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Can someone please explain this about ICOs for me: are people investing because they believe the company itself will create real economic value resulting in div

Can someone please explain this about ICOs for me: are people investing because they believe the company itself will create real economic value resulting in dividends based on their coin holdings, or is it all about secondary market gambling and betting they'll make a profit off coin speculation?

phereford 9y ago
There was a podcast(1) about part of your question recently. Essentially, people are playing with "house money" as they have generated net gains from BTC and other coins. Instead of incurring a taxable event by cashing out, they might just be pouring it into ICOs. (1): https://itunes.apple.com/us/podcast/unchained-big-ideas-from-worlds-blockchain-cryptocurrency/id1123922160?mt=2&i=1000385480911 https://itunes.apple.com/us/podcast/unchained-big-ideas-from...
- nugget 9y ago
  I believe the IRS considers the transfer of ETH for an ICO token (or BTC, etc) to be a taxable event.
  - phereford 9y ago
    I think it's a grey area, but I am not an accountant. The government considers it to be intagible property in some scenarios and a capital asset in others. For the most part I think the capital asset happens on the conversion to fiat due to the realizing of gains and losses. If anyone else has more knowledge here, I would love to know for certain. https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan...
    - nugget 9y ago
      I'm 100% certain that absent a ruling letter the current guidance from the IRS is that a transfer of one token for another token (e.g. Ethereum for Bitcoin via Poloniex) is considered a taxable event, similar to, for example, selling gold and purchasing copper. I'm not sure if Ethereum tokens would be able to stretch into a different definition, but I suppose time will tell.
xorcist 9y ago
There are no dividends paid on holdings. That would make it a security and fall under regulation. Most ICOs stipulate that in their T&C that tokens are to be regarded as without value. Yet they put up a big dog and pony show about selling them. To think that this absolves them of responsibility is a bit naive, in my opinion. This particular token is a clear cut example. Block.one will build another altcoin. There is no code yet, only a whitepaper that on the face of it seems to promise the impossible (all the functionality you can think of at a million times the throughput). To finance this they will sell this EOS token, which is explicitly stated not to be exchangable for their future altcoin product or have any other use. It might be of interest to note that the person behind this is not new to the game. This is his third crowdfunding scheme, and the first two products are far from what was promised. As to why people invest your guess is as good as mine, but the greater fool theory is a good starting point.
- dbancajas 9y ago
  You sound legit. Real question: I'd like to short 1000$ of this "security" or bitcoin/ethereum, is there a way to do that currently?
  - deleted 9y ago
    [deleted]
  - zeusk 9y ago
    You can short Bitcoin or Ethereum on any major coin exchange and some trading platforms even go up to 200x leverage using margin and synthetic derivative contracts.
    - dbancajas 9y ago
      Can you tell me which major exchange does this? I'd like to buy a "reverse insurance" a-la "big short" type of thing. Also, what are the examples of a "synthetic derivative contracts"?
- Kiro 9y ago
  > EOS token, which is explicitly stated not to be exchangable for their future altcoin product or have any other use. So what is it exactly? What are you buying?
dna_polymerase 9y ago
Look at the recent ICOs. The companies usually have little to none to offer, Mysterium, Gnosis, Bancor. People only buy hoping the coin will be included on Poloniex. Worked for Gnosis, investors saw huge returns. Yet the technology is all not existent, stay away for the tech. Before these things actually launch you can buy coins, but until they launch its all just gambling.

phereford 9y ago

There was a podcast(1) about part of your question recently. Essentially, people are playing with "house money" as they have generated net gains from BTC and other coins. Instead of incurring a taxable event by cashing out, they might just be pouring it into ICOs. (1): https://itunes.apple.com/us/podcast/unchained-big-ideas-from-worlds-blockchain-cryptocurrency/id1123922160?mt=2&i=1000385480911 https://itunes.apple.com/us/podcast/unchained-big-ideas-from...

nugget 9y ago
I believe the IRS considers the transfer of ETH for an ICO token (or BTC, etc) to be a taxable event.
- phereford 9y ago
  I think it's a grey area, but I am not an accountant. The government considers it to be intagible property in some scenarios and a capital asset in others. For the most part I think the capital asset happens on the conversion to fiat due to the realizing of gains and losses. If anyone else has more knowledge here, I would love to know for certain. https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan...
  - nugget 9y ago
    I'm 100% certain that absent a ruling letter the current guidance from the IRS is that a transfer of one token for another token (e.g. Ethereum for Bitcoin via Poloniex) is considered a taxable event, similar to, for example, selling gold and purchasing copper. I'm not sure if Ethereum tokens would be able to stretch into a different definition, but I suppose time will tell.

xorcist 9y ago

There are no dividends paid on holdings. That would make it a security and fall under regulation. Most ICOs stipulate that in their T&C that tokens are to be regarded as without value. Yet they put up a big dog and pony show about selling them. To think that this absolves them of responsibility is a bit naive, in my opinion. This particular token is a clear cut example. Block.one will build another altcoin. There is no code yet, only a whitepaper that on the face of it seems to promise the impossible (all the functionality you can think of at a million times the throughput). To finance this they will sell this EOS token, which is explicitly stated not to be exchangable for their future altcoin product or have any other use. It might be of interest to note that the person behind this is not new to the game. This is his third crowdfunding scheme, and the first two products are far from what was promised. As to why people invest your guess is as good as mine, but the greater fool theory is a good starting point.

dbancajas 9y ago
You sound legit. Real question: I'd like to short 1000$ of this "security" or bitcoin/ethereum, is there a way to do that currently?
- deleted 9y ago
  [deleted]
- zeusk 9y ago
  You can short Bitcoin or Ethereum on any major coin exchange and some trading platforms even go up to 200x leverage using margin and synthetic derivative contracts.
  - dbancajas 9y ago
    Can you tell me which major exchange does this? I'd like to buy a "reverse insurance" a-la "big short" type of thing. Also, what are the examples of a "synthetic derivative contracts"?
Kiro 9y ago
> EOS token, which is explicitly stated not to be exchangable for their future altcoin product or have any other use. So what is it exactly? What are you buying?

dna_polymerase 9y ago

Look at the recent ICOs. The companies usually have little to none to offer, Mysterium, Gnosis, Bancor. People only buy hoping the coin will be included on Poloniex. Worked for Gnosis, investors saw huge returns. Yet the technology is all not existent, stay away for the tech. Before these things actually launch you can buy coins, but until they launch its all just gambling.