9 ms·

ICOs and VCs

124 points by untangle 9y ago

empath75 9y ago
Ico's seem to primarily be a way to get around securities regulation, and I suspect that someone is going to get prosecuted for it eventually.
- pmorici 9y ago
  Doubly so since a large percentage of them seem to be thinly veiled scam.
romanr 9y ago
I read it and still have no clue what is it about, what"ICO" stands for. Never explained
- kemonocode 9y ago
  Initial Coin Offering. Like an IPO but not quite, you're not selling securities after all, and they may not pay any dividends, you're simply selling a token you can trade with others that may be exchanged for a service by the company that provided them later on. I expect them to raise a lot of uncomfortable questions in a near future.
  - DennisP 9y ago
    Coinbase published results of some legal research on ICO legalities. They say tokens that can be exchanged for services are relatively safe. Some ICO tokens actually pay dividends, and that's a little dicier. There are various other criteria. If it's a fully automatic system already deployed on the blockchain, that's lower risk than a coin whose value depends on company performance. https://blog.coinbase.com/2016-12-07-blockchain-token-securities-law-a66ef03c383f https://blog.coinbase.com/2016-12-07-blockchain-token-securi...
- golergka 9y ago
  Initial coin offering. Like IPO, minus the regulations, plus the hype.
  - ci5er 9y ago
    Coming soon: More regulation!
    - fragsworth 9y ago
      And a lot less hype
- deleted 9y ago
  [deleted]
- ScottBurson 9y ago
  I found this: https://techcrunch.com/2017/05/23/wtf-is-an-ico/ https://techcrunch.com/2017/05/23/wtf-is-an-ico/
kemonocode 9y ago
>The investors who bought your token, like public market investors, may be gone tomorrow, next month, or next year, having moved on to the next big thing, leaving you with little to show for it other than the money you raised. Oh boy... >VCs, at leas the best ones, are there for your company in good times and bad. There is a difference, trust me. This part made me laugh so bad, my entire body hurts. Now, I know pretty well who he is, thus why he may not realize how much bad VCs hurt the industry, especially when a vast number does exactly what he said: leaving as soon as there are any signs of trouble. And I know that from experience. Now, do I always agree with ICOs? Not really, selling promises that particular way is bound to lead up to some disappointment from one side or the other. But they are perfectly valid to fund yourself if your service, your core business model can be compartmentalized that way. As he said: "The token that you sell in your ICO is the atomic unit of your business model."
- DennisP 9y ago
  Maybe there's a role here for startup consultants, who provide the sort of help that VCs claim to provide, to startups who have already raised money via ICOs.
  - jacquesm 9y ago
    Most start-ups would not be in a position to pay and if they were they usually would not realize they need that kind of help until it is too late.
    - Everhusk 9y ago
      The key is to find a way to contractualize third party help into a smart contract so some of the tokens are released if the advice truly helps in the long run.
      - DennisP 9y ago
        One way is just to pay consultants at least partially with the project tokens, which should go up in value if the project succeeds.
RichardHeart 9y ago
Hey, we could sell equity in our company for money....or we could give out gift certificates (tokens) and keep all the equity. Sure, as soon as we've got all the dummies money, the incentives will massively shift for us so that we're better off doing a new ICO than building anything, but they won't notice. Who cares if distributed systems are an overhead and not an efficiency, we can all get rich!
- ajmurmann 9y ago
  If you sell the equity for money only certified investors are allowed to invest. You now also have a investor whose word carries some weight on your company. The latter might be good or bad depending on the investor and your personal view/attitude and situation.
  - JumpCrisscross 9y ago
    > If you sell the equity for money only certified investors are allowed to invest. You now also have a investor whose word carries some weight on your company. Finance types are a creative bunch. The industry has spent a good amount of time trying to poke holes in securities regulation since the 1930s. Regulators and prosecutors have expended a similar deal of effort suturing the loopholes. The thread interfering with your idea is the symmetry between securities purchased for cash and securities purchased with "services rendered". Securities regulators and the IRS take a broad view of the latter. The former would likely be more vigilant if unaccredited investors [1] were "buying" these tokens, and even more so if such transactions were taking place next to accredited investors getting bona fide stock. [1] https://www.sec.gov/fast-answers/answers-accredhtm.html https://www.sec.gov/fast-answers/answers-accredhtm.html
dna_polymerase 9y ago
The BAT ICO is not a success story. It shows how f*cked up the current coin markets are. 4 people saved >50% of coins. They are not interested in the company (how can they communicate huh?) they want to sell quickly when the coin hits Poloniex. VCs are not over. The VC advantage derives from the real world experience and connections they can provide. Also no VC ever would have invested in BAT itself. Everyone knows, if there is an adtech revolution, it will come from Google and Facebook not an adblock browser producer.
- kolinko 9y ago
  Because so many revolutions that were initiated by huge incumbents instead of upstarts...
  - dna_polymerase 9y ago
    Your "upstart" does not stand a chance against Googles and Facebooks wallets.
- nugget 9y ago
  I've learned the hard way that "Everyone knows" can be a very dangerous (and expensive, in terms of missed opportunity) way to start a sentence. Just some food for thought.
- _pmf_ 9y ago
  > there is an adtech revolution, it will come from Google and Facebook not an adblock browser producer While I like Brave, you are almost certainly right. As soon as alternatives gain traction, Google can act nice for some time, then switch back to being its fraudulent self. Maybe Amazon has the will and stamina, although they are toxic towards self publishers (customer pays full price, but author only gets paid for percentage read).
yresnob 9y ago
How does prevent fraud..maybe just some types? I dunno about this..
dreamdu5t 9y ago
VCs don't like ICOs because they expose how irrational raising money is. They hamper the whole narrative of VCs being "experts" when the truth is it's all a casino financed by the Fed. VCs are used to controlling the narrative of WHY a company deserves money.
runeks 9y ago
I just don't understand this. A national currency is an irredeemable medium of exchange, made valuable because it's -- by law -- exempt from capital gains tax (it measures capital gain), and because it's been given legal tender status. Why would anyone trade an irredeemable currency issued by a private corporation? "Currency" is surely a misnomer, because no one would want to buy or sell goods and services in exchange for it, which makes it more like irredeemable equity, which makes no sense either.
- ShabbosGoy 9y ago
  Why do you buy tokens at the arcade?
  - runeks 9y ago
    Because I can use them to buy something in the arcade, at a price I can check for reasonability beforehand. What can I buy using the Basic Attention Token? And at what price?
    - ericflo 9y ago
      Advertisers will buy ads with it. Publishers will collect most of that spend. Users will get some too. The value will fluctuate but all currency does that.
      - moe 9y ago
        Except for a small problem: None of that will happen. Nobody will switch from Chrome, Safari or Firefox to the "Brave Browser" in order to have ads injected into their browsing session. The concept is so fundamentally ridiculous that I can't even muster pity for the people who sunk their money into this scam.
        ericflo 9y ago
        I use Brave, and there's about a half million other people who are using it too. What I guess you really mean is not that "nobody" will switch, but that "everyone" won't. So it's just a matter of market size, which I agree - we'll see.
rasmafazi 9y ago
VCs drag you into mainstream orthodoxies in order to be able to do an IPO on Wall Street. With ICOs around, who would put up with VCs again?
zby 9y ago
This whole ICO affair will not end well. Here is a guy complaining about not being able to buy the BATs at the crowdsale: https://www.reddit.com/r/ethtrader/comments/6efsc8/bat_ico_whalesale_completely_against_the_ethos_of/ https://www.reddit.com/r/ethtrader/comments/6efsc8/bat_ico_w... - this is a serious gold rush attitude. Those people don't seem to understand that most (9 for 10 some say) startups fail. And the tokens they are buying is just a promise - they don't bind the company to do any thing. The company promises to use the BAT token in their future monetization model - but in fact they can pivot at any point, like many (if not most) startup do, and do something else, or maybe even do yet another ICO with another token. And that is on top of all the problems with crowdfunding - where even if there is a legal binding, and maybe a fractionary ownership - without all the regulations that were invented to protect the investors - the founders/executives still can do anything with the money they received from the funding event: https://medium.com/@zby/the-problem-with-crowdfunding-81b53f963387 https://medium.com/@zby/the-problem-with-crowdfunding-81b53f... Update: Even if now most ICO creators are honest - then soon they'll be crowded out by scammers, because honest funders will find other ways to fund their starups - but for scammers it will never be easier than with ICOs.
- altoz 9y ago
  I wrote a similar article on the difference between ICOs and VC investment. In short, the investor gets much less in an ICO: https://medium.com/p/why-icos-are-very-different-than-seed-capital-a59e4c78b84a https://medium.com/p/why-icos-are-very-different-than-seed-c...
  - mck- 9y ago
    Great primer on ICOs - thanks for enlightening me :)
- beager 9y ago
  From the linked reddit thread: > This is totally against the spirit and ethos of what cryptocurrency stands for. What exactly is the spirit or ethos of cryptocurrency? I thought the big selling point is that there is no spirit, no ethos, no regulation. Folks who are disappointed that a cryptocurrency investing channel has no safeguards against exploitation can't have it both ways.
regulation_d 9y ago
I've heard some people complain about GNO's dutch auction style offering, but only generically. Dutch auction seems like a good option for highly-anticipated coins like BAT. Does anybody have insight into why the dutch auction style isn't more widely used?
- dna_polymerase 9y ago
  Gnosis is now owned to an extend of >90% by the Gnosis team themselves. This is why Dutch Auction is not used more broadly. It doesn't help with any of this.
  - regulation_d 9y ago
    That seems more like a flaw with the individual offering than with the concept of the dutch auction. Did team only release a small percentage of the coins in the auction or did they just bet more than everyone else?
  - regulation_d 9y ago
    when you say "It doesn't help with any of this." I'm not sure what you mean. Theoretically dutch auction is much more democratic than these other twitch based sales. You have a set amount of time to jump on board. You're incentivized to bid as much as you feel the coin might be worth, with the confidence that you won't be paying more than anybody else. There might be more complications with dutch auction ICOs than dutch auction IPOs, but it's still seems better than feeling like I do when I'm trying to buy Adele tickets on Ticketmaster. EDIT: typos
joosters 9y ago
To give an example of the current insanity of ICOs, take a look at the terms & conditions for a recent token sale - from https://patientory.com/ https://patientory.com/ : https://patientory.com/token-sale-terms.pdf https://patientory.com/token-sale-terms.pdf Ownership of PTOY carries no rights, express or implied, other than the right to use PTOY as a means to obtain Services, and to enable usage of and interaction with the Platform, if successfully completed and deployed. In particular, you understand and accept that PTOY do not represent or confer any ownership right, stake, share, security, or equivalent rights, or any right to receive future revenue shares, intellectual property rights, or any other form of participation in or relating to the Platform, and/or Foundation and its corporate affiliates, other than rights relating to the receipt of Services and use of the Platform, subject to limitations and conditions in these Terms and applicable Platform Terms and Policies (as defined below). PTOY are not intended to be a digital currency, security, commodity, or any other kind of financial instrument. So.. by buying the tokens, you are getting, nothing, basically. You have a sufficient understanding of the functionality, usage, storage, transmission mechanisms, and other material characteristics of cryptographic tokens like Bitcoin and Ether, token storage mechanisms (such as token wallets), blockchain technology, and blockchain-based software systems to understand these Terms and to appreciate the risks and implications of purchasing PTOY; You've also got to fully understand blockchains. You have carefully reviewed the code of the Smart Contract System located on the Ethereum blockchain at the addresses set forth in Exhibit B and fully understand and accept the functions implemented therein; You've also got to be an expert programmer fluent in all ethereum's security weaknesses, plus you better have a disassembler handy to reverse engineer their compiled code (they don't provide any source code - plus, 'Exhibit B' doesn't event give the contract address anyway) You are not purchasing PTOY for any other purposes, including, but not limited to, any investment, speculative, or other financial purposes; Sure, sure. That's why people are buying these things, right? It goes on... you also agree to indemnify the company against everything, all warranties are disclaimed, no liabilities can be held against them, you waive your rights to legal actions against the company, or any class actions (you must agree to arbitration). Oh, and they naturally reserve the right to modify these terms at any time without notice. No-one in their right mind would agree to these kind of terms, and yet they are common across many ICOs. It is madness. And I haven't even mentioned their proposed application (healthcare on the blockchain) which is dumb in so many other ways.
bluesign 9y ago
I really dont understand the value behind ICOs. - there is no guarantee of limited supply of tokens ( no promise that BAT will be limited ) - there is no guarantee that company will not come up with secondary token (ex: advanced attention token) - Also there is no indication of what 1 BAT will get you. All calculations etc subject to change
- zby 9y ago
  I have not checked it - but there probably is a guarantee of limited supply - the contract that generated them is already in the Ethereum blockchain and it cannot be changed.
  - bluesign 9y ago
    Yeah I checked out, seems you have right.
  - chinathrow 9y ago
    > "he contract that generated them is already in the Ethereum blockchain and it cannot be changed." Unless another hard fork kicks in and multiple truths exist?
deleted 9y ago
[deleted]
equalarrow 9y ago
Fred's not a dumb guy, even though I never agreed with his Android over iOS statements (Android first, etc). I think he's smart and to him, my opinion doesn't matter, I'm sure. However, vc is a hundreds, if not thousands of years old. Fine tuned and tweaked in the 80's on to the dot com and thru facebook & google and beyond. ICO is just a few years old - it's typical for the disrupted to not feel threatened until it's too late. This, in my mind, is the real model going forward. Fuck pandering to Sand Hill road or SV at all - launch an ICO from anywhere in the world on your whitepaper and testnet (shaky???) dev... ICO's may seem ridic, but this is just the beginning. We are now running at internet speed and there's gonna be a point (soon? who knows when) where this stuff is going to all be automated and 24 seconds will seem quaint. Welcome to high frequency funding.
thesausageking 9y ago
> VCs, at leas the best ones, are there for your company in good times and bad. There is a difference, trust me. This is backwards. Raising via an ICO mean no VC can ever push you out as CEO or take control of your company. Their priority is making the company get to a big exit, with or without you. When Ev was running Twitter, Fred wasn't a fan of his and had not problem plotting behind his back with Jack and eventually pushing him out.
- kevando 9y ago
  Can you site any of this?
  - arikr 9y ago
    Not OP, but read the book 'Hatching Twitter,' most of it is in there.
    - thesausageking 9y ago
      Yes, it's all detailed in Hatching Twitter which is written by a NY Times columnist. Basically, when Ev was CEO, the board told him to his face he was doing a fantastic job. He had turned around the product org and gotten user growth back on track. At the same time, Fred and a few of the other investors met secretly with Jack and came up with a plan to push Ev out and, bring Jack back with Dick Costolo as interim CEO. Excerpt from the book after Ev was told he was out: Williams, stunned, picked up the phone and began dialing. Bijan Sabet was apologetic and insisted that they wanted to keep him on in a product-advisory role. According to several people at the company, Fred Wilson, however, said he thought Williams had always been a terrible C.E.O. “I never considered you a founder,” he said. “Jack founded Twitter.” Other portfolio investments of his have followed a similar pattern of having the original CEO pushed out once they get to a certain level of success.
untangle 9y ago
Thread-starter here. I have raised VC, PE, and debt. Early-stage and late stage. Here's my take on "ICO vs VC." ICO's: For the investor, they are akin to commodity futures trading. The underlying value of the token is nil, as is the degree of control over the underlying property. But returns from price speculation can be very rich. For the issuer, they have the money virtually without strings attached. There is no other form of assistance and no loyalty implied in either direction. For example, I'd be shocked if there were positive "operational" returns from a token like the Brave coin. For that to happen, Google, Facebook, and the rest of the ad industry would have to grant sanction to the vendor of a Chromium-based browser startup yo turn the entire industry on its side. I doubt it. Seriously. VCs: For the investor, they get some modicum of ownership and control of the underlying property – sometimes not much but usually a lot. There is an implied responsibility to help with follow-on funding, but nothing solid. The investment is risky but not speculative. For the issuer (of preferred shares AKA the company), they get the money with all kinds of strings attached. If the VC is top-tier (e.g., Fred, Kleiner, NEA, etc.), significant branding, easy intros, and many other benefits can accrue. If the VC is less prestigious, the operational impact is more neutral. (No VC can make your company grow or be successful – that's on you.) My opinion: 1. If I could pull off an "ICO" (bad name) at my next company, I'd do it immediately. Great upside and little downside. 2. I say "immediately" because I don't think that this vehicle will last long in its current unregulated state. There will be failures. There are enemies. There will be evil deeds (fraud), and those deeds will involve unaccredited investors. 3. The ICO will be a short-term speed bump to VCs. 4. That all said, who wants to join me and start an "ICO production" company to create the coins and infrastructure for them to do their own ICOs? Speed is life, and I know some VCs... :)
- EGreg 9y ago
  The investment is risky but not speculative. What's the distinction, in precise language?
  - untangle 9y ago
    > What's the distinction, in precise language? Good question. I was using the language according to this definition: "A speculative investment is one with a high degree of risk where the focus of the purchaser is on price fluctuations. The investor buys the tradable good (financial instrument) in an attempt to profit from market value changes." https://marketbusinessnews.com/financial-glossary/speculative-investment/ https://marketbusinessnews.com/financial-glossary/speculativ...
kicanozcan 9y ago
VCs are actually very interested to play a part in this new form of financing. I live in the Bay Area and have been talking to friends in VCs - from my understanding, it's legally risky for them to directly invest in ICOs and they are putting money in other funds that can invest in ICOs like Polychain - this is truly an exciting time! Also, how else you think BAT sells so fast if it wasn't for institutional money

124 points by untangle 9y ago

Ico's seem to primarily be a way to get around securities regulation, and I suspect that someone is going to get prosecuted for it eventually.

pmorici 9y ago
Doubly so since a large percentage of them seem to be thinly veiled scam.

romanr 9y ago

I read it and still have no clue what is it about, what"ICO" stands for. Never explained

kemonocode 9y ago
Initial Coin Offering. Like an IPO but not quite, you're not selling securities after all, and they may not pay any dividends, you're simply selling a token you can trade with others that may be exchanged for a service by the company that provided them later on. I expect them to raise a lot of uncomfortable questions in a near future.
- DennisP 9y ago
  Coinbase published results of some legal research on ICO legalities. They say tokens that can be exchanged for services are relatively safe. Some ICO tokens actually pay dividends, and that's a little dicier. There are various other criteria. If it's a fully automatic system already deployed on the blockchain, that's lower risk than a coin whose value depends on company performance. https://blog.coinbase.com/2016-12-07-blockchain-token-securities-law-a66ef03c383f https://blog.coinbase.com/2016-12-07-blockchain-token-securi...
golergka 9y ago
Initial coin offering. Like IPO, minus the regulations, plus the hype.
- ci5er 9y ago
  Coming soon: More regulation!
  - fragsworth 9y ago
    And a lot less hype
deleted 9y ago
[deleted]
ScottBurson 9y ago
I found this: https://techcrunch.com/2017/05/23/wtf-is-an-ico/ https://techcrunch.com/2017/05/23/wtf-is-an-ico/

kemonocode 9y ago

>The investors who bought your token, like public market investors, may be gone tomorrow, next month, or next year, having moved on to the next big thing, leaving you with little to show for it other than the money you raised. Oh boy... >VCs, at leas the best ones, are there for your company in good times and bad. There is a difference, trust me. This part made me laugh so bad, my entire body hurts. Now, I know pretty well who he is, thus why he may not realize how much bad VCs hurt the industry, especially when a vast number does exactly what he said: leaving as soon as there are any signs of trouble. And I know that from experience. Now, do I always agree with ICOs? Not really, selling promises that particular way is bound to lead up to some disappointment from one side or the other. But they are perfectly valid to fund yourself if your service, your core business model can be compartmentalized that way. As he said: "The token that you sell in your ICO is the atomic unit of your business model."

DennisP 9y ago
Maybe there's a role here for startup consultants, who provide the sort of help that VCs claim to provide, to startups who have already raised money via ICOs.
- jacquesm 9y ago
  Most start-ups would not be in a position to pay and if they were they usually would not realize they need that kind of help until it is too late.
  - Everhusk 9y ago
    The key is to find a way to contractualize third party help into a smart contract so some of the tokens are released if the advice truly helps in the long run.
    - DennisP 9y ago
      One way is just to pay consultants at least partially with the project tokens, which should go up in value if the project succeeds.

RichardHeart 9y ago

Hey, we could sell equity in our company for money....or we could give out gift certificates (tokens) and keep all the equity. Sure, as soon as we've got all the dummies money, the incentives will massively shift for us so that we're better off doing a new ICO than building anything, but they won't notice. Who cares if distributed systems are an overhead and not an efficiency, we can all get rich!

ajmurmann 9y ago
If you sell the equity for money only certified investors are allowed to invest. You now also have a investor whose word carries some weight on your company. The latter might be good or bad depending on the investor and your personal view/attitude and situation.
- JumpCrisscross 9y ago
  > If you sell the equity for money only certified investors are allowed to invest. You now also have a investor whose word carries some weight on your company. Finance types are a creative bunch. The industry has spent a good amount of time trying to poke holes in securities regulation since the 1930s. Regulators and prosecutors have expended a similar deal of effort suturing the loopholes. The thread interfering with your idea is the symmetry between securities purchased for cash and securities purchased with "services rendered". Securities regulators and the IRS take a broad view of the latter. The former would likely be more vigilant if unaccredited investors [1] were "buying" these tokens, and even more so if such transactions were taking place next to accredited investors getting bona fide stock. [1] https://www.sec.gov/fast-answers/answers-accredhtm.html https://www.sec.gov/fast-answers/answers-accredhtm.html

dna_polymerase 9y ago

The BAT ICO is not a success story. It shows how f*cked up the current coin markets are. 4 people saved >50% of coins. They are not interested in the company (how can they communicate huh?) they want to sell quickly when the coin hits Poloniex. VCs are not over. The VC advantage derives from the real world experience and connections they can provide. Also no VC ever would have invested in BAT itself. Everyone knows, if there is an adtech revolution, it will come from Google and Facebook not an adblock browser producer.

kolinko 9y ago
Because so many revolutions that were initiated by huge incumbents instead of upstarts...
- dna_polymerase 9y ago
  Your "upstart" does not stand a chance against Googles and Facebooks wallets.
nugget 9y ago
I've learned the hard way that "Everyone knows" can be a very dangerous (and expensive, in terms of missed opportunity) way to start a sentence. Just some food for thought.
_pmf_ 9y ago
> there is an adtech revolution, it will come from Google and Facebook not an adblock browser producer While I like Brave, you are almost certainly right. As soon as alternatives gain traction, Google can act nice for some time, then switch back to being its fraudulent self. Maybe Amazon has the will and stamina, although they are toxic towards self publishers (customer pays full price, but author only gets paid for percentage read).

yresnob 9y ago

How does prevent fraud..maybe just some types? I dunno about this..

dreamdu5t 9y ago

VCs don't like ICOs because they expose how irrational raising money is. They hamper the whole narrative of VCs being "experts" when the truth is it's all a casino financed by the Fed. VCs are used to controlling the narrative of WHY a company deserves money.

runeks 9y ago

I just don't understand this. A national currency is an irredeemable medium of exchange, made valuable because it's -- by law -- exempt from capital gains tax (it measures capital gain), and because it's been given legal tender status. Why would anyone trade an irredeemable currency issued by a private corporation? "Currency" is surely a misnomer, because no one would want to buy or sell goods and services in exchange for it, which makes it more like irredeemable equity, which makes no sense either.

ShabbosGoy 9y ago
Why do you buy tokens at the arcade?
- runeks 9y ago
  Because I can use them to buy something in the arcade, at a price I can check for reasonability beforehand. What can I buy using the Basic Attention Token? And at what price?
  - ericflo 9y ago
    Advertisers will buy ads with it. Publishers will collect most of that spend. Users will get some too. The value will fluctuate but all currency does that.
    - moe 9y ago
      Except for a small problem: None of that will happen. Nobody will switch from Chrome, Safari or Firefox to the "Brave Browser" in order to have ads injected into their browsing session. The concept is so fundamentally ridiculous that I can't even muster pity for the people who sunk their money into this scam.
      - ericflo 9y ago
        I use Brave, and there's about a half million other people who are using it too. What I guess you really mean is not that "nobody" will switch, but that "everyone" won't. So it's just a matter of market size, which I agree - we'll see.

rasmafazi 9y ago

VCs drag you into mainstream orthodoxies in order to be able to do an IPO on Wall Street. With ICOs around, who would put up with VCs again?

zby 9y ago

This whole ICO affair will not end well. Here is a guy complaining about not being able to buy the BATs at the crowdsale: https://www.reddit.com/r/ethtrader/comments/6efsc8/bat_ico_whalesale_completely_against_the_ethos_of/ https://www.reddit.com/r/ethtrader/comments/6efsc8/bat_ico_w... - this is a serious gold rush attitude. Those people don't seem to understand that most (9 for 10 some say) startups fail. And the tokens they are buying is just a promise - they don't bind the company to do any thing. The company promises to use the BAT token in their future monetization model - but in fact they can pivot at any point, like many (if not most) startup do, and do something else, or maybe even do yet another ICO with another token. And that is on top of all the problems with crowdfunding - where even if there is a legal binding, and maybe a fractionary ownership - without all the regulations that were invented to protect the investors - the founders/executives still can do anything with the money they received from the funding event: https://medium.com/@zby/the-problem-with-crowdfunding-81b53f963387 https://medium.com/@zby/the-problem-with-crowdfunding-81b53f... Update: Even if now most ICO creators are honest - then soon they'll be crowded out by scammers, because honest funders will find other ways to fund their starups - but for scammers it will never be easier than with ICOs.

altoz 9y ago
I wrote a similar article on the difference between ICOs and VC investment. In short, the investor gets much less in an ICO: https://medium.com/p/why-icos-are-very-different-than-seed-capital-a59e4c78b84a https://medium.com/p/why-icos-are-very-different-than-seed-c...
- mck- 9y ago
  Great primer on ICOs - thanks for enlightening me :)
beager 9y ago
From the linked reddit thread: > This is totally against the spirit and ethos of what cryptocurrency stands for. What exactly is the spirit or ethos of cryptocurrency? I thought the big selling point is that there is no spirit, no ethos, no regulation. Folks who are disappointed that a cryptocurrency investing channel has no safeguards against exploitation can't have it both ways.

regulation_d 9y ago

I've heard some people complain about GNO's dutch auction style offering, but only generically. Dutch auction seems like a good option for highly-anticipated coins like BAT. Does anybody have insight into why the dutch auction style isn't more widely used?

dna_polymerase 9y ago
Gnosis is now owned to an extend of >90% by the Gnosis team themselves. This is why Dutch Auction is not used more broadly. It doesn't help with any of this.
- regulation_d 9y ago
  That seems more like a flaw with the individual offering than with the concept of the dutch auction. Did team only release a small percentage of the coins in the auction or did they just bet more than everyone else?
- regulation_d 9y ago
  when you say "It doesn't help with any of this." I'm not sure what you mean. Theoretically dutch auction is much more democratic than these other twitch based sales. You have a set amount of time to jump on board. You're incentivized to bid as much as you feel the coin might be worth, with the confidence that you won't be paying more than anybody else. There might be more complications with dutch auction ICOs than dutch auction IPOs, but it's still seems better than feeling like I do when I'm trying to buy Adele tickets on Ticketmaster. EDIT: typos

joosters 9y ago

To give an example of the current insanity of ICOs, take a look at the terms & conditions for a recent token sale - from https://patientory.com/ https://patientory.com/ : https://patientory.com/token-sale-terms.pdf https://patientory.com/token-sale-terms.pdf Ownership of PTOY carries no rights, express or implied, other than the right to use PTOY as a means to obtain Services, and to enable usage of and interaction with the Platform, if successfully completed and deployed. In particular, you understand and accept that PTOY do not represent or confer any ownership right, stake, share, security, or equivalent rights, or any right to receive future revenue shares, intellectual property rights, or any other form of participation in or relating to the Platform, and/or Foundation and its corporate affiliates, other than rights relating to the receipt of Services and use of the Platform, subject to limitations and conditions in these Terms and applicable Platform Terms and Policies (as defined below). PTOY are not intended to be a digital currency, security, commodity, or any other kind of financial instrument. So.. by buying the tokens, you are getting, nothing, basically. You have a sufficient understanding of the functionality, usage, storage, transmission mechanisms, and other material characteristics of cryptographic tokens like Bitcoin and Ether, token storage mechanisms (such as token wallets), blockchain technology, and blockchain-based software systems to understand these Terms and to appreciate the risks and implications of purchasing PTOY; You've also got to fully understand blockchains. You have carefully reviewed the code of the Smart Contract System located on the Ethereum blockchain at the addresses set forth in Exhibit B and fully understand and accept the functions implemented therein; You've also got to be an expert programmer fluent in all ethereum's security weaknesses, plus you better have a disassembler handy to reverse engineer their compiled code (they don't provide any source code - plus, 'Exhibit B' doesn't event give the contract address anyway) You are not purchasing PTOY for any other purposes, including, but not limited to, any investment, speculative, or other financial purposes; Sure, sure. That's why people are buying these things, right? It goes on... you also agree to indemnify the company against everything, all warranties are disclaimed, no liabilities can be held against them, you waive your rights to legal actions against the company, or any class actions (you must agree to arbitration). Oh, and they naturally reserve the right to modify these terms at any time without notice. No-one in their right mind would agree to these kind of terms, and yet they are common across many ICOs. It is madness. And I haven't even mentioned their proposed application (healthcare on the blockchain) which is dumb in so many other ways.

bluesign 9y ago

I really dont understand the value behind ICOs. - there is no guarantee of limited supply of tokens ( no promise that BAT will be limited ) - there is no guarantee that company will not come up with secondary token (ex: advanced attention token) - Also there is no indication of what 1 BAT will get you. All calculations etc subject to change

zby 9y ago
I have not checked it - but there probably is a guarantee of limited supply - the contract that generated them is already in the Ethereum blockchain and it cannot be changed.
- bluesign 9y ago
  Yeah I checked out, seems you have right.
- chinathrow 9y ago
  > "he contract that generated them is already in the Ethereum blockchain and it cannot be changed." Unless another hard fork kicks in and multiple truths exist?

deleted 9y ago

[deleted]

equalarrow 9y ago

Fred's not a dumb guy, even though I never agreed with his Android over iOS statements (Android first, etc). I think he's smart and to him, my opinion doesn't matter, I'm sure. However, vc is a hundreds, if not thousands of years old. Fine tuned and tweaked in the 80's on to the dot com and thru facebook & google and beyond. ICO is just a few years old - it's typical for the disrupted to not feel threatened until it's too late. This, in my mind, is the real model going forward. Fuck pandering to Sand Hill road or SV at all - launch an ICO from anywhere in the world on your whitepaper and testnet (shaky???) dev... ICO's may seem ridic, but this is just the beginning. We are now running at internet speed and there's gonna be a point (soon? who knows when) where this stuff is going to all be automated and 24 seconds will seem quaint. Welcome to high frequency funding.

thesausageking 9y ago

> VCs, at leas the best ones, are there for your company in good times and bad. There is a difference, trust me. This is backwards. Raising via an ICO mean no VC can ever push you out as CEO or take control of your company. Their priority is making the company get to a big exit, with or without you. When Ev was running Twitter, Fred wasn't a fan of his and had not problem plotting behind his back with Jack and eventually pushing him out.

kevando 9y ago
Can you site any of this?
- arikr 9y ago
  Not OP, but read the book 'Hatching Twitter,' most of it is in there.
  - thesausageking 9y ago
    Yes, it's all detailed in Hatching Twitter which is written by a NY Times columnist. Basically, when Ev was CEO, the board told him to his face he was doing a fantastic job. He had turned around the product org and gotten user growth back on track. At the same time, Fred and a few of the other investors met secretly with Jack and came up with a plan to push Ev out and, bring Jack back with Dick Costolo as interim CEO. Excerpt from the book after Ev was told he was out: Williams, stunned, picked up the phone and began dialing. Bijan Sabet was apologetic and insisted that they wanted to keep him on in a product-advisory role. According to several people at the company, Fred Wilson, however, said he thought Williams had always been a terrible C.E.O. “I never considered you a founder,” he said. “Jack founded Twitter.” Other portfolio investments of his have followed a similar pattern of having the original CEO pushed out once they get to a certain level of success.

untangle 9y ago

Thread-starter here. I have raised VC, PE, and debt. Early-stage and late stage. Here's my take on "ICO vs VC." ICO's: For the investor, they are akin to commodity futures trading. The underlying value of the token is nil, as is the degree of control over the underlying property. But returns from price speculation can be very rich. For the issuer, they have the money virtually without strings attached. There is no other form of assistance and no loyalty implied in either direction. For example, I'd be shocked if there were positive "operational" returns from a token like the Brave coin. For that to happen, Google, Facebook, and the rest of the ad industry would have to grant sanction to the vendor of a Chromium-based browser startup yo turn the entire industry on its side. I doubt it. Seriously. VCs: For the investor, they get some modicum of ownership and control of the underlying property – sometimes not much but usually a lot. There is an implied responsibility to help with follow-on funding, but nothing solid. The investment is risky but not speculative. For the issuer (of preferred shares AKA the company), they get the money with all kinds of strings attached. If the VC is top-tier (e.g., Fred, Kleiner, NEA, etc.), significant branding, easy intros, and many other benefits can accrue. If the VC is less prestigious, the operational impact is more neutral. (No VC can make your company grow or be successful – that's on you.) My opinion: 1. If I could pull off an "ICO" (bad name) at my next company, I'd do it immediately. Great upside and little downside. 2. I say "immediately" because I don't think that this vehicle will last long in its current unregulated state. There will be failures. There are enemies. There will be evil deeds (fraud), and those deeds will involve unaccredited investors. 3. The ICO will be a short-term speed bump to VCs. 4. That all said, who wants to join me and start an "ICO production" company to create the coins and infrastructure for them to do their own ICOs? Speed is life, and I know some VCs... :)

EGreg 9y ago
The investment is risky but not speculative. What's the distinction, in precise language?
- untangle 9y ago
  > What's the distinction, in precise language? Good question. I was using the language according to this definition: "A speculative investment is one with a high degree of risk where the focus of the purchaser is on price fluctuations. The investor buys the tradable good (financial instrument) in an attempt to profit from market value changes." https://marketbusinessnews.com/financial-glossary/speculative-investment/ https://marketbusinessnews.com/financial-glossary/speculativ...

kicanozcan 9y ago

VCs are actually very interested to play a part in this new form of financing. I live in the Bay Area and have been talking to friends in VCs - from my understanding, it's legally risky for them to directly invest in ICOs and they are putting money in other funds that can invest in ICOs like Polychain - this is truly an exciting time! Also, how else you think BAT sells so fast if it wasn't for institutional money