solve, and very important. But I think doable.

If you're hosting something such as a movie, and it's blacklisted, couldn't you just add a small amount of noise to the video file to make it unblacklistable?

I guess that depends on how things are being blacklisted.

Exactly. YouTube has the same problem and does all kinds of things to detect this. They have the benefit of already having the media on all their own storage which they can run a map-reduce on, however.

For now, but this sounds like a problem machine learning was built to solve. Youtube has issues because with the sheer volume of video they don't have the silicon to transcode/examine every frame, but on a more limited network with less traffic such analysis might be doable. The more "variations" people introduce in response, the larger the training set for the algorithm.

Yes, this is an adversarial machine learning problem. I highly doubt those kind of measures would be implemented by file coin though, considering the cost of scanning files for such at scale. I'm sure, at least in the short term, it will likely be some time of hash or edit distance measure (or an equally naive and easy to fool approach).

What if I just encrypt the video before I put it on the network and use a side-channel to distribute the key? ML gonna have a tough time with that.

Since the content is encrypted, how would you blacklist any content? The nodes don't know what kind of material they are hosting.

You don't blacklist based on content, but on the hashes of the content, which the nodes have to know. At one point or another, the decryption key has to be shared for the encrypted content to be usable for anyone, and if the copyright holders get a hold of that key, they can prove a violation and blacklist the hash of the content.

You do realize though that changing just 1 bit can change the entire hash? What's to prevent people from appending a random bit or two, and getting an entirely new, unblocked, hash?

Responding to specific take down requests is enough to activate the safe harbor provisions in the DMCA. Legally they don't have to do anything else.

I was just explaining the general concept. I don't claim to have in depth knowledge on the subject.

I think blocking a hash can already be a victory, since it basically makes all the metadata that was associated with the hash useless and forces reseeding under a new hash and publicizing that hash. As long as you make it inconvenient enough, very few people will bother, which is the best the copyright holders can hope for.

Reseeding might be pretty easy though in IPFS since there is a block layer below the object layer, and I guess you can't really block block-hashes.

Great point; this happens a lot with YouTube videos, and would definitely get worse with other sorts of media

Your plan is to create a centralized list of things "good and moral people" should avoid, that only good and moral people will opt-into? That's a funny strategy for several reasons.. First - do you really want "bad guys" to have a list of all the content they shouldn't have? Might as well call it do-not-read.txt. Secondly, if the system is opt-in for "good and moral people", will that really do anything to stop the distribution of content on do-not-read.txt among "bad and immoral" group?

I'm personally glad that the fathers of the internet had better things to do than moralizing legality.

Its not about "good and moral" vs "bad and immoral", but "legal" vs "illegal". Blacklists are not currently implemented in IPFS but one imagined a solution, where people opt-in to their e.g. state-supplied blacklist to prevent run-ins with the government, which could say "if you aid criminals by providing them with illegal content, we will hold you accountable for it". In the end, it is probably nothing more than a facade to appease governments that in the end will come up with something similar ineffective.

you mean, illegal in Russia? Or Uganda?

Depends on which risks/rewards you want to take on, just like today. If you live in China, you might want to adhere to the Chinese blacklist, but outside of it, you probably don't care, since the Chinese government also doesn't seem to care _that_ much.

> since the Chinese government also doesn't seem to care _that_ much

Sounds like the opposite of something most would consider "important".

So basically, Pied Piper plus a coin?

And without compression. And precisely what sia and storj do

It's not, the real business model here probably looks a lot like rapidshare.

It's more about enabling applications with decentralized data storage than it is a new type of object storage.

The https://lbry.io/faq/what-is-lbry is just as empty buzzword bingo as the Filecoin docs.

We're building the basic building blocks of autonomous software. If Ethereum is universal compute, Filecoin will provide the storage backing for it.

The beneficiary will be AIs, not humans.

Right now, we're just now thinking of clouds, containers, and "serverless" (functions-as-a-service). If we take those ideas and iterate them forward, we converge closer to a real "serverless" paradigm -- what Ethereum already provides today in principle, if not at scale. This will require storage that can keep up with it, and that is where FileCoin comes in. While human consumers may benefit from this, it enables autonomous software that can live on its own and manage its own matabolism (resources accounted for through the blockchain). What those autonomous software will do? I don't really know.

AFAIK the uploader has to pay in this type of system; it's basically just S3 but cheaper and "decentralized". You can upload pirated content to a public S3 bucket if you want and I don't think AWS really cares because they're getting paid and they are covered by the DMCA safe harbor.

If the society is collectively willing to pay for storage mostly to host pirated content, that tells you a lot about what the real (rather than publicly expressed) social consensus is wrt piracy.

Last time i checked my local usenet, it was alive and thriving

> It's a solution in search of a problem, like so much good, early technology.

Care to elaborate and share examples of other "good, earl technology"? Typically when I hear "solution in search of a problem", I start thinking "this is going nowhere".

Google Wave comes to mind. Great tech, but marketed to the wrong group (developers) and didn't solve any problems I had at the time.

Pretty much any technology you use now was a solution in need of a problem. PDAs and Touchscreen tablets are the most fitting examples.

Sorry, maybe I didn't get your original point - I thought you were insinuating that ICO was a technology in search a problem and that all super successful (i.e. good) technologies starts this way (which I would disagree).

I thought you were insinuating that ICO was a technology in search a problem and that all super successful technologies starts this way.

Not insinuating, that's my claim - nearly every big technology was too early (eg. a solution looking for a problem - whether in form or scale) before it blew up years or decades later. I don't think that's controversial. It's also true that a lot of trash that never makes it are also solutions in search of problems.

I think you're confusing their adoption curve with a problem they solve. For example - PDA's certainly solved a problem (having a mobile/digital calendar), they just didn't solve enough problems when they were introduced.

The entire Internet

I don't know if this just sounded like a zinger to you when you wrote it, but "the Internet" is a prime example of anything but a solution in search of a problem.

What big problem did the early internet solve? Sending messages between universities? Why not just use a phone?

ARPANET/the Internet was developed to facilitate communication, remote access and data sharing between different computer systems. Are you sticking with "Why not just use a phone?".

20+ years ago the majority of the world had little to no understanding of the internet. People with technical backgrounds may have had theoretical ideas about how connecting the world online would radically change it. But it was exactly a "solution in search of a problem" in the same vein as decentralized computing through blockchain technology is today. A world where the digital world was as critical as the real one seemed ridiculous on its face back then.

There's so much unused storage because it's so cheap and people have the money to buy it and not use it. If you add another profit layer of people looking to make money, that simply increases costs.

I like what Juan had to say, it's good stuff and IPFS has the potential of being very disruptive.

With Filecoin I think what happened in that conversation was that to Juan it wasn't a big deal, it's just one of the things possible in the IPFS paradigm. But since crypto currency is all the rage these days, and this being YC, he was being lead to talk about the money side of it, but I don't think he really gave it much thought, other than that Filecoin is a neat way to trade storage without any paper/fiat currency, across country borders, etc.

To put it another way - IPFS is the thing. Filecoin is just a side-effect. But in our present times, Filecoin is worth actual millions, while IPFS is just a protocol. But it's clearly a fluke, the most important technology/idea here is IPFS.

Filecoin is a completely different beast than IPFS. Based on the Filecoin whitepaper, it requires the creation of 2 new proof mechanisms "Proof-of-Replication" and "Proof-of-Spacetime" which are not well-defined at all on the whitepaper. It's like saying you achieved Byzantine fault tolerance but not say how, which is a big deal. That's one of the core challenges.

It seems to me that their team has underestimated those challenges and were more busy on designing a big ICO than actually thinking about those problems and the feasibility of their claims. Most probably it will take much more than 6-18 months that they claim or it will be launched with centralized components of the system ("compromises") until they figure things out.

I think you are absolutely right, that there are huge problems still left to solve. But even so, then how is this different than a very large VC round that is (slightly) more open to the public? Plenty of businesses get money to build out technology with only the belief that the team raising it have what it takes to make it happen.

That's not quite true. The vast majority of VC money is to scale up a company. Only a small minority of investments, aka a portion of seed rounds, are done with the technology (and subsequent business model) merely in a hypothetical whitepaper stage.

This company might be different because they demonstrated their ability as IPFS is fleshed out but as others pointed out Filecoin is a different beast entirely and they are basically starting from scratch again.

The higher end of 6-18 months of pure dev time is a long risk range to get an untested product out. But I guess they have plenty of runway now to work on it with this massive ICO. Let's just hope they don't spin their wheels forever in research mode and spend their time and money wisely.

It's entirely possible someone else figures it out before them and this play will be a game of scale. I've heard this idea from more than one person well before Filecoin was around.

> Only a small minority of investments, aka a portion of seed rounds, are done with the technology (and subsequent business model) merely in a hypothetical whitepaper stage.

There are occasional exceptions [0].

[0] https://venturebeat.com/2017/07/25/khosla-ventures-leads-50-...

Here's a more in-depth look at Proof of Replication: https://filecoin.io/proof-of-replication.pdf

I liked most of the podcast except for this specific part, I did think the interviewer had a point, he was asking if there's any exciting consumer use case.

I think as the inventor of IPFS he would have thought a lot about these things so he should at least have a few interesting consumer use case but he gave 0. I'm guessing because it's all illegal ideas. Instead he said it's more about B2b (or something like that) and about people making money from sharing their drive.

Just to be clear I still think IPFS is awesome. Just like how i think BitTorrent is awesome. They will have the same problem if the leader doesn't have a clear picture of how it can be used. Most successful platforms started out NOT as a platform but as a single application and then expanded. He's obviously not trying to build an application but an equivalent of the Internet itself, but then we have the problem of how are you going to make money and how are you going to get consumers excited? And this is something they do need to have an answer to.

There's a bunch of projects trying to solve the distributed mass storage problem. I am not convinced this problem exists.

(1) Hard drives are dirt f'ing cheap. Buying more than one and putting them at different locations (home and office etc.) is not hard. Storage is still experiencing a Moore's Law type geometric increase in density so this is going to get easier not harder in the future.

(2) Cloud storage is cheap too. S3 is cheap. S3 reduced redundancy is really cheap. Backblaze B2 is stupid cheap. There's no privacy problem here if you encrypt your data on your end. (1) and (2) are not mutually exclusive. They go together nicely. Keep your data local and then back it up encrypted to cheap cloud storage. Many very affordable NAS devices will do this for you.

(3) Enterprise users categorically don't want a system where they don't know who's running their infrastructure. In some cases such a thing would be prohibited by data residency regulations. You will never ever ever convince a CIO to use this. In some cases it might be illegal for them to use this.

(4) The real problem for end users is data handling UX, not actual storage. (1) and (2) are adequate for virtually all users.

(5) The web does have an ephemerality problem but I fail to see how this will solve it.

(6) These systems are mostly too heavy for mobile and don't cope well enough with node ephemerality for laptops. They only work well on desktops and servers and those already have mega-cheap storage and backup options in the form of (1) and (2). Look into how much disk you can cram in a desktop these days for under $500.

(7) The anonymous/uncensorable niche is already filled by Tor, I2P, and Freenet.

This really looks like a solution to a non-existent problem. Am I missing something?

Not trying to hate, just questioning.

Think about all the extra space on all the harddrives in the world that isn't being used.

For example, when you buy a new computer, with a 500 GB drive, 400GB of it isn't going to be used for a while.

Hard drives may be cheap, s3 may be cheap, but that extra 400 GB of hard disk space? That space is literally FREE.

Hard disk space is weird, because there is so much completely unused space out there, that would be literally free to use.

Filecoin will allow this free space to be put on the market.

I think the OP's point is the cost of infrastructure means that this space on the market will never be less than the cost of S3 or local storage. So why buy the "free space", which leads to the bigger question. why sell it.

Because operating a node for File Coin is certainly not free in terms of network costs and requires the opportunity cost of giving up your local storage for the duration.

You pay the operational burden of keeping your computer networked 24/7, and likely receive cents in exchange.

How many people already keep their computer on and working 24/7 (or close enough) in practice, though?

I buy your arguments. However, I am curious (primarily as a thought experiment): what would happen if Filecoin was able to solve (3) - (8)? By opening up the barriers to entry and creating a perfectly competitive marketplace, economics says that the price of storage would then equal the marginal cost of providing that storage (i.e., electricity, networking, and amortized hardware cost). Presumably that's lower than what Amazon and others charge.

Would love to see a theoretical analysis of Filecoin's impact on the storage market, presuming that it can build the foundations for competing in that market.

Well, at least a storage-backed crypto currency can offer some intrinsic value. That's much less stupid than burning electricity purposelessly.

On the technical side, I find it doable. Unless they actually try to implement it "on the blockchain". Given blockchain transaction rates, by the time you'll download your porn, you will not need it anymore.

Of course we can ask, how big is the market for cold storage? On the other hand, how big is the market for gold?

Electricity is already burned purposelessly. It's called heat.

In the future you will see that the only profitable miners are ones who can "sell" their heat, i.e. using it for greenhouses or other applications.

One advantage I see is that you can automate/script/code the whole process, from top to bottom, including the means of payment, without needing individuals to sign up with credit cards or bank accounts, and without needing to trust third parties.

If costs and functionality are equivalent to our current solutions (like S3), then the cryptocurrency ecosystem is certainly better, but how much better is it? That is arguable and I would expect the developers to be inflating its value quite a bit.

Our decentralized marketplace, OpenBazaar, uses IPFS for storing stores' content. Visitors to the store seed the content so other users can interact with the store when the vendor is offline. But that means you have to wait for people to visit your store before you can shutdown the software. If Filecoin is successful they'd be able to pay to ensure their store stays available on the network without actively running the software.

The need for file coin is that early investors need to get rich quick

Can we stop describing ICO raises in USD? They raised ethereum tokens (ETH). The value of those tokens is specious, as there is no liquidity for the volume of ETH raised.

Based on current ETH/USD rates, the USD figure given translates to ~614K ETH. The value of 614K ETH has ranged from 92MM USD to 240MM USD in the last two months, and has been as low as 4.3MM USD since the beginning of the year.

"as there is no liquidity for the volume of ETH raised"

Volume is over $80 million in the ETH-USD pair over the past 24 hours, on just two exchanges (Coinbase/GDAX, Bitfinex).

Add in CNY, KRW, EUR and the true liquidity is much higher than that.

Edit: https://coinmarketcap.com/currencies/ethereum/#USD

There are no exchanges that will let you withdraw $xx million a day in fiat.

They'll need to spread the ETH to basically all the big exchanges, with multiple bank accounts attached, and liquidate large sums everyday for months and hope none of the accounts get frozen.

Still quite the windfall even if realistically just a fraction of the sums being thrown around.

GDAX & Gemini will definitely let you withdrawal millions per day, you just need to be verified and clear from AML/KYC standpoint.

There are no exchanges that will let you withdraw $xx million a day in fiat.

That's why your lawyers and their lawyers have to negotiate this up front and have a deal with penalties signed before any transactions take place. If you're dealing with amounts that big, you do that.

I really want to hear the story when someone dumps $100M worth of Etherium. Or Bitcoin.

I wonder what would happen if you went to an Bitcoin exchange and said "I want to sell $100M worth of Bitcoins over the next 30 days. I'll pay your usual fees. After each day's sales, you wire transfer the proceeds to my bank within one business day, and you agree to a sizable penalty if you're late. Any validation of identity you want to do takes place before we do any business."

well if you find people buying these coins, what's the problem? That's the concept of an exchange.

It'll definitely drive the price down ,so that would be a weird thing to do anyway, except if you _want to_ drive the price down.

$100M in BTC is... ~29,000BTC. Let's call it 30,000BTC.

GDAX seems to handle 5k-10kBTC on a normal day. So liquidating in a month would be 10-20% of the trading volume on GDAX, every day for a month. Even pushing it out to 3 months liquidating, it would be a sizable portion of the sales. (This would be 0.250BTC/min for 90 days.)

I, too, would like to see what happened if someone liquidated a position that quickly.

(Of course, if you had $100M in BTC, you'd probably want to liquidate over the course of a year -- where you'd still be sizable traffic, but perhaps not completely crash the price. This would be 0.06BTC/min for a year.)

Edit:

Looking closer, GDAX seems to have a volume of about 6BTC/min. So the volume estimates for clearing 30kBTC in X days:

     30 days - 11.5%
     90 days -  3.8%
    365 days -  0.95%

GDAX is about 10% of the BTC volume globally, so you're talking 0.1%-1.2% of BTC volume being that clearing, for between a month and a year.

You'd also want to look for an OTC buyer at those levels. Gemini will facilitate those transactions and I think a couple others too. I don't have much experience in that area though.

Coinbase/GDAX will do exactly this, and your ~$3m of trade volume per day will be <10% of their book, and a drop in the bucket compared to the global markets. Your trades will be arb'd to every other exchange in seconds.

There are a ton of complaints about Coinbase support, but they cater to the largest clients like every other financial company.

The question is how much of that volume is the same money going back and forth. Taking sizable amounts of money out of the system is different. See 2010 flash crash".[1] There may be less real liquidity than transaction volume indicates.

[1] https://en.wikipedia.org/wiki/2010_Flash_Crash

The majority of the global volume is crypto-crypto, so I agree it's a valid concern, but the volume of fiat trades has gone way up over the past several months. For example, Coinbase added 1 million accounts in June - the vast majority by necessity are putting fiat in vs cashing out.

One flash crash happened on the ETH-USD pair on GDAX like a month ago, when a large dump triggered cascading margin calls. Bitcoin has had a few of those over the years too.

The volume on many exchanges are fake. It's pumped up using bots buying and selling among each other. Large dumping tends to go through dark pools or OTC. The real volumes are much lower.

The price crashes to 0.10 cents ... https://www.bloomberg.com/news/articles/2017-06-30/the-45-mi... ... and that was only 12.5 million. and then coinbase paid people who lost money out of their own capital. lol. ponzi at its finest.

Well in this case USD might be the best metric, as Filecoin isn't traded like a typical token on the ethereum blockchain like past ICOs. This ICO was done on Coinlist [1]. Filecoin tokens don't even exist yet and won't even be on the ethereum blockchain. You're purchasing tokens in advance that will be given to you in the genesis block on Filecoin's platform whenever it launches.

I would be curious to see the ratios of the currencies involved in their funding. I.e how much raised was in raw USD vs ETH vs Bitcoin. Maybe most was in fact ETH? I have no idea, I haven't seen those numbers listed anywhere.

[1]. https://coinlist.co/static/media/How-to-Invest.0a9f70b4.pdf

This isn't correct, you can actually fund the Filecoin ICO with cash(USD), BTC, and also ETH[1] as long as you are an accredited investor.

1. https://coinlist.co/static/media/How-to-Invest.0a9f70b4.pdf

The flaws in Filecoin’s token sale:

1) Filecoin gave an amazing deal to their buddies, just a few weeks ago

2) Filecoin is being insanely greedy

3) Early clickers are incentivized, price unknown

4) Protocol Labs and Filecoin foundation are keeping 2x the coins that investors will get

Source: https://medium.com/token-economy/the-analysis-filecoin-doesn...

"no liquidity for the volume of ETH raised"

Look again. Poloniex alone exchanges $1 billion dollars, 3M ETH, on the ETH/BTC pair, weekly. https://cryptowat.ch/poloniex/ethbtc/1w Volume on the path ETH→BTC→USD is a lot higher than ETH→USD and that's the path that whales dumping ETH take.

"Volume on the path ETH→BTC→USD is a lot higher than ETH→USD" which kinda reinforces the point that there is no liquidity

If you can get USD at the end why does it matter if you have to go through BTC for now? The liquidity is still there.

So what?

The point in having currency is a speculation of value between entities?

"The value of 614K ETH has ranged from 92MM USD to 240MM USD in the last two months,"

As I see it that's irrelevant. Whats relevant is the value at the time of the investment. As of yesterday, they raised Ethereum that had a then value of $186m. The fact that it may go up or down tomorrow is irrelevant.

What's important to note about ICOs is not necessarily whether the idea is actually practical and that it will work.

What matters right now is whether the idea can stir our intellect and get the crowds excited.

This is because behind the idea there's a new token which value is completely driven by the excitement of the crowds (it's pure speculation).

If I invest N amount of money in a token which gets people excited, I will surely get back N + <crowd excitement>.

So it's sort of like a snake that bites its own tail, and we see these crazy prices specifically for this reason. People are not investing hoping for the project to be developed - they're investing because they know others will as well, which will drive the prices up.

ICOs are a new breed in economy where people can speculate, anonymously, using tokens that are distributed to the crowds in various ways (PoW, initial distribution, etc.). What does this mean for our future economy? I'm not sure, but it surely looks exciting (even though most projects behind ICOs are complete crap).

If our future economies will be driven by these tokens, we might think back at this period of time, looking at perhaps the people who will be the %1 of the future.

ICOs are a new breed of gambling.

I'll probably get down voted for this but nonetheless it needs to be said, partly tongue in cheek; ha ha, only serious.

Gambling is not a sin /

Provided that you always win.

-- Roald Dahl

For those who abhor levity and reading between the lines the lesson is this;

Risk is a spectrum; p < 1 is gambling for small n. So where does sure thing become risky become gambling become plain stupid? And one thing society as a whole will agree on is that p = 1 is not morally wrong. Therefore, "Gambling is not a sin / Provided that you always win" is true regardless of your sense of humour. The grey areas are less well defined, just like people's sense of humour.

I'd argue that most of our current economy is gambling (stock markets).

I'd like to read your arguments on that.

Information symmetry between company and investor. buybacks also obscure real stock value (and something around 75% of corporate profits go to maintaining or raising stock price)

> I'd argue that most of our current economy is gambling (stock markets).

I think you're confusing economy with speculative investment. Most of the US economy consists of manufacturing and service industry output, not the stray under or over valuation of the stock market (which is derived from non-gambling output in the first place). Since when is $6.3 trillion in gross manufacturing output considered gambling? If there is a major economy anywhere on earth that has been a more sure thing (aka the exact opposite of gambling) on average over the last ~140 years than the US, please point it out.

Whether you value Apple at $500 billion or $800 billion right now, has no substantial impact on their sales or net contribution to the US economy / GDP. The same is true for Facebook, Microsoft, or 3M, Delta Airlines, Johnson & Johnson, GE, Berkshire Hathaway etc. Whether the S&P 500 has a PE ratio of 25 (2017) or 18 (2013), does not dramatically alter the US economy.

There's also nothing "current" about it. The stock market has been important for the US economy for more than a century. It's increasingly less important, not more. The private non-bank market for business capital has expanded dramatically while the public market is contracting - and likely to continue contracting - as fewer companies go public.

You'd be wrong.

Throwing money at a business proposition is neither new nor gambling.

It is when the investors throw money at it in the hope they'll get a return on investment. You don't need $250 million to build a distributed Dropbox clone.

> It is when the investors throw money at it in the hope they'll get a return on investment

Traditionally, the gambling-investment line is drawn at the zero-sum boundary. If you're buying these tokens because you think the encrypted storage business is worth that much (i.e. based on profits), it could be investing. If you're buying to avoid missing out on something other people will want to buy because it's cool (i.e. there is no discussion or thought given to profit) it's probably pyramidesque gambling.

How is that different from any other investment?

But is this really an investment in a company? It looks like they're just buying tokens in the hope that when people start using FileCoin there will be more demand for it.

It works as an investment precisely because the tokens will be tradable, and with use and demand they should increase in value significantly.

It's an investment because the coins are usable as a medium of exchange and as a store of value.

If you can have Amazon S3 type service hosted in IPFS and actually get paid for it instead of paying for it... what is the problem with this business proposition?

One distinction is that legalized gambling is highly regulated. ICOs, not so much.

Are the gambling regulations actually there to protect consumers? The largest form of gambling in the us is probably lottery, which is exclusively controlled by state and local governments. The regulations don't prevent extremely poor odds (much worse than private gambling) and marketing targeted to low income Americans. At least ICOs require some sophistication

Regulations aren't there to protect against stupidity. They're there to protect against fraud. It's to stop someone from setting up a fly by night lotto, collecting ticket money, then leaving town.

If you are tasked with making a better society and you use the opportunity to promote and entrench greater stupidity, is that fraud?

I'm always outraged when I see NY Lotto ads on the subway.

This is just a way to profit off people who don't understand math and have some sort of addiction.

It's a poor tax.

I once saw an ad that said something like "if you are putting in your resume to be a door man, it's time to play the lottery"!!!!

Not, time to go back to school, time to vote for better income redistribution, not good for you for looking for work -- no, the city decided to trivialize unemployment and poverty AND make the claim playing the lottery is better than hunting for a job.

Regulation seems to be about limiting who gets to extract the profit from the poor, not protecting the poor / the people.

I prefer to think if it as an Innumeracy Tax.

A friend once commented on the subway advert that went: "All you need is a dollar and a dream"

His comment was: "We'll keep the dollar and you keep the dream".

I find this offensive in many ways. The chance of winning the lottery might be minuscule, but minuscule is still infinitely larger than zero.

On top of that, you don't have to hit the jackpot to win life-changing money. Powerball odds for a 10k/250k prize are 1 in 913K, and for a 1M/2M prize, 1 in 11M - much better than the jackpot prize's odds of 1 in 292M.

Many people are totally okay with coughing up $2 every now and then for raising their chances from 0/infinity to 1 in a million or few.

You are offended by what, exactly?

That lotteries are a tax on the poor (who often cite gambling as a legitamit retirement investment option!)?

And you actually DON'T raise your chances, at all.

The odds are actually in favor of you lowering your standard of living by whatever you are spending on lottery tickets.

Look at the statistics on where the bulk of the money comes from for lotteries -- the poor, often people who can't afford food for their children.

It's offensive that a democracy would run state lotteries and advertise them to its most vulnerable people.

I'd be very curious about what kind of statistics you have that show a significant decrease in standard of living for $2 lottery tickets.

Well, on average people who make $13,000 / year spend about 9% of their total income on lotteries. It skews higher for non-whites.

For people who make 100k a year they spend about $300 a year on lotteries.

Many states generate more revenue from lotteries than by taxes, so this is a regressive hidden tax effectively.

States also tax ticket sales for lotteries at close to 40% so it's also the worst investment tax around.

Lotteries are used by states to generate money from vulnerable poor populations and move that money back up to support other programs that wealthier folks enjoy.

Here is an indepth article outlining more. Unfortunately some of the links are broken, but I will update you if I find the base research studies mentioned.

http://www.alternet.org/hard-times-usa/disturbing-facts-abou...

Holding $,€,£ etc. is gambling even if you don't realize it.

What’s a truly risk-free alternative though?

Entropy. It's guaranteed to go up.

In a closed system, hence not the Earth.

Life itself is a risk which includes everything in it.

That's a rather ridiculous reductio ad absurdum.

The euro/USD exchange rate has varied between roughly 1 and 1.6 over the past 10 years. That's including the 2008 crisis.

Meanwhile over the last year alone the BTC/USD exchange rate varied between about 500 to 3400.

My 10 euro bill is extremely unlikely to suddenly massively increase or lose in value. That's the difference.

> The euro/USD exchange rate has varied between roughly 1 and 1.6 over the past 10 years.

This low range variation is only possible because of government monetary intervention that doesn't exist on CryptoCurrency.

Or the spectacular (billions and billions) amount of real world objects and services traded for those dollars and euros at the margin, every single day, continually acting as feedback for their value.

I don't think that's true in this case. EUR/USD is a floating exchange rate.

It is true to an extent, this is why central banks inflate, perform liquidity swaps, etc.

How Does the Government Regulate Exchange Rates?

https://www.thebalance.com/how-does-the-government-regulate-...

>If our future economies will be driven by these tokens, we might think back at this period of time, looking at perhaps the people who will be the %1 of the future.

I get your point but please don't feed this "fear of missing out" that I'm sure many are feeling (myself included, to a certain extent). Some people are going to invest money they can't afford to lose.

Maybe they'll be the next 1%ers. Or maybe they're just like the folks who bought pets.com shares. There's simply no way to know and at this point it's more akin to gambling than investment.

Play the roulette, bet everything on red. You wouldn't want to miss out, would you? If red does come out and you don't bet you'll feel like a loser.

You don't have to bet the barn for heaven's sake. $800 in bitcoin 5 years ago makes you a millionaire today. Most software engineers are going to be just fine making one or two gambles on that order, and if it means they get more involved in new tech and have fun all the while I think it's a great idea.

> but it surely looks exciting

Or terrifying, take your pick.

I can't tell if you intentionally passed over the point, but this kind of circular investing is not sustainable. If something has value only because people buy it, at some point there are going to be more people taking profit than putting new money in. That's when the price starts to fall.

If Bitcoin's price history is anything to go by, when the prices start to fall, they will fall fast and hard. At least in Bitcoin's case, there's a core value proposition that's actually worthwhile, so it's able to recover. With most of these ICOs, the core value proposition isn't actually valuable. When the price finally starts to collapse, the floor could be very low, and there may not be a recovery. See the old tokens Quarkcoin, Primecoin, and most of the rest of the top 25 altcoins from 2013

I know very little about ICOs other than what I have read on HN and HN comments so take what I'm saying with a pinch of salt.

My understanding is that an ICO is like an IPO minus a century+ of regulation and oversight by the authorities and instead of a share of future earnings, you get a share of a closed economy.

The oversight and rules governing stock offerings is fantastic no doubt but when you describe a Coin as a circular investment scam, I think you are glossing over the possibility that the economy you are buying into could become valuable. An example of this would be Second Life which at one point had a thriving virtual economy in digital goods.

Extrapolating further, ICOs, due to their horizontal, borderless nature, are going to be instrumental in further tying together a global economy. Just like they used to say no two countries on the Dell supply chain would fight wars with each other, I can't imagine a world dominated by ICOs for different slivers of the online economy actually fighting an IRL war.

Probably utopian but I think worrying about ICOs being a ponzi/greater fool get rich scheme overshadows its potentials.

In 2001 if you said that the Internet was going to be worth $1 trillion dollars, you were correct. But 99% of investments on internet companies in 2001 were bad investments.

That's where we are today with ICOs. Cryptocurrency is going to be absolutely massive, and it has some very intelligent people doing amazing things. But the vast majority of ICOs are going to flop. Look at the rankings in 2013:

http://web.archive.org/web/20131218060943/http://coinmarketc...

If this is true, then VCs spreading their money across any and every ICO makes strategic business sense and should be applauded instead of being pilloried for being scam artists trying to fleece regular folks into buying coins.

That's only if you assume the tokens today will form the foundation of the $1 trillion cryptocurrency economy. The biggest projects of tomorrow may not exist yet, or they may take a very different shape than the volatile token economics we see today.

That still doesn't call into question the VC's investment strategy. You can't always time the market waiting for the killer app of Coins. Waiting to black swan the ICO space like John Paulson did with housing isn't feasible in the aggregate.

> you get a share of a closed economy.

Who wants that?

There are use cases where this is needed/desirable, but for the most part this is a bug and not a feature. I don't want to convert my general purpose currency into SomethingCoin to purchase Something. I want to purchase Something with general purpose currency.

(Standard caveat: I'm a Coin know-nothing)

Once SomethingCoin becomes fungible with Something2Coin and Something14Coin, you could have the makings of an economic system.

Edit1: Say you sold disk space for FileCoin, converted it and bought petfood using DogeCoin (I know Doge is for charity but hear me out), you wouldn't ever have to move money between IRL currency and Coins.

While by and large I agree about most ICOs, I think the value proposition is a lot clearer for something like Filecoin.

Does that necessarily mean it is worth what it is valued at? No, but comparing the IPFS folks with total snake oil is a bit unfair.

Sure, but it's kind of like saying that FTP looked like it would be a useful protocol in 1985, and an early draft of RFC 959 should have been adequate to raise gobs of money. In the end FTP added a lot of value to the internet, but it doesn't mean that the folks who wrote the reference implementations would have known what to do with the equivalent of $1B.

Sure, but there's a weird / interesting aspect to these ICOs here as well, in that the valuation of the coin is also what will drive adoption of the providers. Since miners will be paid in coin to validate providers and providers will also be paid in coins, then there needs to be some value associated with it.

The ICO in this case kind of bootstraps the value of the coin in a way that is needed in order to bring on miners and providers. So in a way the value being raised is a bit like capital costs that the network will "spend" to bootstrap and verify the network.

Don't get me wrong, this is a lot of money to raise, but saying this is totally nuts without taking into account that the model is very different (and interesting!) is not giving credit where its due. Will it work? Who knows and certainly most startups fail, but it isn't a foregone conclusion.

Yes, but is the value proposition really $2.5 billion _pre-product_ for a team of maybe 20 (not sure exactly how many people are on Protocol Labs payroll)? And, did people actually do their diligence? Did any of the investors confirm with qualified academics and blockchain specialists that their Proof-of-Spacetime paper is secure and functional?

Or did the market blindly throw $186 million in one hour into a hot deal because it's the hottest deal?

Juan has been saying for years that one of their primary goals for Filecoin was a token sale to fund Protocol Labs.

    ICOs are a new breed in economy

Pumping up worthless crud with tons of PR to get suckers, er "investors" to "get in now" is an old old old scam. Adding "with cryptocurrency" onto the end of it doesn't make it new.

You get liquidity the next day instead of in 5 or 10 than with regular startups, I don't see a problem with that, investors are here to make money right?

Is not like it doesn't happen with the regular VC cash money right? E.g. Color?

Or with regular stock market. e.g. Enron.

Clueless investors are always gonna be there.

How can you make the claim that that $186M is liquid? Last time someone dumped a large amount - $1-2M worth of Etheruem's Ether? - it tanked.

it was a flash crash as in it ended in a flash/quickly and the price rebounded, central banks becoming insolvent and not being liquid and needing bailouts are the reason there is high speculation in crypto tokens in the first place, the trust is shifted from the bankers to the developers

That's a neat distraction from how crypto-assets will ultimately shift a lot (an unreasonable amount) of wealth to early adopters simply because they were early adopters, if it gains a legitimate status as a currency throughout nations.

1) The $186M raised was a mix of Ethereum, Bitcoin and cash. We don't really know how much was of each.

2) They really don't need to sell all at once and who knows, may even have engineers willing to be paid in cryptocurrencies.

Filecoin already has investment from USV, they have their runway using real money to pull anyone looking for a paying job into the mix, and could give them crypto-assets to incentivize their loyalty.

In the past 30 days, over 30 Billion dollars worth of Ether has been purchased. 2 million is nothing. Source: https://coinmarketcap.com/currencies/volume/monthly/

Here, I'll pay buy $1 million worth from you, if you'll buy $1 million worth next week. Sound good?

Likewise, that "$30B USD" is referencing exchange between different crypto-assets, yes?

> People are not investing hoping for the project to be developed - they're investing because they know others will as well, which will drive the prices up.

I found out recently that this is called the Greater Fool Theory - https://en.wikipedia.org/wiki/Greater_fool_theory

Bingo.

Reminds me of the time Facebook's valuation was growing by +$5 billion every 2 weeks, and Techcrunch was writing an article about it every time, further passing the hot patato along to late investors, while making the initial investors richer and richer.

Or, perhaps with a better name, a Keynesian beauty contest: https://en.wikipedia.org/wiki/Keynesian_beauty_contest#Overv...

>I'm not sure, but it surely looks exciting (even though most projects behind ICOs are complete crap).

Bubbles and fraud are not really exciting per se...

Maybe I'm the exception, but I invested in filecoin because I'm excited about IPFS and believe coin-incentivized storage would be a very powerful feature and something I would love to spend my week-ends hacking on. I'm also an early investor in the company behind IPFS for the same reason.

I haven't invested in any other crypto-currencies, and don't have any plans to do so.

Just one datapoint.

> If our future economies will be driven by these tokens,

It won't. This is zero sum gambling, not investment. Economic growth does not come from this.

I think its pretty short-sighted to say that ICO craze will not result in economic growth. As one early example, take a look at the Ethereum DAO, which allows arbitrary investors to participate in opportunities that may not otherwise exist.

Until it was hacked and no one dare to build the 2.0 version.

Moreover. In The DAO, the "tokens" gave you voting rights so the "curators" couldn't pick up all the money and go to the small island in the Caribe on vacation^H^H^H^H^H^H^H^H^H^H^H to write a white paper.

Also, in The DAO you can get (most/hopefully) of your Ethereum back, with a (incredible useful) one month delay.

I.E. someone realize that you can pick all the money without giving any concrete right to the "investors".

So much people with much money trying to find new ways to make money out of money. That says much about the current state of the economy.

And making the rich richer. No way to invest unless you have money or you are in the inner circle. Code has also not been released. So much for open source.

If it makes you feel any better, I suspect that a lot of these schemes are going to make a lot of rich people that bit less rich...

And a few rich people a bit more rich.

All depends which side of the coin you're on (pun intended).

Well I propose "RobinHoodCoin" with an innovative "proof of no stake" approach!

"RobinHoodCoin" - whatever is mined will get evenly distributed, incl. genesis.

RobinHoodCoin will constantly leak money form large to small wallets

Yep, only accredited investors could buy Filecoin at the ICO. The rest of us can still buy Siacoin which is similar.

I don't think these VC-backed cryptocurrencies will win in the long term. It's the same principle as with stocks, cryptocurrencies are going to work in favour those who understand them the most; in this case, developers.

The mission of cryptocurrencies is to take control away from finance people. Hobbyist developers are going to decide which cryptocurrencies deserve their precious development time.

Cryptocurrencies are all about the tooling and infrastructure around them.

> in this case, developers.

i dont think developers are the ones who will profit - after all, developers are the ones who wrote the code for a lot of financial institutions, and none of them gain much more than just a salary.

At the same time though, 3 of the 5 largest companies in the US have CEOs with a background in software development/computer science. 5 years ago, 0 of 10 did. There's definitely a trend toward developers having more power.

That trend started further back than the last couple of years, as billg can confirm.

and yet, are those CEO's doing dev when they are being paid their large sums of money? They may have learnt something as a developer, but _doing_ development isn't their major money making activity.

jondubois said understand, not do.

Not to be contrary, but "citation"?

This (https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...) lists the 5 largest companies in the US as:

1. Walmart

2. Berkshire Hathaway

3. Apple

4. Exxon Mobil

5. McKesson

Walmart's CEO, Doug McMillon, career at Walmart was in distribution and then buying before moving to the executive.

Buffett had a background in business admin, economics and insurance.

Tim Cook has that CS background.

Daren Woods of Exxon Mobil has a degree in Electrical Engineering in the early 80s, which might be at best half a point.

John Hammergren of McKesson has a pure business background, with a Bachelors and Masters in Business Administration.

Depends on your definition of "largest company". Revenue is one metric. Market cap is another.

https://en.wikipedia.org/wiki/List_of_public_corporations_by...

1. Apple

2. Alphabet

3. Microsoft

4. Amazon

5. Berkshire Hathaway

I think the poster's metric was largest in terms of capitalization and not revenue. The top 5 in terms of capitalization:

1. Apple 2. Alphabet 3. Microsoft 4. Amazon 5. Berkshire Hathaway

https://en.wikipedia.org/wiki/List_of_public_corporations_by...

> Tim Cook has that CS background.

Does he? He certainly has decades of experience in computer companies, but his educational background was, to my knowledge, in industrial engineering.

Well you'd be a fool not to do or negotiate some mining upfront.

Finally a voice of reason in this thread... Man so much hate, somebody is jealous. And is not investors they're putting their money here with liquidity in days not years, and no board seats so you can just chill... I love it.

Crypto currency are the new tulip bulbs[1]. Only some are going to make money. Current buyers are relying on greater fools to take these off their hands.

A crash is eminent so hold tight and wait for it. You will have plenty of opportunity. History will repeat itself as new fools arrive on the scene[2].

[1] https://en.wikipedia.org/wiki/Tulip_mania

[2] https://en.wikipedia.org/wiki/List_of_stock_market_crashes_a...

I'm actually worried that one of the main things in favour of cryptocurrencies is that they can act as an effective currency for illegal activities, i.e. they'll stay profitable for as long as regulations struggle to keep up with them.

I believe that cryptocurrencies only reached a critical mass to be relevant att all because of the value it delivers to criminals.

All that is ever discussed about cryptocurrencies at HN is marginal in comparison.

I think enthusiasts and speculators are actually a significant driver of the high prices. Criminals would much rather have a stable, quick Bitcoin than what we're seeing right now.

I am starting to worry that this bubble is going to grow until it threatens the world economy.

Depends on whether assets or debt will be leveraged for speculation and whether futures contracts will be used as some kind of meta-currency.

Then you have contagions because it will erode trust in other sectors. Economies kinda freeze up without trust or reliable value propositions.

Speculation sure but I don't see how leverage can get too high with a hard limit to the number of bitcoins floating around. Not like option contracts for example where you create as many as you want out of thin air.

Well the leverage would be in option contracts on Bitcoin. These are already available on some exchanges.

See this prescient article, written in 2013: http://blog.gardeviance.org/2013/11/a-spoiler-for-future-bit...

POW can't work at these scales. At $250k/btc mining would burn something close to the equivalent of New Zealand's GDP. As this would be purely electrical energy, energy use alone would be equivalent to that of Spain or similarly sized country.

An extremely small fraction of the inflated value of these coins is actually part of - interacting with - the global economy. Most of it is not and will never be liquid.

Most of it has been and is locked up, not touching other aspects of the global economy, and most of the actual bubble value will vaporize without ever touching any part of the 'real' global economy.

It's the specific reason there is nothing to fear about the inevitable implosion of this crypto-coin bubble. Not to mention, after it implodes, the real money will be made as throughout history (whether we're talking the auto bubble or the internet bubble or the oil prospecting bubble).

The dotcom bubble implosion wiped out trillions in moderately liquid value (the US stock market as one example being radically more liquid than the coin market overall), a sum that makes the crypo-coin bubble look hilariously trivial (even if you inflate it up to $500 billion), the global economy kept trucking regardless; US GDP has expanded by ~80% since the year 2000.

Sun Microsystems during the peak of the dotcom bubble, all by itself, was overvalued (peak market cap near $200 billion, probably worth more rationally $60-$80b tops) by more than 2x the total sum of all bitcoins.

>An extremely small fraction of the inflated value of these coins is actually part of - interacting with - the global economy. Most of it is not and will never be liquid.

I am not sure how you arrived at this conclusion? As more money will move into these currencies, won't it create an impact when eventual crash arrives.

> The dotcom bubble implosion wiped out trillions in moderately liquid value (the US stock market as one example being radically more liquid than the coin market overall), a sum that makes the crypo-coin bubble look hilariously trivial (even if you inflate it up to $500 billion), the global economy kept trucking regardless; US GDP has expanded by ~80% since the year 2000.

Don't you think mania has just started? It took a few years for dotcom bubble to reach its bursting stage.

Serious question: how much money is moving into these currencies already?

Bitcoin market cap was $9.4B a year ago, now it is at $58.3B. Average daily trade volume is ~$1B over the last few months. I guess trade volume just reported in USD, but includes all bitcoin transactions.

Is there a way to estimate how much money from 'global economy' actually moved into bitcoin and other currencies?

Edit: typo

Money doesn't "move into these currencies". Someone has USD, someone has BTC. They swap. That's it.

Or maybe you mean that too much productive capital is being wasted mining these coins? If so, maybe you're right. I'm not sure that has much to do with a crash that would affect the global economy though.

You're not saying anything that couldn't be said about houses in the US Midwest.

> You're not saying anything that couldn't be said about houses in the US Midwest.

So?

The reason it was problematic for people to pour money into housing was that loans (often loans of around 100%) were secured on these assets. No one is currently securing loans on Bitcoin holdings. If they start to, that will be a problem, but I don't see banks ever securing loans on something so volatile.

> Most of it has been and is locked up, not touching other aspects of the global economy, and most of the actual bubble value will vaporize without ever touching any part of the 'real' global economy.

I think the question is how much actual currency will be borrowed against cryptocoin valuations, and how much and over how many generations will people manage to leverage that credit, before that value vaporizes. Derivatives will always be the problem. With the actual economy not producing returns (over 1 or 2%), cryptocurrency may distribute the paper value that investors demand throughout the economy without 99% of people and funds being able to find a mention of any cryptocurrency in their own portfolios.

What is the state of cryptocoin derivatives anyway? Are they being synthetically collateralized? Are they part of any major consumer fund mix?

I feel like it is a lot less like Tulip mania and a lot more like the dotcom boom/crash. I say that in the sense that there is significant utility in some cryptocurrency concepts, but not all of them...however there is widespread overheating due to speculation.

That is also to imply that some may emerge after a crash in the same way that Amazon, Google, eBay/Paypal, etc., emerged and thrived after the crash.

I do not deny the utility of crypocurrencies there will be winners out of this. But current breed of investors will trigger another bout of golbal meltdown.

Even Amazon lost its value during the crash so chances are that most investors sold out everything in panic. Only those who had nerves of iron actually came out alive.

I don't think there's enough money in cryptocurrencies to trigger a global meltdown. It will no doubt have an effect of the economy, but it's still fringe enough that a crash in the near future would be mostly harmless.

At the moment it's not but of this mania continued for some more time it will snowball as more and more folks get in just because they don't want to miss out.

I hope you are right and crash comes early on.

I'm not sure a crash will look as expected. People currently holding the crypto-assets aren't in any rush to liquidate to pennies on the dollars they spent, and there can and has been a long delay before the rallying drums get new money and excitement pumped into it to make the "$100" cost something someone is willing to pay. They buy, the value goes up some, perhaps they sell some to realize they can make a return - it wets their appetite, and they pump more money into it - whether $1000 or $100mm. It's very dangerous for society because it could actually work

According to https://arstechnica.com/information-technology/2017/08/inves... they hardly have any code yet anyway.

We're about to announce our company and do a fundraising round. Relatively small, a few million at first with a limited number of investors, then do a blockchain IPO (yes IPO - we're selling shares with control and dividends, not pointless tokens). And our market is huge with no real coordinated players, so it should be very lucrative.

Even so, I am concerned about letting just anyone put money in. Even though we are an extrajurisdictional company and the SEC doesn't trouble us, I'd like to know people putting money in have some idea what they're doing. At first we thought to limit the amount, require a minimum $1000 or $2000 purchase. But that makes it worse, I think.

What is a company in our situation supposed to do to be socially aware and not just "make the rich richer", while also making sure someone doesn't invest their last $1000? Just put up disclaimers?

And how many computing cycles and kWH are wasted on cryptocoins

To be honest, this is my reason for not jumping mindlessly on the cryptocurrency bandwagon: it's wasting so much resources and power, especially when you take a look at videos of mining farms.

I'm not really in this world, but you'd save more power by recycling aluminium cans (%5+ of US power consumption) than by killing off cryptocurrency mining.

Personally I bring everything I can to recycling points, sometimes even if it's not my own garbage. But I'm aware people don't care.

On the other side the crypto mining is not only the power consumption: it's all the hardware and it's production as well. The ASIC antminers can't be used for anything else, hard to recycle as well and they constantly need to get bigger and faster. For Ethereum, people are buying shitloads of high end GPUs.

I also don't like the idea of storing insane amount of data, hoping to find correlations to make more money, but this is also nothing I can do anything about.

You understand that this article is about a cryptocurrency that uses a service (long term file storage and access) and the proof of work function instead of pointless computation.

Yes, I do, and this sounds like a good idea - emphasis on the sounds, because it's not new, see primecoin.

The whole thing reminds me of one Arthur C. Clarke short story, probably from the 1950s, where a group of Tibetan monks has purchased a computer to generate "all the one billion possible names of God". Before the computer, the monks had been doing the work by hand for centuries.

An American computer engineer is sent to install the machine. He chuckles at the monks' superstition: they claim that generating the billion gibberish strings is a task from God and the fundamental purpose of the universe.

Then the Universe is destroyed when the billionth name is generated.

https://en.wikipedia.org/wiki/The_Nine_Billion_Names_of_God

They made a mistake by not increasing the search space (or difficulty in Bitcoin terms) in order to make that computer faith-compatible.

Filecoin at least isn't based in competition who can do "useless" computation the fastest, but computation only happens to verify data is actually being stored by those claiming they do so.

I'll never understand why this keeps coming up. Energy consumption is not a waste if it has utility, and the bitcoin network has utility. I suppose you could make this argument for some worthless altcoins, but the difficulty for those is low enough that the amount of energy consumed is negligible.

Bitcoin is as worthy as tulips, in terms of intrinsic value.

(Of course the worth of paper currency is the same, still, the backing is stronger)

What will happen when bitcoins are worth less than the cost to mine them is anyone's guess

Paper currency is backed by the presumed continued existence and effective taxing and police power of the issuing state. It might seem theoretical, but if you benefit from the existence of the state, generate value, and don't pay your share to the state in the currency that they demand it in, then your punishment is anything but.

Right, but the total USD value is much greater than the tax obligations of its citizens.

Are you sure? The quickest sources I could find claim it's the other way by a significant margin.

> There was approximately $1.56 trillion in circulation as of July 12, 2017, of which $1.52 trillion was in Federal Reserve notes.

https://www.federalreserve.gov/faqs/currency_12773.htm

> In FY 2017, total US government revenue, federal, state, and local, is “guesstimated” to be $6.56 trillion

http://www.usgovernmentrevenue.com/total

The total USD value is much larger than bank notes. Money in bank accounts and equivalent services is in this context indistinguishable from notes.

The reserve requirements on balances on more than $115.1 million are 10%. That means with $1.56 trillion outstanding you're looking at a ballpark amount outstanding of $15 trillion in bank deposits. That's still not "much greater" than the $6 trillion annual tax revenue.

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

From your link: "Depository institutions must hold reserves in the form of vault cash or deposits with Federal Reserve Banks."

Current balance of federal bank deposits is ~$2.3T:

https://www.federalreserve.gov/releases/h41/current/

Interesting. I'm not sure how to read that balance sheet. For the sake of argument let's say that there's $2.3T is federal bank deposits and $1.5T cash in circulation. If it's all used as reserve balances then that's a total of $38T in bank deposits outstanding. $6T taxing power a year is still not small compared to this!

The intrinsic value of bitcoin is that I can transfer money to anyone in the world, very quickly, for a couple cents of transaction fees, in a way that can't be censored.

Your traditional bank account balance is stored as 1's and 0's in a database somewhere. What is the intrinsic value of those bits?

Now think of how much energy is "wasted" keeping all those accounts updated, the lights on at all the branch offices, etc.

The way they store the information is irrelevant. They also have regulation and mandatory checks and balances on their ability to repay current account holders.

> Now think of how much energy is "wasted" keeping all those accounts updated, the lights on at all the branch offices, etc.

You should do some research before making such uninformed assertion (also banks do more services than just transaction ledgering)

> the bitcoin network has utility

Utility and potential for utility are incredibly different. Bitcoin has no utility. I can't safely store value in it, nor can I use it for quick transactions.

Its only utility is speculative. The energy consumption is fueling a somewhat randomized, opt-in wealth redistribution service. That's not to say I think bitcoin or its ilk are terrible, but rather that the energy, in most cases, could be better used elsewhere (or like, not at all).

It's ok to like bitcoin. But let's not fool ourselves about the bad parts of it.

Mining bitcoins alone is on par with Ireland for electricity consumption.

It doesn't look like Filecoin does this. Proof of stake also solves this problem for other crypto currencies. Ethereum is one of the big ones that is planning to move to PoS. I seem to recall reading somewhere that BitShares will too.

And it is the whole world-wide economy. It is important that they keep this money from the poorer guys too, so that inflation doesn't look high and their investments look promising.

I decided not to invest after reading this: https://medium.com/token-economy/the-analysis-filecoin-doesn...

It still amazes me that people buy what everyone on Bitcoin Forums would have called a "premined shitcoin" just a few years ago...

Bitcoin maximalists may accidentally be right occasionally, but I wouldn't take advice from them.

I wouldn't want to invest in it either, but the truth is is that these investors will likely all make a lot of money. Just because a project is terrible in various ways doesn't mean the investors in the ICO won't get rich, and the founders won't get rich.

Especially the special ones that got in early at a fraction of the price.

Yes some will. But you should look at it like gambling for those that do. They lucked in to FileCoin and will probably make money, but perhaps they've also lost money on other ICOs. If they get out now, they might end up ahead but for each one of them, there has to be someone that loses equal money (assuming it truly is a bubble).

I don't understand why they would do the coin offering now. The network is inoperable and won't be for quite a while.

The main advantage to me seems to be a more of a community-driven storage approach. S3 is really cheap and really reliable and really old. A distributed file store would be cool, but as a community/free network like P2P. The $200M seems really high for a community project.

They do the offering now because they have a bit of a name and the world is currently filled with suckers who think that getting in on an ICO is a worthwhile speculation. The greater fool theory at work.

It could still tie their hands later on. Once it starts crashing they'll lose a lot of the early adopter enthusiasm that they will need to catch on.

Timing. Do it before the bad PR and bubble talk leave no more "greater fools" and makes it harder to pull off an ICO.

To make money, even if it doesn't work.

And to drive attention.

And to engage people in a way they will have to defend their investment later.

> A distributed file store would be cool, but as a community/free network like P2P.

Something like IPFS? https://ipfs.io

filecoin is made by the creators of ipfs.

And it sheds a really bad light upon it for me. I like the idea of IPFS but cannot stand all this coin snake oil.

I think the /idea/ of IPFS is very useful. On the other hand, I think the creators are way too interested in bikeshedding and writing new white papers for less useful things. They just aren't interested in providing real value to end users. They have this early adopter bubble that seems to be quite popular but I don't think it's going anywhere.

There's 168 million reasons to do the coin offering now. If someone was begging you to take that kind of money for a half-baked side project, would you say no? (to be fair, this is quite a bit further along than half-baked, but still)

I agree with your main point, and know you added a small disclaimer, but this team is the most put together team I've ever met. Every time I've been with them they've been hard at work making things happen. Any time our team needs something from them we get it.

> I don't understand why they would do the coin offering now. The network is inoperable and won't be for quite a while.

This is quite cynical of me, but the first thing that comes to mind is that they could be scared that theres a general CC bubble going on right now and they want to be sure to get some money before it pops. Look at bitcoin prices right now: https://coinmarketcap.com/currencies/bitcoin/

So instead of on-premise SANs or cloud provider block storage, store your files all over random devices protected by a complicated crypto that requires miners and tokens to stay active?

Fantastic. I'm sure the enterprise sales are going to go really well.

This fallacy that everything needs to be distributed is really getting out of hand.

It's not about the solution. It's about having a token that can go up in value.

> This fallacy that everything needs to be distributed is really getting out of hand.

Unlike many other ICOs, I think this is actually a good example of something that can and arguably should be distributed. Cheap storage is much more readily available in a system like this than from cloud providers and there's no real trustworthiness of the cloud providers. No nth time dropbox gets hacked, no EC2 going down, etc.

I've been using client-side encrypted cloud storage for a while, but you either self-host with relatively poor tooling, use fairly untrustworthy proprietary tooling or use a provider that charges an arm and a leg for storage fees.

There's no good compromise right now - and I'm not saying FileCoin will be it, but they have a good backing of developers and have decent chances. Other contenders:

- GridSync - fixes Tahoe-LAFS syncing, making the self-hosted solution much more bearable, but still size limited

- Sia - an already existing cryptocurrency based solution that seems to have done a lot right, but doesn't have the same marketing wank.

I'm really not impressed with the way Filecoin has run their token sale though - but it doesn't rule it out if they can make the best solution in the end.

I have a (not very well supported) prediction that Filecoin will be the first ICO company to incur the wrath of the Securities and Exchange Commission.

Last month the SEC released a report [0] that said in many cases these ICO tokens can be classified as securities, and therefor going forward, could be subject to all the same laws and regulations. These are not laws you want to be breaking. This Filecoin ICO has been highly publicized, and importantly, came after the SEC's report.

It doesn't matter if it all only exists on a blockchain. When the SEC decides to make an example of one of these companies it will be a bloodbath.

Matt Levine has been covering this topic recently. [1]

[0] https://www.sec.gov/news/press-release/2017-131

[1] https://www.bloomberg.com/view/articles/2017-07-26/tokens-va...

They've done their best to abide by SEC guidelines here - they've only sold to accredited investors by US standards and placed a lot of KYC/AML restrictions on it.

Now, I'm not sure if that'll be enough or if they'll be held responsible for the secondary markets which will surely pop up once it's released.

scrutiny surely, but since they only accepted accredited investors, and likely under 100 of those, probably would not run afoul of regulations. though as someone in the DC cognoscneti told me once, any Fed prosecutor can make a career by going after a high profile target - win, lose or draw

Filecoin seems at the top end of the scale when it comes to following these regulations (from my laymans perspective), e.g. only selling to accredited investors. I guess attacking them would make it even clearer that all ICOs are a potential target, but there are going to be a lot of targets in clearer violation of the rules.

After glancing over the whitepaper, I get the motivation, but I just don't see how this scheme is viable, financially.

Participants with little storage to give, have little to earn, but must remain connected to the network. Why bother with that?

Participants with large amounts (petabytes) of storage to give are competing with Amazon S3, Google Cloud Storage, etc. At this scale, it's hard to imagine competing financially with these and other giants. (Furthermore, if you have petabytes of storage idling around, you might have a business problem anyway.)

This is all pretty hand-wavy, but I think the idea is you are creating a wide open market wrapped up in a protocol, in such a way that the network effect becomes your advantage.

I believe the economic model is such that buyers reward nodes that are closer to where the content is being accessed most. I'm not positive, but I'm hoping the protocol actual distributes / moves content accordingly. If so, then you suddenly have something pretty neat, in that you incentivize providers to pop up where they are needed most, across country borders and at cut-throat rates.

Yes, this happens to some extent with CDNs now, but imagine anybody being able to be a CloudFront provider and being able to charge for storage at the same terms as everyone else and I think that is getting closer to what Filecoin is trying to do. (though I fully admit I may be totally wrong given that a lot of these details haven't been worked out yet)

To put it in more concrete terms, when I lived in Rwanda one big problem is that within the country the network is great, they have quite a bit of fiber and very developed mobile networks. But their connection to the outside internet is terrible, they have two pipes coming in and neither is reliable. So there would be great benefits to having local CDNs there, and Facebook and Google do but others don't because it just isn't worth it. You could see something like Filecoin being the economic incentive for someone local to provide that service and greatly increase the speed of internet access for everyone in the country.

Can anyone tell me how they arrived at the $186m figure? Are they just multiplying the last traded price by total supply, and forgetting about market depth/slippage?

I mean, if I sell a plastic cup to someone for 10 cents, and then go produce 100 million of these plastic cups, do I have $10m in plastic cups? Or could it be that I’m unable to find 100 million buyers each willing to pay 10 cents for a cup, even though that’s the last traded price?

As far as I’m concerned, the amount of USD they’ve raised equals what they could earn by executing a limit sell order with a price of zero into the Filecoin/USD market (thus eating up all bids).

They literally sold 186m worth. As in, Filecoin literally has 186 million in the bank. Its insanity

They also have no obligation to deliver a product. If they fail to deliver a product after 5 years, they must return all of the money to the original investors.

They could theoretically just earn interest on $186 million for 5 years and then return the money and say "oops, we missed our target". The terms of the SAFT allow it.

Wow... I just had to get it confirmed, and I still can’t believe it. Did they raise this without giving up any equity?

Yes

Is that 186 million in ETH or fiat?

A combination of Bitcoin, Ether, and fiat. But they could easily liquidate tokens or buy more to change their holdings structure.

This is probably a money laundry/tax evasion operation.

I don't believe these "big name Silicon Valley investors" just flush such amounts of money down a toilet without a hidden agenda.

After watching Ozark, I'm actually convinced that software is amazing for money laundering, it's stupid easy to generate huge amounts of fake data.

"Look, our food delivery app delivered 10,000,000 meals and everyone paid by cash!"

"Wow, we rented 10,000 homes through our short term rental app this month and everyone paid by cash!"

"Hey, we have an ATM that lets you convert money into NameCoin, sooo many people are using it, look at all this cash!"

From a bit of inside info from the aggregator side (think app - but let's keep it generic), there are some fraudulent activity in the 'seller' side and the aggregators pay a lot of attention to it.

"Uber for X" apps generally don't even accept cash; it's credit card or nothing. Building an app that accepts cash would be a red flag in itself.

Not in Germany (and I think also other european countries). People here love using cash, and so a lot of the startups go with it, or they would lose out on +50% of the market.

Why is that a red flag? Uber accepts cash. We are doing an Uber for X and accepting cash, cryptocoin, and limited credit cards (CC companies dislike adult services so it might involve too much cat-and-mouse to be worthwhile).

Not accepting cash seems like a the lack of features in an MVP. It's easier to handle CCs, but collecting cash in a sharing-economy situation is more work. It certainly isn't a good thing to not accept cash!

The big name valley investors got in at 50 cents per FIL in an advisor only pre-raise. The $180mm in the first hour is from your average Joe accredited investor who bought in at like $2.63 per FIL. The price is now $4.50+ for future investors. If there was a liquid resale market, the SV investors have nearly made 10x already. Of course, they cant resale for a while due to vesting and legal restrictions.

While crime is certainly a possibility, rich people just have so much money and they don't have that many options for where to put it. This is part of the reason why the housing crash happened; some new investment vehicle was created, and people with way too much money ate it up. And now with interest rates so low, the demand for high yield investments continues to grow.

Is this a joke? Regardless whether the concept has any merit, at this stage of idea/startup we would normally be talking about seed level funding round so small sums of money to get a small team and build a product.

Almost 200 million is obscene as a seed funding. If this isn't the proof this is tullip mania then I don't know what is.

I lived through the late 90s dot.com mania and you saw an MBA out of Harvard and a couple techies raise this kind of money on nothing more than a hair brained idea with .com after it. Russ from Silicon Valley with his "radio. on. internet!" is pretty close to the truth.

This is a bubble. Not FileCoin, but ICOs and block chain.

The vast majority of these ICOs are outright scams or unworkable nonsense. I've read some of these white papers but I stopped when they threatened to give me an eye rolling injury. (Can eyes roll so far back they get stuck?) Some of them read like they were generated by a statistical language model to parody CS papers on distributed systems.

FileCoin is actually one of the best I've seen-- the team behind it has actually shipped distributed/decentralized systems that actually work (IPFS). I have to stress this-- in the ICO space a team that has actually shipped something useful is rare and this places them far above the herd. They might actually do something with this money.

I also hope the honest/good ICOs don't get crushed when this inevitably implodes or gets prosecuted by the SEC. There's so much obvious outright fraud in this space I can't imagine the SEC (and FBI, etc.) aren't watching or even briefing prosecutors.

That being said we (ZeroTier) have looked at an ICO but...

(1) Our system has no built-in scarcity that needs a token. We have no use case for a token. It would be a force fit or an invented case, which would make it scammy.

(2) We have existing investors who are justifiably nervous about taking on an unknown liability of the "potential criminal violation of securities laws" sort. So am I for that matter.

Well, Russ from SV's story is essentially what happened with Mark Cuban and Broadcast.com...so it effective is the truth.

Agreed. The obscene amounts being raised through ICOs doesn't make any sense for a product or service that doesn't even exist yet.

I'm kind of amazed how Filecoin managed to create such a hype, even though its nothing more than a whitepaper right now.

I mean, there are already 2 or 3 coins that are doing something very similar and already have at least a working prototype (eg Siacoin, Storj), or have an interesting algo like Proof of Storage from Burst. Is there anything that makes Filecoin superior compared to the other's, or is it just that its VC-backed?

I don't get it. Competing with Amazon S3 seems like a very unpromising business idea, blockchain or not.

The only point is to come up with a flimsy excuse to sell an ERC-20 compatible token as an unregistered security on exchanges.

Long rant: https://davidgerard.co.uk/blockchain/icos-magic-beans-and-bu...

There is indeed only a single legitimate use-case: Censorship resilient storage.

For everything else the available Cloud storage options are cheaper, faster, easier and more reliable.

I agree. But censorship resilient storage should be really niche.

Would you accept filecoin to use your resources to host children pornography? I also think you will receive a visit from the police if you do that.

if it's encrypted, i don't think anyone can prove it's porn, which probably makes you immune

Unless that is the primary reason to use Filecoin. You can not prove it is porn, but if Filecoin's primary use case is child porn, then if you have Filecoin, you are likely storing someone's child porn, and you are likely running Filecoin to access your own child porn that is stored on someone else's computer.

Remember that just running a Tor node makes the authorities suspicious about that person. There are few non-suspicious reasons for running Tor unfortunately from a government's perspective, you are either an activist fleeing some government censorship (sometimes, but I think that is rare) or doing something semi-illegal (much more often.)

There is a big risk that is where this is heading.

If the file is shared it can be publicly seen.

Comment deleted because it was wrong.

That's incredibly inefficient. S3 has to be reliable and store the data in a redundant way. Filecoin will have to do the same because losing a host happens all the time.

Also S3 is incredibly expensive if you factor in outgoing traffic costs.

Buying 5TB consumer drives for 130€ and throwing them away after one month of usage makes more economic sense than using S3 for filecoin. Heck if you throw those consumer drives away after 12 months the storage cost will still be cheaper than glacier which you can't even use for filecoin.

Exactly.

Plus, getting average people to switch from services like S3 "because blockchain" is even less likely than getting average people to switch from WhatsApp/Telegram/whatever to Signal "because privacy". It's just not going to happen.

$186M ... that's crazy.

And here I've been sitting wondering if anyone would bother investing in my idea for a Bitcoin mining co-op. I want to create a U.S. based mining farm that allows anyone to buy-in and have access to a portion of the hashrate. The idea being that, today, the average Bitcoin user has no way to reasonably voice their opinion through the hashrate because they can't compete with the efficiency of the big miners. We fix that by being a big miner; build our own ASIC, hardware, everything, and sell that back to average users at market rate. Level the playing field.

But the level of investment needed is in the tens of millions (custom ASIC, custom hardware, custom datacenters, etc). It's not an incredible amount, and I'm not worried about the technicals (I previously co-founded a company making FPGA miners and my previous company was a hardware startup), but it's enough to give me pause and sit on the idea for now. But if Filecoin got $186M through an ICO ...

Yeah but your idea is not a get rich quick, pump and dump scheme.

Isn't it already possible to own shares of a mining pool?

I'm not aware of any such thing.

oh there have been quite a few but they have all been scams

It’s worth noting that, if you enter this space, you’ll be competing with existing miners, some of which are quite large. Some have over 10% network hashrate, which means they’re earning 12.5BTC×$3500/BTC=$43,750 every two hours. That’s half a million dollars per day, or $15m per month, and I assume most of it is being channeled back into optimizing their already fairly optimized ASIC chips. And you’ll be starting from scratch.

Yes, that's the point. To compete against them directly. Get enough funding to override their advantage.

> And you’ll be starting from scratch.

I haven't built a mining ASIC (yet), but I built the first open source code for mining FPGAs. I wouldn't be starting from scratch. It'll take a little bit of re-architecture to update that code to multi-core designs (the FPGAs were single core, fully unrolled loops), but that's relatively easy. The more aggressive optimization will be around power consumption, which I plan to hand off to the engineers working with the target fab's libraries doing the HDL->layout conversion.

This isn't rocket surgery. Mining ASICs are perhaps the easiest ASICs to build. It's even feasible to do manual layout, since the design is so repetitive. Just need to hand layout one round of SHA-256 which amounts to only a couple adds and mix of binary ops. Done.

> That’s half a million dollars per day, or $15m per month

Minus NRE, manufacturing costs, on-going maintenance, on-going electrical costs, and all the money they wasted mining BCH and playing other games.

Don't forget AsicBoost!!!

The inherent challenge, as I see it, is that if you manage to produce e.g. an electric car that’s not quite as good as a Tesla, you still have a car that can transport people from A to B. And if you have trouble selling your cars, you just lower the price until all your cars are sold.

With mining chips, if you have a chip that’s just half as efficient as the best one, your customers have zero incentive to buy your product, as efficiency is all that matters. An inferior car can still transport people, even though it’s not the best car, but a mining chip whose electricity cost is $5,000 to mine a Bitcoin that costs $3,500 is worse than useless (you might as well throw it out).

That’s quite a difference.

I’m not saying this makes your venture impossible, just that it’s an important aspect to consider.

Good points.

Efficiency isn't actually all that matters; it's total cost versus revenue. Every mining device has some sort of lifetime to it. Its total cost is cost of the device itself + (electrical costs + maintenance + cooling) * lifetime. Its revenue is a function of its hashrate.

So, all else being equal, if someone makes a mining chip with less efficiency than the best, they simply have to sell the chip for less $/TH.

But usually all else _aren't_ equal. Say you're mining in the far northern regions of the planet. You can take advantage of the colder climate to reduce your cooling costs, so you don't have to expend money designing chips and hardware with good cooling. But you can't take advantage of hydro or solar power, so power efficiency becomes more important.

Or, let's say you mine near the equator. Now you can probably build out a solar farm and get cheaper power than anyone else. But cooling is a major issue. You have to spend more on good chip packages and thermal designs.

On top of that, the design of the chip itself can dictate a lot of cost. For example, when I designed my FPGA miners, I made it so that the FPGAs could be both programmed and communicated with by a single, cheap FTDI chip. This made the boards super simple and cheap.

Basically, it's a complex equation that can't be boiled down to simple power efficiency.

Sounds like you know a lot more about this than I do.

Have you considered leasing as a way to reduce risk for operators? So, rather than mining operators needing to take the risk of standing with outdated hardware, you — as the manufacturer — would take on that risk by allowing mining operators to stop the lease if it becomes unprofitable.

This changes the incentive structure so that you stand with a loss if your hardware becomes obsolete.

Not completely thought out, but I believe parasitic storage might be a better approach to scaling out a censorship resistant distributed object store. Some kind of cryptocurrency could help fuel it as well.

A parasitic storage approach would leverage existing "free" tiers of services like google drive, onedrive, dropbox, yandex.disk, etc. One of the hard parts of scaling that would be creating the fake accounts to hold the data, so a cryptocurrency+contract could fuel the reward needed for people to create these by hand. You use the reward to buy storage space, so there's some incentive for the people creating them.

I'm less clear on how you would combat the various providers finding the fake accounts and deleting them along with the data. Would clearly need duplicate storage of objects to work around that, and some central reference table to map keys to the various copies, and provide the high level "api" for creating buckets, etc.

This is why we can't have nice things. If you misuse the free tiers in this way, they will go away.

That's a fair point. Maybe if it focused on the services that more clearly abuse their customer's privacy. Like mapping to Facebook post attachments.

Yeah, an interesting way to change the balance of "if it's free, you are the product".

> This is why we can't have nice things. If you misuse the free tiers in this way, they will go away

Imo, we shouldn't have free tiers.

It's like "unlimited" internet. I don't want things to be non-sustainable, it's a myth. Give me scalable solutions. How about instead of free tiers, very cheap tiers with very limited resources to try the product out? etc etc.

I think you could use such accounts as the backing store for offered storage in the Filecoin "system"

For most storage, one needs it to be local to compute or easy to put behind a CDN - e.i. in a datacenter or on a very fast network that is connected to the datacenters.

If not, you are cut out from the main commercial storage market.

What is left is:

- People who want to store stuff that is can not be legally stored on existing networks, such as illegal drug or porn stuff.

- People who need secure stuff stored in a distributed fashion.

- People who want to have a way of backing up their PC? But will this be faster and cheaper than using Backblaze-like solutions that buy storage in bulk and optimize for costs?

Is there enough redundancy to ensure that no data is ever lost?

Could someone actually attack the network to cause data loss?

What are the costs? - Inbound, new storage per GB. - Outbound, access per GB. - Deleting storage. - Static storage on a per GB/hour.

What is the performance of this?

Can Backblaze make more money being a provider to Filcoin or should Backblaze use Filecoin for it storage? Just like Bitcoin mining Filecoin should, if successful, be dominanted by people like Backblaze.

That's pretty much my take as well. I really like the concepts behind IPFS and FileCoin and I think they're really fine piece of software engineering (well, IPFS is, can't say much about FileCoin yet) but as an other comment pointed out it's a solution in search of a problem.

I tried hard to find a use for IPFS but I failed. I could use it to share files with other people but simply having a publicly reachable web server is simpler and more convenient. People don't have to install IPFS or use a public gateway to get my content.

The cool feature is being able to rehost any content if you want to "cache" it but that's only possible if the original provider decided to host it through IPFS, so there's kind of a chicken-and-egg issue.

I can't really use it for backup either unless I pay a third party to always cache my data, but in this case I might as well use tarnsap, dropbox or something similar and it'll probably be even more straightforward.

So it's a pretty cool piece of tech but sadly I simply have zero practical use for it.

Say my desktop is always running and always connected to the network. Now I can rent out my extra storage space. Considering I am incurring almost no additional cost to rent out this space, the price is extremely elastic and will therefore be lower than the cost of a service like S3.

I assume that the VC investors actually bought a stake in the company? It's misleading to lump them together with the ICO investors, who are buying nothing more than a vague, non-enforceable promise (see any ICO terms & conditions, you have absolutely no rights or ownership as a coin holder)

Many of the ICOs flat out stated that the tokens you're receiving entitle you to absolutely nothing, and hold no value, but somehow people have convinced themselves that the people behind these ICOs are going to give them something in return out of the goodness of their hearts anyway.

This is pointing out something profound. Investing is powerful when you can have liquidity right away.

AN ASIDE: The valuation in the ICOs too high. But the following profound point still holds true...

Imaging if an angel investor can invest in a company early, like Dropbox. Then when it grows some, he could sell 10% of his shares on a highly public and liquid market (like Ethereum coin exchange). He then invests that in AirBnB when it was tiny. He may invest in a startup that goes down after the Series A. Oh well, he may sell for 30% the valuation he invested in. The power is there by those who make big gains in the big winners, and that they can then move money out very soon and into new places.

> Imaging if an angel investor can invest in a company early, like Dropbox. Then when it grows some, he could sell 10% of his shares on a highly public and liquid market (like Ethereum coin exchange). He then invests that in AirBnB when it was tiny. He may invest in a startup that goes down after the Series A. Oh well, he may sell for 30% the valuation he invested in. The power is there by those who make big gains in the big winners, and that they can then move money out very soon and into new places.

What is your point? This has nothing to do with cryptocurrencies. If you replace "Etherium coin" with "USD", the scenario is unchanged.

he could sell 10% of his shares on a highly public and liquid market

This is the part that's illegal. If a company's shares trade on a public market then they need to file all the paperwork of a public company with all the costs that entails.

Their Filecoin Token Sale Economics says that 10% of all tokens is allocated to investors. Not sure how much they sold, but even if it's almost all out, does it make it a $1.8bn capitalisation?

There is also 52 million they sold in a 'pre-sale' I dont think is included here. Yes, that would mean they have ~litecoin valuation currently.

The total number of Filecoins that will enter circulation is going to be around 2 billion, and they are selling right now for somewhere between $2 and $5 each. That puts the valuation somewhere between $4 billion and $10 billion.

A lot of money for what's basically Pied Piper without middle-out.

Seriously though these coins won't be worth much given a competitor could either a) dominate mining or b) fork it.

Yeah, these guys don't even have a cool name like EndFrame.

I'm actually more confident in Sia than Filecoin, despite them flying much more under the radar. Sia devs are more transparent (you can reach the lead dev here or on reddit pretty easily), have software that's in early stages but works, they've been regularly putting out new releases with new features, bug fixes, and polish.

But Filecoin does have the funding, so they might be able to sweep the rug out from under Sia just by paying serious money to close the gap. I'm hoping Sia ends up the dominant player, though.

I tried Sia and it worked. I was able to use it. The tech seems solid and the plan seems straightforward and logical. If there is a good niche for decentralized storage then it already exists and they have it.

No wonder nobody has heard of them. /cynicism

Edit: Cynicism is not wholly unjustified. A while back I was taking to a big marketing guy about how marketing teams in big companies often get less excited about products once they hit prototype. Something that doesn't exist is just so much more exciting than something that does. Real things have caveats, limitations, and costs.

Yep, Silicon Valley covered that as well. "Don't try to make money with your software! Because there will be solid numbers and it'll never be enough. Have a zero revenue model! That way all they see is the potential!" (paraphrasing)

A startup I worked for actually had exactly this problem when they had a big idea the company was founded for, but wanted to put out a couple small apps first as a warmup for the team. When those ancillary practice apps didn't perform amazingly well, the board of directors got nervous and killed the company before it even got started on the app that the company was founded to do in the first place. I'm pretty convinced in hindsight that if we just worked on the big app in the first place, the company might still be around today.

This is what's good (and bad) about the cryptocurrency / blockchain (etc.) state at the moment.

It's all pure speculation, and makes a fantastic study from an anthropological and economic standpoint into how the perception of value (and the belief in that value in something) can increase the value of that 'thing'.

I think there's a lot of hyper-salesmanship at play at the moment - my real worry is that the hype catches up to the technology which is (at the base level at least), proven. When this happens, I believe a lot of these ICOs are going to crash and burn due to a lack of understanding of the base technologies they're implementing in order to generate revenue.

Abstraction is not always a good thing.

So are the developers of Filecoin just going to retire in Hawaii now after becoming rich?

Only if EOS and Tezos didn't already buy the property they were looking at.

The Economics of Filecoin

https://medium.com/@ryanshea/the-economics-of-filecoin-a8d82...

What is the difference compared to storj?

A different group of people is running with the money this time.

The end result of Filecoin will be extreme centralization just like Bitcoin mining unless there are extreme legal issues that makes everyone scared of being part of the network (e.g. child porn.)

Thus there will be a few ultra large cost optimized providers probably similar to BackBlaze that handle 90% of all storage on the network.

Does that extreme centralization fulfill the vision of Filecoin?

Didn't centralized storage win long ago as there were a bunch of failed decentralized storage services in the past? With the low price, high speed, CDN, and reliability of centralized storage, what would the decentralized one give me that I don't already have?

Can someone please explain how exactly someone would transfer their files onto Filecoin? How does the system ensure reliability? I just don't understand why I would put my files in some random person's hard drive.

So if I am personally bearish on the entire "alt-money" movement, how do I turn this into a potential profitable bet? Any tips on where I go to "short" coins?

I'm not aware of any regulated exchanges that currently have Bitcoin futures contracts, but even if you could find one the volatility + leverage would make for a very interesting ride down (assuming you're not immediately stopped out).

You can do it on Kraken.com

You can short these coins in a lot of locations, depending on which ones you want to short. If you want to short larger ones, you should check out bitmex (https://bitmex.com), a derivatives platform, or bitfinex (https://bitfinex.com), a very large exchange. If you are expecting platforms as regulated as stock brokers in the US, you are out of luck. There's many other exchanges that will allow you to work with more (lesser value/known) assets.

Keep in mind just about everyone who has tried to short these things has lost everything. I've watched coins that I think are completely worthless and have zero real users go from 100 million market cap to 200 million, to 500 million, to over a billion. And they still sit there today. And every step of the way, 'rational actors' are trying to short it, waiting for it to finally correct.

I've seen this quote mentioned a lot recently in cryptocurrencies, and it is still not mentioned enough: "the market can remain irrational longer than you can stay solvent".

LIke to know how this can be done I have a Quant Trading Platform I need to raise money pinder321@gmail.com

Great, another Ponzi scheme I can get in at the start with... how do I invest?

Half the money these ICOs are raising is going to end up being paid to the SEC in fines. Maybe not Filecoin because they have at least made an attempt to pretend to comply with the rules - although Christ knows what will happen when Filecoins start trading on exchanges! But there are a LOT of companies out there who are going to be totally screwed.

These could go big too... "3 ICOs Set To Out-Perform Long Term Benchmarks In The Cryptocurrency Markets" https://medium.com/@alexanderwestin/3-icos-set-to-out-perfor...

I actually think we'll see our first billion dollar ICO here soon.

I don't doubt you, and I think that's an incredible shame to everything computing has enabled humanity to achieve.

I don't think it's a shame personally. Cryptocurrencies and especially ICOs have enabled economic Darwinism at a scale rarely before seen.

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