Why is value flowing to ICOs? It's diversification of Bitcoin
jonathannen.com
jonathannen.com
ICOs appear to be more like Kickstarter with tokens. Some are in it for speculation and possible wealth, others really like the underlying product/game/app.*
For example, French indie game 'Beyond the void' is integrated with an Ethereum blockchain. People fund the dev and receive tokens to use in the game. "Investors" win when the game is live. That their token can be changed for other currencies is secondary.
People will get burned. Just see the scammy ICO ads on your Facebook feed. As with Kickstarter (with its 21% tech project success rate), diligence is required.
But that any one of us can relatively easily exchange objects of value across hundreds of different projects is just about revolutionary.
* Currencies like Monero and Litecoin are more truly speculative in that their value rests solely in perceived future utility and adoption.
CEO - Serial Blockchain Entrepreneur. In this for the long haul!
CTO - "Crypto expert" == Business guy who understands blockchain superficially
CFO - This guy is real, of course.
Working code! = Fork
Whitepaper = Buzzword language that just says their going to tokenize something. 'LegitCoin will tokenize the derivatives market for solar!'
Create positive pump articles and videos for us for free tokens!
My non-technical brother in law asks me every other day to look into one of these turds for him, and I have to deflate his bubble.
At this very early stage of adoption, most people who are smart enough to figure out how to trade crypto should be smart enough to do some research before buying 1000 vaporware coins.
As the doors open to the wider population, though, it's inevitable that hucksters will try to separate regular folk from their hard earned cash.
The notion is reprehensible (and goes against the spirit of cryptocurrencies) so some regulation around accountability would not be unwelcome.
You have bitcoin & litecoin reversed there friend. Compare organic looking transaction count and volume, adjusting for market cap.
If his English had been a little more intelligible, I'd have been interested to find out whether he was shilling for an ICO or a fake exchange.
Want to hide your money? Use Monero. There are even services that fulfill BTC orders: you send them Monero, they send BTC to the specified address. There are also services that go the other way.
It uses ring encryption and appears to be well-implemented. It will be with us for a long time.
Monero in and of itself is fungible, but it doesn't 'solve' money laundering.
As far as raising questions, it's like cash, but it's also extremely convenient to transfer large amounts.
Most ICOs don't do KYC; if they're asking for crypto-based investments they likely aren't asking for conventional investors and aren't vetting the speculators who only want to know how long they have to hold the token before dumping on the market
It's a travesty that some of these companies raise millions without giving up equity, voting, or dividends.
Pretty sure they got the guy behind a lot of the thefts when they arrested that BTC-e guy earlier this year.
Until we have serious ringsizes this will remain an issue.
I would consider LBTC rather impractical for smaller trades though.
Sorry for being nosey but I'm genuinely curious!
Indeed. And since there is little real (read: economically useful) work that Bitcoin can actually do, speculators pile them into other types of coin that are, at best, an additional level of indirection between Bitcoin and real value.
Hm, creating complicated financial derivatives to hide the underlying non-viability of the core product. Now why does that sound familiar.
"Join my startup, your salary is 100 Million Kangaroo coins per year. We call them 'ru-bucks' because we're cool like that."
But if a company does well, stocks >>> ru-bucks.
Or at least they should ...
Sadly, I actually believe my little satire will become reality very soon, as I believe coins will be handed out as comp ... I'll bet a Kik, very soon.
EDIT: Point being that this isn't just a start up thing.
A companies assets belong the shareholder - so if the money is in Google's bank account or transferred to the investors bank account, it the same thing, technically.
Imagine a corp with $10B in the bank, valued at $25B, implying 'future returns in present dollars' are worth $15B. Add that to $10B in the bank you get $25B.
Now - if they company paid out $10B in a massive dividend - what is the company now worth? --> $15B.
When money comes out of the company, the value of the company goes down by that amount.
Technically.
Obviously it's more complicated, and it relates a lot to whether or not a company can re-invest the company better than an investor could otherwise.
But in the end, it's all baked into the value of the stock.
So it really doesn't matter that much.
Most startups don't pay dividends because cash is much more valuable, and they have places to spend it.
A company sitting on a hoard of cash, probably should pay dividends, otherwise, it's operating ratios aren't going to be that great.
Ex: MSFT bank account was so big at one point, analysts had to treat MS as 1/2 a 'software company' and 1/2 a 'hedge fund' - because the performance of MS was only about 1/2 'how their business was doing' - the rest of their stock performance was just 'how their fund managers were doing'. 5% returns on MS's investments, are maybe worse than the bigger returns they get by investing in their business.
Only companies with big cash piles - or - really predictable set of earnings pay dividends. If you are a massive company that sells 'crackers' and have been around for 120 years, and your business doesn't change much and are healthy - you probably pay dividends. Startups - not so much.
Curious - Why do you feel that's an effect of Bitcoin? Arguably you could make that same statement with "USD" instead of BTC.
> Indeed.
Art?
Modern art is rather like bitcoin - mostly pointless work of no value with pseudo-randomly attributed value, used for portable hoards of those capable of dealing in it.
That they offer a diversification of bitcoin is merely an oversight in the grand scheme of things.
I'm not sure if I want to be on the other end of that deal ...
However, as we see with stocks, there's nothing stopping an entity from doing whatever they please in the end.
Like issuing a second set of coins, at par or equal value to the 'current coins'. Possibly requiring that the first tranche be redeemed for the second.
Or whatever shenanigans they want.
With the Kik ICO, they've kept a huge flood of coins to do with as they please. And they will in fact do whatever they please with them.
For these 'company managed' coins, I think they serve as a de-facto 'central bank'. They'll find a way to change the rules if they choose to.
And the companies can make them more worthless at any time by changing the rules. Which they will, if they can get away with it.
In both cases, you are well aware most of your investments will fail and you're expecting one 10x or 100x that will make it up for other losses . aka gambling ...
Hmm, I wonder if the zero interest rate "trickle down" free money that is keeping stocks artificially inflated has anything to do with this assumption ?
>>> With ICOs, the claim is that many people mean to cash out by selling before the bubble bursts.
Yeah totally not the same as founders rushing to growth with bullshit things like "growth hacking", then rushing to exit to cashout before everyone realizing their business is not actually solving a real problem. ( like all the messenger apps/chat bot frenzy of last year)
It isn't mysterious that this is also the result in cryptocurrency as well.
An oft parroted rebuttal is that bitcoin is being used for speculation and very little is being used for purchases of goods and services, even though that fits the same behavior of national currencies it is used to discredit bitcoin's use as a currency.
It looks like it is growing the way one would expect.
Are you asserting that a sizeable fraction of U.S. dollar M3 or even M2 is sitting idle speculating on the future value of the U.S. dollar?
Rates are built into modern currencies in a way they were not for gold. That's Bitcoin's fundamental problem. It's a 19th-century currency relearning old economics.
No. But that also happens whether it is inadvertently just sitting there, or in bonds as part of a massive carry trade
Secondly did you read the article? It is about sizeable portions of bitcoin being used to invest in ICOs, which I was agreeing with and pointing out how otherwise illiquid portions of national currencies are used this way as well
Bonds fund useful activity. Most ICOs have yet to finance a single developer's salary.
The point the parent was making is that the money IS SITTING there. And bonds are not M0.... you are proving his point.
Anyone holding USD in a deposit account or loaned it out is speculating that the value of USD will remain almost the same (willing to lose 2% to inflation).
Of course someone holding a currency expects value to hold or go up. Unfortunately value of USD and other fiat goes down at exponential rate and by end of century will be practically worthless.
Imagine paper bills in year 2100. No?
Then you can imagine USA will digitize it's currency on some Blockchain of their own(this is a no brainer).
Now imagine THE Fed changing interest rates (aka Coin Emission Rate) as they please.
Pretty soon people will diversify their currency holdings away from a single country/government that can change emission (interest) rate at will and has onerous reporting and surveillance requirements.
Logical conclusion is a supra/trans-national global currency something Bitcoin or Monero.
"Granpa, was it true that when you were young you used to get paid in tree cotton papers?"
"No Timmy, I was not paid with paper money even in the 1990s."
Most forms of capital formation have no bearing on anything in physical goods and services economy, colloquially called "main street". ICOs are no different and I'm not sure why you feel the need to single them out.
The point here is that people are growing this currency's economy by reinvesting in new projects within that economy, just like they do in national currency economies. Thats what the article is about, thats why I've been pointing out, and what is hard to accept about that?
If they are underwritten by VC's you can be assured that the terms heavily favour them, and the immediate value is going into their pockets.
It's the ultimate rub.
A free, legal way to print Monopoly money that people will trade for real money.
A single blockchain cannot physically scale beyond a certain number of transactions (based on Amdahl's law), but the amount of value that passes through a single network can in fact keep going up indefinitely (e.g. when the price of the coin goes up, the value of transactions go up, even though the actual number of transactions stay the same) - But the flat transaction fees become prohibitively high and only suitable for large transactions; that's why you need new networks with lower-priced coins and fees to handle the load of smaller transactions.