All the libertarians are now learning the downside to a fully unregulated market.
On the flip side, basically this means that if you're willing to accept a 10% risk of total loss, ICOs are not a bad investment -- knowing that going in.
On the flip side, basically this means that if you're willing to accept a 10% risk of total loss, ICOs are not a bad investment -- knowing that going in.
One solution I've been kicking around is something like an escrow + shareholder voting. It would play out as follows:
1. Devs come up with an idea, decide they want to ICO to fund it.
2. Devs come up with game plan including set of milestones with timelines.
3. Devs reach out to escrow who arranges an ICO. ICO occurs, all ether besides a starting amount is held by the third party.
4. When devs hit first milestone, they show work to holders of ICO coin who then vote on whether the milestone has been achieved. Devs have to report any coins they previously mined or held so that they can't vote for themselves and agree to not purchase any further coins in a contract with the escrow. They also have to identify their relationships with any early coin buyers for the same reason. If they get approval from their shareholders, the next batch of money is released so that the work for the next milestone can be complete. If not, no money is released or the coins are voided and all monies are returned to the investors.
The third party company would take a management fee, purchase insurance to protect against theft of the assets, and be a registered US corporation so legal action could be taken if they committed fraud.
An added benefit is that if you are early to market you could help SEC shape ICO policy (assuming it's not too late) potentially becoming a mandated gold standard.
[1] https://en.wikipedia.org/wiki/Vitalik_Buterin
[2] https://en.wikipedia.org/wiki/Decentralized_autonomous_organ...
In other words, you could come up with this really complicated scheme to verify trust with your ICO in order to win over savvy investors. Or you could just hack together a buggy, insecure ICO in a few weeks and get flooded with retail investors clamoring to get their dumb money into any crypto they can lay their hands on. Barely computer literate friends and relatives have asked me recently how they could get into crypto. There's virtually an army of these woefully uninformed "investors" to get money from in an ICO. Why the heck would anyone lose months (at a minimum) of development time to build some trust that nobody cares about anyway?
Doesn't that basically mean your ICO is subject to US law, essentially eliminating the main benefit of a "trustless transaction"?
The idea that you can have large investments and crypto backed companies without someone in the financial chain being subject to external governance is completely unrealistic. No rational investor would participate in that. Large numbers of people will inevitably commit fraud, and they have, as noted by the article.
So how is having an escrow that is subject to US law an answer to "I want to have a trustless network with no government intervention"?
At the end of the day it depends on what the goal is. Is the goal to lower the barrier to entry for new companies to raise money, or is it to create some idealistic free market? The former is possible and useful, the latter is not.
There are many other ways that an ICO could result in total loss to you. Just as a back of the napkin estimate, it used to be conventional wisdom that 90% of startups fail. I'd say that's a more reasonable lower bound than 10%.
And for ICOs, fraud is fraud. If someone promises one thing and instead runs off with your money, the gov't will prosecute that.
Edit: Obviously a world without scammers would be ideal. However, I'd rather have an unregulated market than one with gatekeepers.