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>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.

    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?

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.

> 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...

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".

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-...

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.

>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...

> but it surely looks exciting

Or terrifying, take your pick.