Ray Dillinger: If I'd Known What We Were Starting
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Startups by definition are organizations in flux seeking their scalable business models, and claiming to have all the answers upon inception is an exercise in hubris and/or grandstanding. The late Steve Jobs did say that customers don’t know what they want, but many of these ICO firms don’t even seem to take the first steps in talking to early prospects.
1999 is calling, and they want their 18-month growth plans, 50-page business plans, and million dollar war chests back.
> How to make money in ethereum, from high to low risk ... 3. Even more profitable is kicking off your own ICO. Go through the checklist - fancy HTML5 theme that you can buy off of Themeforest and edit the HTML a bit for the landing page, create a Slack channel/Twitter account/subreddit, write a "whitepaper" that is easy enough for the shmucks you're targeting to understand, yet replete with enough pseudo-academic crypto jargon and irrelevant/unnecessary mathematical symbols to get the shmucks nodding their heads and pretending to understand how this particular algorithm/equation based on the "turing-complete ethereum blockchain" will "change the world" or "bank the unbanked" or, more importantly to them, appreciate 500x in value.
Ironically, the first "ICO" to do it with full compliance, useful tech and good business model, will be huge. There is demand for it.
The other big opportunity is to come up with a framework that everyone can use to be compliant (e.g. An Ethereum with "compliance" mechanisms built into it will be a big "general-purpose" blockchain).
It's hard to understand why ignore compliance, when being compliant is quite simply going to be much bigger, sustainable and "good business" than all scammers put together.
Yes, Filecoin raised over $200M. But their troubles are still in the future. The ICO bubble may pop before any of their investors get liquidity. It's probably illegal for Filecoin to trade on any public exchange, so they need to create a "SecondCoin" exchange for qualified investors. And blockchain-based storage has some unsolved problems like low demand.
Being compliant is quite simply going to be much bigger, sustainable and "good business" than all scammers put together.
Any evidence of this? My impression is that 90% of ICOs wouldn't survive any due diligence.
At some point I expect some court to say "X shares were illegally transferred from person A, give them back". If we don't know where they went, it's impossible on block-chain to give them back, unless we assume the existence of someone who has the rights to make arbitrary changes, at which point there is no point having a blockchain.
But I think really the statement of interest is here: > ... at which point there is no point having a blockchain.
Lots of people have different reasons for liking block chains. Their reasons may disagree with yours.
And what if they refuse [despite consequences]?
> Lots of people have different reasons for liking block chains. Their reasons may disagree with yours.
I'd say the common/paramount feature is "decentralized, trustless ledger w/distributed consensus." Dillinger talks at length here about how "...the Trustless nature of Bitcoin was the main thing that convinced me Satoshi wasn't scamming." Yes, lots of private things calling themselves a "blockchain" exist. But those all submit themselves to some sort of authority/trust system. And it's likely the case that they do that in order to avoid the problem described.
IMO it's anarchy [good connotation] vs rule-of-law. Crypto-coin/asset systems can be ruled by distributed consensus but this feature is mutually exclusive with state-managed systems. When they intersect or when they're forced to intersect, we end up with an imbalance/mismatch.
I feel like this is a problem that is pretty commonly exercised in our legal system and incarceration is usually a strong last resort motivator.
This is just the tip of the iceberg BTW. What if they die or have a brain injury? Their password securing the wallet is now lost to the world. Now there's no way to reverse this transaction. We accept this risk with the trustless system of currency. But real estate, equities, this kinda stuff -- it just doesn't map well at all.
One other potential problem is that if an owner of some Bitcoin dies, there may not be access to their wallet at all. However, if there is considerable wealth in that wallet, they should have incentive to pass that on to their heirs, in which case they may have set up a will or otherwise passed on instructions for how to recover the money. Whoever that money is recovered to can then be approached for settling the estate or what-have-you.
In the end, though, laws and the consequences for breaking them are (in principle) set up to incentivize behavior that is good for society. If you break laws, you face consequences. If you avoid those (e.g. court orders you to pay and you refuse), you face other/worse consequences (e.g. garnished wages, contempt of court). If the consequences still aren't strong enough or enforceable enough to maintain the peace, then society has a problem and new laws can be passed.
The problem is using blockchains to represent shares in a company (for example). Ownership of a company can't be "lost", or "unpaid". Legally, someone owns each share of a company, and a court can declare ownership is moved. At that point, your blockchain doesn't represent reality any more (as declared by a court) and then, what value does it have?
Can a court actually declare that ownership is moved, or can they only declare that one is to transfer ownership, implicitly under penalty of something else if you don't? If you have a car and the court declares that it is my car now, that doesn't physically transport it to my driveway and you could steps to prevent that from happening (eg, driving it into a lake).
When it comes to things like houses, a court certainly can declare ownership is changed, there is no option for you to refuse, or have to do anything.
This already happens without block chains.
For example, when someone on Twitter raised the problem of collaterizing smart contracts (no one is going to lock capital away in extended escrow, which creates an obvious enforceability problem), Naval Ravikant argued in response that a third party guarantor would be necessary. As far as I can tell, he didn't recognize the irony in his own statement.
I only follow blockchain/ICO events from the peripheries so I'm sorry if I'm grossly misunderstanding.
Would you ever trust some random, small-time agent to collaterize a smart contract you're involved in? That's obviously foolish. Even trusting a mid-size agent is foolish. You don't know how these people are operating, and whether they might go insolvent the very next day. This is one of the primary reasons we have large, regulated, centralized institutions in the first place.
Can that be abused? Yes. But all such abuse will be evident in the public record, and then the usual legal system can easily get involved -- which it already did anyway, if you're doing a proper IPO just with stocks tracked on a "block chain".
And how do you think theft of stock certificates is handled (they are a piece of paper)? Stock certificates do satisfy legal requirements...
Are you seriously suggesting this is how politicians are chosen?
http://business.financialpost.com/g00/news/fp-street/tmx-dev...
> TMX’s new proxy voting system prototype still needs regulatory approval before it can be tested live, the company said.
Anyone have an idea of how long this might take?
We're a long ways off on all counts.
Just look transaction rate:
BTC: 4 trans/sec Etherum: 20 trans/sec Visa: 2,000 trans/sec
I'm not saying it's impossible to improve by orders of magnititude, but I don't think it will happen next year or the year after that or the year after that.
It always bugs me when I hear someone who I know knows better use a line like: "Just do it legally, for Pete's sake! Go to the SEC" -- as though this was a matter of dropping a postcard in the mail. I'm confident that these writers know better.
The real situation -- as you can see in any of the stories about Blue Bottle's non-IPO, Hedosophia, etc -- is that "just do it legally" is rapidly approaching the regulatory singularity of "just get the NRC to license your new nuclear reactor design." Even for multibillion-dollar companies, "just do it legally" is becoming prohibitively costly. Compare to the 1990s, when sub-100M IPOs were not that weird.
This has enabled VCs to earn enormous monopoly fees, originally as gatekeepers to the IPO process, now as gatekeepers to a gigantic secondary market in "unicorns." Lambos all around.
As in taxi medallions, this bottleneck creates immense profits. Naturally, the spectacle of Uber versus the taxi mafia, or ICOs versus the VC mafia, creates a lot of passions. Especially among those with axes to grind.
There is one big difference: Uber provides a consistently excellent transportation experience. Whereas most ICOs are straight-out terrible. Let's hope that the sheep get separated from the goats, as fast as possible.
[/end imprudently-frank throwaway]
Having worked in the most regulated business - insurance, and being there when more consumer protection has been implemented, I can say that there was no drop in scams and complaints AT ALL.
The fact that you have a license or a traditional VC money, doesn't ensure success or fair service. In fact, around 90% of VC funded startups fail too.
Legal or compliant doesn’t mean "not scamming". It just means more expensive and hence restrictive..
It blows my mind that crypto-folks who promote inclusion and freedom call for regulation instead of finding new smart ways to deal with new problems.
For example, Bitcoin resolved privacy and re-use of addresses with HD wallets. Problem with thieves - solved through hardware wallets.
I'm sure we have the capacity to deal with upcoming issues without someone telling us what to do and actually preventing GOOD ideas to be done without having to sell your soul. I understand VC's interests here, but they also need to understand that their value will increasingly be in the experience, contacts and network that they have, not necessarily in their money.
Having said all that, no, I'm not a fan of 99% of current ICOs. But still I don't cry on the shoulders of regulators. And those speculators who invest without any due diligence, usually with much lower $$ value than what it seems and with the vision of a 100x or 500x in a few months, well those will learn through experience. The market will clean itself from fraudsters.
This is a beautiful summary of the ICO ecosphere.
If Bitcoin had stable value instead of a built-in boom-bust cycle then we wouldn't have crypto scam mania today. Dillinger praises Satoshi's honesty, but Bitcoin's monetary policy is "a blatant bribe to early adopters". https://www.gwern.net/Bitcoin-is-Worse-is-Better
That's rank speculation. Satoshi also didn't provably burn those millions of coins by sending them to a bunk address-- i.e. whatever the Bitcoin address equivalent is for "IF-I-HAVE-THE-KEY-TO-THIS-ADDRESS-THEN-THIS-HASHING-ALGORITHM-IS-BROKEN".
Unless Ray is one of the authors of Bitcoin he has no idea whether Satoshi was interested in personal wealth, or died, or was tracked down by a security service, or something else entirely.
If satoshi sometime shows up and starts moving his coins, that's fine by me. He deserves to be super rich, because what he created is revolutionary.
Notice he said "it looks like he doesn't even want to be paid for it".
But also realize, there's the satoshi coins, but there's no way to know how many other addresses he mined to, and that its quite possible he has 100k coins that have been moving since he disappeared and nobody knows they are his.
Or he could have started mining after he disappeared or started investing cash to buy them after, and still be very rich.
No, that is not a blockchain, but I can see what you did there, blockchain inventor.
I hadn't thought about a launch of e-coins as stock. This is interesting and helpful, as someone who's only been lightly following blockchain and e-coin news. I have some fear of missing out, and Ray's perspective makes me think I've worried about the wrong things.
I've been following the progression of the tech in general and have friends who try and play the ICO game, but it's just too fickle for me. I'm not ready to go full day trader over that stuff. However the long term trend (zooming out) tends toward:
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Minimal attention > growing attention > hype and burst > pop and settle > stagnation > return to attention, and start over
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repeatedly, and all generally on an upwards trend over the past ~6 years from what I can tell so far. Just speaking to the prices, here. Something different is happening with the ICOs and the ability to build upon the networks like Ethereum. It's hard to predict, and it's curious what all the calamity surrounding those gambles will amount to. I'm sure a few of the companies will stand out and remain, but most of it just seems so... poorly footed.
https://bitcointalk.org/index.php?topic=946236.msg10388435#m...
Semi-unrelated by Craig Wright who has (falsely) claimed to be Satoshi also claims Dillinger is his friend. Wright said Dillinger quit bitcoin due to the toxic drama. More likely Wright & his friend were early miners and not involved in the Satoshi persona.
What I don't understand is why this never took off. People know bitcoin through the news, it is not new. In this time Apple Pay has come along nicely but not bitcoin.
Bitcoin has gone off on a tulips tangent. This seems at odds with what I thought the purpose was, being able to pay securely and without Visa getting their cut.
[0]: https://bitcoin.stackexchange.com/questions/114/what-is-a-sa...
It's clear that Satoshi either had some affinity to JavaScript or was otherwise familiar with people who are crazy enough to do financial calculations using double-precision floating point numbers, from the fact that the upper limit of existing satoshis is so close to what fits into a double-precision mantissa.
I think something like Tether, which pegs its value to the USD, might be a better approach for crypto-based e-commerce. BTC can more easily be converted to Tether, so it would probably work better for everyone involved.
It's just not as well-known yet.
BTC isn't taken as a currency because you can't live in its zone. Everybody swaps it into the currency of the zone they are living in - unless they are speculating.
You use the currency of the zone you are living in because everything you need is priced in that currency, and everything is priced in that currency because there is a strong taxation authority that demands payment in that currency.
I agree with your other argument. My landlord doesn't accept BTC, and neither does the IRS.
But, yes, the time to confirm is annoying: 1 in 24h/transaction_time orders miss that day's shipping deadline and are delayed by a day. More importantly, any delay > 1m requires the UI to accommodate for transactions that aren't instant.
But, as a retailer, these are rather small issues. What matters more is simply the lack of demand. We've offered BC as a payment method and its use has always been a rounding error in our statistics.
At this adoption rate, I won't invest any more time if it ever breaks. The transaction costs are actually higher now than they are anywhere else, and both PayPal as well as credit cards are faster. Next year, the new EU legislation will open the market pretty wide and I'm expecting (almost-)free, instant transactions to be available Europe-wide (our market).
I had actually forgotten all about it until a few weeks ago, when I accidentally started the wallet app, and got quite excited seeing the balance. I got accidentally lucky by speculating in BC for the last three years :)
The whole idea of crypto-anarchy was to avoid the SEC from the beggining. Of couse there will be scammers, but some people, or some other form of organization, will appear and do the job that SEC should do (and, frankly, doesn't) but in a way that fits the new model.
There are a lot of scams in the real world, and the government isn't capable of preventing them. In fact, the government itself is a giant scam, and you're not criticizing it.
because it seems to me satoshi was pretty right, by saying that bitcoins will get rarer and rarer even if miners mine more and more thanks to powerful machines. Rarer bitcoins means prices going down ( what costed 1 bitcoin before probably cost 0.001 bitcoin now), not up ( which is the definition of inflation).
I think you meant to write deflation.
He is a well known figure within the crypto community. He is also a very private person.
> Why should we trust him with this post?
What makes you think that you should? I'm pretty sure Ray would be the first to tell you that you shouldn't trust anyone, particularly not on the internet.