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However, when considered as an alternative to classic equity financing, token sales yield a >100X increase in the available base of buyers and a >1000X improvem

However, when considered as an alternative to classic equity financing, token sales yield a >100X increase in the available base of buyers and a >1000X improvement in the time to liquidity over traditional methods for startup finance. The three reasons why: a 30X increase in US buyers, a 20–25X increase in international buyers, and a 1000X improvement in time-to-liquidity. these token sales are successful because people who buy into them are selling off their profits from buying Ethereum (from $0.88 in Jan '16 to $193 today >2000% return). Its a diversification play of course. Look how much the DAO raised a year ago. Its ridiculous that the adults in the room like A16Z, USV, Balaji are falling into hypnosis. ICO's coming out have no product, no users, just a white paper and a nice website, with an ERC20 contract address for deposits. If you talk to anyone buying these tokens, they all say the same thing, that they're buying to flip the tokens on Poloniex for a quick buck. A recent example is Gnosis, which raised $12.5M by selling 4.17% of their tokens at $30 each during the 1st auction round. They started trading at $60-100 a week after the sale and now are trading above $200. Look at the charts of coins delisted by Poloniex. immediate 50%+ drop. The value of these tokens is their liquidity. Take that away and you won't see these valuations. For traditional VC's, if companies let their shares float on exchanges, the SEC mandates financials. These tokens are designed around hopes and dreams. Most certainly a bubble but more so a game of musical chairs, make some money while the music is still playing. Bitcoin at the end of the day grew in price from speculation BUT it had a real use, albeit in the black market. It has grown from that since 2013 but not by much. P.S. Token sales don't even give up equity. These people are paying millions for API keys they can't yet use? I don't think so.

jerguismi 9y ago
> These people are paying millions for API keys they can't yet use? Comparing API keys to tokens is quite weird. I don't think they have almost anything to do with each other. In general the blog text is pretty bad. It doesn't differentiate very well between tokesn and cryptocurrencies. Tokens are usually not mined but are more like shares in a company. Also many of these ICO's are very scammy, investors should be cautious.
- isubkhankulov 9y ago
  Have you guys thought about adding ETH trading? or Monero/Dash?
- arethuza 9y ago
  "I don't think they have almost anything to do with each other." I read it as these tokens being transferable "right" to access some service. However, what I don't understand is why there would any reason for such tokens to appreciate in value unless there was some restriction on supply (which would damage the long term viability of the service) or some other benefit from buying in early. Or you could treat them like bearer shares - whoever ever has the token has the equity. But that could presumably have a lot of legal issues - not least around transparency of ownership and control.
modeless 9y ago
Stopping investment scams like the current ICO bubble is exactly the reason the SEC exists. It is an absolute certainty that this party is going to end in regulation and it's also likely that a bunch of people will end up in jail. The only real question is how long it will take the regulators to figure out which one of them has jurisdiction here. I say this as an early Bitcoin investor and current holder. Bitcoin was not a scam, but many of these ICOs are blatant cash grabs specifically designed to circumvent SEC rules about selling unregistered securities to non-accredited investors. I'll also say that I think current SEC rules are too restrictive and to the extent ICOs represent Uber-like defiance of bad regulation, they could be a good thing. But a totally unconstrained ICO market bubble may be far too much of that good thing.
- arthurcolle 9y ago
  Completely agree with everything you're saying. I hope the SEC prosecutes any criminal activity that is found to be intended to take advantage of unsophisticated investors, but I don't think its appropriate to characterize ICOs as a cash grab as some have in this thread. I participated in the Ethereum pre-sale in 2013 and think ICOs in conjunction with the relatively new SEC regulation surrounding crowdsales (https://www.sec.gov/news/pressrelease/2015-249.html https://www.sec.gov/news/pressrelease/2015-249.html) could potentially facilitate new, organically-grown companies that reward individuals for their independent analysis of a project that they believe has value, irrespective of how much capital they have - people should be able to measure the risks they are willing to take, and exercise the judgment call accordingly. Currently regulatory limitations force potential investors with less capital to limit their participation in projects that they may want to have a stake in - I don't think that's fair. I do think that there are some projects that have tremendous promise (more specifically in the Ethereum ICO space, since Bitcoin smart contracts are basically dead in the water at this time). For example, Swarm City markets itself as a sharing economy platform (after the rebranding from Arcade City due to one of the founder's shady dealings), and intends to compete with the class of organizations with business models like Uber and Airbnb. While they have a ways to go in terms of developing the intended product to a level that could be acceptably called production-quality, this is exactly what decentralized applications could be used to build. The fact that Swarm City is trying to work through its earlier issues and still has active development/plans to release a real project is very promising, and shows that small-scale decentralized development can work in the real world. Whether a real product can be released remains to be seen, but I'm cautiously optimistic and advising my peers to just be really, really careful - especially as new highs are tested every single day. Aeternity is another interesting project that builds on top of Ethereum but is focused on scaling and the issue of oracles right off the bat, which is something that is kind of brushed off as a trivial and minor detail, but that will really make or break these decentralized application platforms on the whole. The technical lead, Zack Hess, has experience working on cryptocurrency projects (@zack-bitcoin on GitHub) and I think its amazing that all this cryptoasset technology is enabling people to raise money easier than before. While abuses need to be dealt with as swiftly and dramatically as the scale of the crimes deserves, it does seem a little hostile to characterize the class of these projects as completely fraudulent. But the valuations for some of these projects is just insane. People don't need two prediction markets valued at >$300m and a variety of distributed supercomputing platforms with no real-world use-cases this badly...
intev 9y ago
This. I'm still shocked that reputable VC firms like a16z are completely throwing their weight behind cryptocurrencies without even a slight bit of skepticism. I recently listened to an a16z podcast where they had on a founder of a blockchain hedgefund. It was enlightening to listen to them talk about all the various coins and all the use cases. Chris, in the interview, uses an analogy of this being similar to the beginning of the internet and how you could have invested in either companies or domain names, implying domains are much more of a sure bet. In their mind, buying coins is equivalent to buying domain names. I think this pretty much illustrates their whole view - either force make some bets and be seen as part of the pioneers or miss out and be seen as the late adopting skeptics. But there are so many fundamental differences that I would argue it's not even in the same realm of similarity. For starters, there is rampant oversupply. Everyone is trying to get into blockchain and trying to initiate an ICO or trying to create their own blockchain. Then there's the actual lack of use cases for the majority of them. Even in the beginning of the internet one thing was clear - it was a breakthrough in how quickly information could be transmitted. It's not very clear what the obvious use case for blockchains are, though proponents will provide a long list of possible use cases. Take Golem for example. On paper, it looks interesting - it's a token for computing power that's not based on a central controlling entity. So for this to even work there has to be some sort of SDK that "packages" computing work so that computers on the Golem network can ingest it. It's a given that SDK itself is a huge attack surface vector, making every computer on the network vulnerable to a bug that will eventually be found. On top of that, there will be the huge variations in computing power and capacity at any given time ensuring that any critical infrastructure cannot run on it. Let's say you run into a problem, and maybe your output was unexpected. How do you debug? Whom do you contact if things go wrong? I'm willing to bet most people will pay a little more for the benefit of having a central point of contact (like AWS). There's also the argument for coins being used as "shares" of a company. This is probably the most dangerous use case. There's a reason why regulators exist. They were started to protect the interest of the common man (though now it can be argued they've lost their way but that doesn't mean the answer is to completely abolish them). What's stopping sophisticated scammers conducting fly by offerings and disappearing? It doesn't take much to create a top notch video and create "buzz" around something. This is like Kickstarter on steroids (in the worst possible way). I'm interested in hearing why I'm wrong, so if you have arguments against any of my points, please reply. I really want to believe in all of this, because that seems like the right thing to do, but something in my brain isn't clicking.
DiNovi 9y ago
Bitcoin has grown "not that much" from 2013 you say
- SolarNet 9y ago
  In actual usage, no not really. In bubble based investment, yes. I know people who run bitcoin ATMs, and who trade bitcoin for cash, they have seen only a marginal increase in activity over the last few years. Bitcoin is a useful store of value, it provides ways to transmit value, the electronic equivalent of cash. But the use cases have not much improved, and so it's usage (outside of financial sectors) has not really grown (except the marginal increase of late-adapters in sectors where it is useful). Financial sectors of economies are supposed to help manage the allocation of resources. What financial sectors make are the tools for economies. The bitcoin financial sector forgets this way too much. They don't actually make anything of real value. Which is why these bubbles happen, people are speculating bitcoin will be a great economic tool someday. Except that bitcoin is loosing to other coins in features. As well as the trust of the people using it to produce actual value.
- isubkhankulov 9y ago
  my exact language was "grown from that" meaning grown from the black market.

jerguismi 9y ago

> These people are paying millions for API keys they can't yet use? Comparing API keys to tokens is quite weird. I don't think they have almost anything to do with each other. In general the blog text is pretty bad. It doesn't differentiate very well between tokesn and cryptocurrencies. Tokens are usually not mined but are more like shares in a company. Also many of these ICO's are very scammy, investors should be cautious.

isubkhankulov 9y ago
Have you guys thought about adding ETH trading? or Monero/Dash?
arethuza 9y ago
"I don't think they have almost anything to do with each other." I read it as these tokens being transferable "right" to access some service. However, what I don't understand is why there would any reason for such tokens to appreciate in value unless there was some restriction on supply (which would damage the long term viability of the service) or some other benefit from buying in early. Or you could treat them like bearer shares - whoever ever has the token has the equity. But that could presumably have a lot of legal issues - not least around transparency of ownership and control.

modeless 9y ago

Stopping investment scams like the current ICO bubble is exactly the reason the SEC exists. It is an absolute certainty that this party is going to end in regulation and it's also likely that a bunch of people will end up in jail. The only real question is how long it will take the regulators to figure out which one of them has jurisdiction here. I say this as an early Bitcoin investor and current holder. Bitcoin was not a scam, but many of these ICOs are blatant cash grabs specifically designed to circumvent SEC rules about selling unregistered securities to non-accredited investors. I'll also say that I think current SEC rules are too restrictive and to the extent ICOs represent Uber-like defiance of bad regulation, they could be a good thing. But a totally unconstrained ICO market bubble may be far too much of that good thing.

arthurcolle 9y ago
Completely agree with everything you're saying. I hope the SEC prosecutes any criminal activity that is found to be intended to take advantage of unsophisticated investors, but I don't think its appropriate to characterize ICOs as a cash grab as some have in this thread. I participated in the Ethereum pre-sale in 2013 and think ICOs in conjunction with the relatively new SEC regulation surrounding crowdsales (https://www.sec.gov/news/pressrelease/2015-249.html https://www.sec.gov/news/pressrelease/2015-249.html) could potentially facilitate new, organically-grown companies that reward individuals for their independent analysis of a project that they believe has value, irrespective of how much capital they have - people should be able to measure the risks they are willing to take, and exercise the judgment call accordingly. Currently regulatory limitations force potential investors with less capital to limit their participation in projects that they may want to have a stake in - I don't think that's fair. I do think that there are some projects that have tremendous promise (more specifically in the Ethereum ICO space, since Bitcoin smart contracts are basically dead in the water at this time). For example, Swarm City markets itself as a sharing economy platform (after the rebranding from Arcade City due to one of the founder's shady dealings), and intends to compete with the class of organizations with business models like Uber and Airbnb. While they have a ways to go in terms of developing the intended product to a level that could be acceptably called production-quality, this is exactly what decentralized applications could be used to build. The fact that Swarm City is trying to work through its earlier issues and still has active development/plans to release a real project is very promising, and shows that small-scale decentralized development can work in the real world. Whether a real product can be released remains to be seen, but I'm cautiously optimistic and advising my peers to just be really, really careful - especially as new highs are tested every single day. Aeternity is another interesting project that builds on top of Ethereum but is focused on scaling and the issue of oracles right off the bat, which is something that is kind of brushed off as a trivial and minor detail, but that will really make or break these decentralized application platforms on the whole. The technical lead, Zack Hess, has experience working on cryptocurrency projects (@zack-bitcoin on GitHub) and I think its amazing that all this cryptoasset technology is enabling people to raise money easier than before. While abuses need to be dealt with as swiftly and dramatically as the scale of the crimes deserves, it does seem a little hostile to characterize the class of these projects as completely fraudulent. But the valuations for some of these projects is just insane. People don't need two prediction markets valued at >$300m and a variety of distributed supercomputing platforms with no real-world use-cases this badly...

intev 9y ago

This. I'm still shocked that reputable VC firms like a16z are completely throwing their weight behind cryptocurrencies without even a slight bit of skepticism. I recently listened to an a16z podcast where they had on a founder of a blockchain hedgefund. It was enlightening to listen to them talk about all the various coins and all the use cases. Chris, in the interview, uses an analogy of this being similar to the beginning of the internet and how you could have invested in either companies or domain names, implying domains are much more of a sure bet. In their mind, buying coins is equivalent to buying domain names. I think this pretty much illustrates their whole view - either force make some bets and be seen as part of the pioneers or miss out and be seen as the late adopting skeptics. But there are so many fundamental differences that I would argue it's not even in the same realm of similarity. For starters, there is rampant oversupply. Everyone is trying to get into blockchain and trying to initiate an ICO or trying to create their own blockchain. Then there's the actual lack of use cases for the majority of them. Even in the beginning of the internet one thing was clear - it was a breakthrough in how quickly information could be transmitted. It's not very clear what the obvious use case for blockchains are, though proponents will provide a long list of possible use cases. Take Golem for example. On paper, it looks interesting - it's a token for computing power that's not based on a central controlling entity. So for this to even work there has to be some sort of SDK that "packages" computing work so that computers on the Golem network can ingest it. It's a given that SDK itself is a huge attack surface vector, making every computer on the network vulnerable to a bug that will eventually be found. On top of that, there will be the huge variations in computing power and capacity at any given time ensuring that any critical infrastructure cannot run on it. Let's say you run into a problem, and maybe your output was unexpected. How do you debug? Whom do you contact if things go wrong? I'm willing to bet most people will pay a little more for the benefit of having a central point of contact (like AWS). There's also the argument for coins being used as "shares" of a company. This is probably the most dangerous use case. There's a reason why regulators exist. They were started to protect the interest of the common man (though now it can be argued they've lost their way but that doesn't mean the answer is to completely abolish them). What's stopping sophisticated scammers conducting fly by offerings and disappearing? It doesn't take much to create a top notch video and create "buzz" around something. This is like Kickstarter on steroids (in the worst possible way). I'm interested in hearing why I'm wrong, so if you have arguments against any of my points, please reply. I really want to believe in all of this, because that seems like the right thing to do, but something in my brain isn't clicking.

DiNovi 9y ago

Bitcoin has grown "not that much" from 2013 you say

SolarNet 9y ago
In actual usage, no not really. In bubble based investment, yes. I know people who run bitcoin ATMs, and who trade bitcoin for cash, they have seen only a marginal increase in activity over the last few years. Bitcoin is a useful store of value, it provides ways to transmit value, the electronic equivalent of cash. But the use cases have not much improved, and so it's usage (outside of financial sectors) has not really grown (except the marginal increase of late-adapters in sectors where it is useful). Financial sectors of economies are supposed to help manage the allocation of resources. What financial sectors make are the tools for economies. The bitcoin financial sector forgets this way too much. They don't actually make anything of real value. Which is why these bubbles happen, people are speculating bitcoin will be a great economic tool someday. Except that bitcoin is loosing to other coins in features. As well as the trust of the people using it to produce actual value.
isubkhankulov 9y ago
my exact language was "grown from that" meaning grown from the black market.