3 ms·
One interesting aspect of ICO's is that the owners don't necessarily need to build a business. It's far less work to skim the money and say the business failed.
by sillysaurus3 9y ago
One interesting aspect of ICO's is that the owners don't necessarily need to build a business. It's far less work to skim the money and say the business failed. And until anyone goes to jail for doing that, it remains a lucrative opportunity.
Raising $120M in an ICO isn't the same as raising $120M from a VC. In the latter case, you get nothing if the business fails.
The big question is, why are people dumping so much more money into ICOs than into Kickstarter projects? Why does an ICO seem so much more legit? It's mostly the same thing. Yet ICOs are somehow raising 10x more than the most-funded Kickstarters without breaking a sweat.
- jeremyt 9y agoBecause you can flip coins for a profit. Can't do that on kickstarter.
- fapjacks 9y agoBecause it's actually pretty difficult to withdraw $40 million worth of Ethereum, and so people that are massively successful in BTC/ETH/LTC are able to just park some of their excess in these ICOs on the off-chance one of them is a hit.
- hossbeast 9y agoThis, exactly. Crypto Inception, as the piece puts it.
- anovikov 9y agoThat is a gross understatement. Vast majority of ICOs are deliberate scams, not just they aren't building a business, they have no idea how to do it, have no relevant skills, and whole 'idea' is lunatic and would be laughed off by even a beginner angel investor if pitched to him. In many cases, an idea is also technically unworkable due to scaling limits of blockchains used. It is just that: a scam. Not a bubble as in: 1990s tech bubble, or subprime mortgage bubble. There, you got something which didn't follow the profit curve you predicted. Here, you get nothing for your money.
- quickthrower2 9y agoA lot of the ICOs have similar looking web pages: modern bootstrap style, touting benefits which are generic benefits of any cryptocurrency, and a list of team members with PhDs and suchlike. You could write a playbook for this crap.
- anovikov 9y agoI have been invited to act as a fake cofounder for an ICO several times...
- magnetic 9y agoHow do they manage to con so many buyers?
- vkou 9y ago> The big question is, why are people dumping so much more money into ICOs than into Kickstarter projects? Because an ICO gives you equity, which you can resell to a bigger fool. People buy into ponzi schemes, too, knowing full well that they are ponzi schemes.
- abrookewood 9y agoICOs do NOT give you equity ... that's what IPOs do. You get coins/tokens, not shares, and you have no ownership stake in the company. There's a big difference and it is exactly why they are running wild. If you got equity, then there would be huge amounts of regulation covering them.
- fosk 9y ago> People buy into ponzi schemes, too, knowing full well that they are ponzi schemes. Ponzi schemes are only bad if you are in the last batch of investors. The first ones do get a nice return (otherwise the scheme itself would not last long). A smart investor could decide to put some money in a Ponzi scheme, as long as he knows what's his number in line, deciding to gradually disinvest some % as times goes on in order to collect the enormous gains.
- grey-area 9y agoThis is why Ponzi schemes work so well. Everyone thinks someone else will be the chump who loses their shirt and they will get out just in time. It doesn't usually work out that way.
- vit05 9y agoI do not understand your comparison with Kickstarter. You never invest in a company or project using Kickstarter, you will not earn anything in the future if the project succeeds. If you buy a shirt, you will only get that shirt, even if the company sells millions. You can not pass your position on to someone else. The comparison could be with stock exchanges. So the answer is simple. The barriers to starting an investment in ICO are minimal when compared to any IPO. And it is a global negotiation.
- Kiro 9y ago> you will not earn anything in the future if the project succeeds Neither will you with ICOs. They normally don't give any ownership or the like.
- vit05 9y agoHow not? You get royalties from their project and, if they succeed, you will be able to negotiate that for more than you have paid. And there is a possibility to receive ownership, I do not know if any of the recent ICO has given that, but they could; future products or services for the Token that you have bought.
- Kiro 9y agoNo, that's not how the majority of ICOs work. You get no royalties. The tokens can be anything.
- vit05 9y agohttps://omg.omise.co/ https://omg.omise.co/ OMG holders can use OMG to validate the network. If they validate a block correctly, they get paid the tx fees from that block https://blog.golemproject.net/golem-network-token-gnt-sale-220c2a732f9 https://blog.golemproject.net/golem-network-token-gnt-sale-2... All transactions in the Golem network will be subject to a fee, approximately 5% of the transaction value. This will include both transactions between the users — payments for computing power — and transactions between users and software developers. The latter will consist of payments for the software used on the Golem network in a SaaS model. Where applicable, a blend of both open source and proprietary software will be used.
- DennisP 9y agoAny decent ICO reserves a portion of the new tokens for the founders, vested for at least a year, so they have an incentive to build something that makes them valuable. A cap on the ETH to a level that's realistically usable for development can also be a good idea.
- xorcist 9y ago> why are people dumping so much more money into ICOs than into Kickstarter projects? Because most of it is "free" money. It's not a coincidence that the great altcoin explosion happened after Bitcoin value had increased by several orders of magnitude, and the ICO explosion happened after Ether had. Some people bought what they considered a lottery ticket for a few grand, found themselves with a jackpot, and decided to buy another lottery ticket with (parts of) the winnings. It doesn't feel like real money to them. I don't know if we should feel better about it because of that, but at least it explains why so many of the altcoins and ICOs which are so clearly scams/ponzis can attract so much capital.
- nylonstrung 9y agoThis is exactly why altcoins are popping now- investors are dumping their free Bitcoin Cash which materialized out of thin air into NEO and a bunch of other coins