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Why is value flowing to ICOs? It's diversification of Bitcoin
- free_everybody 9y ago... or maybe ICO's are clever ways of extorting even more money from naive cryptocurrency day traders?
- QAPereo 9y agoIt's probably also a dream come true for anyone who wants to launder some money.
- pmorici 9y agoHow do you figure? I think the general wisdom among people who have a deep understanding of block-chains is that it is about the worst way you could possibly try to launder money. Every transaction you make is forever immortalized in a publicly accessible record book. Not to mention that there is strong KYC at the entry exit points between cash and crypto currencies.
- QAPereo 9y agoAnd yet hackers steal these coins and seem to do alright, Tumblers seem to anonymize currency too.
- aml183 9y agoThe biggest tumbler closed down and none of the other existing tumblers are very trustful.
- pmorici 9y agoDo you have any stats on the percentage of traditional financial crimes that go unsolved vs the percentage of crypto-currency crimes that go unsolved? You would have a hard time finding a major crypto-currency heist, dark market, or rogue exchange that hasn't been tracked down and shut down.
- darawk 9y agoYes but cryptocurrency thieves (i.e. exchange hackers, etc) are currently batting around 100% uncaught, afaik.
- pmorici 9y agohttps://davidgerard.co.uk/blockchain/2017/09/17/kim-nilsson-of-wizsec-how-the-bitcoins-were-stolen-from-mt-gox/ https://davidgerard.co.uk/blockchain/2017/09/17/kim-nilsson-... Pretty sure they got the guy behind a lot of the thefts when they arrested that BTC-e guy earlier this year.
- jpatokal 9y agoI wouldn't describe LocalBitcoins as having "strong KYC"...
- root_axis 9y agoLocalBitcoins is pretty impractical for significant sums of cash.
- darawk 9y agoIf you have significant sums of cash, you can pay someone to sit on LocalBitcoins cashing out all day.
- ryanlol 9y agoHow do you mean impractical? I've done 100k+ trades just fine. For bigger sums you'll usually have the exchanger fly one of their reps over from another country. I would consider LBTC rather impractical for smaller trades though.
- monort 9y agoDid you do this trades in cash?
- dk8996 9y agoThere are a few coins that offer complete privacy. XMR, Pivx, ZCoin. Just to name a few.
- droffel 9y agoOnly one of those three is private by default. If it isnt private by default, calling it a privacy coin or saying it offers 'complete privacy' is farcical. Monero is the only way to go at the moment.
- the_stc 9y agoEven Monero isn't completely private. If you use an exchange to get in an out of Monero, they can probably link your transactions given an approximate timeframe. Until we have serious ringsizes this will remain an issue.
- woah 9y agoI bought a small and equal amount of ZCash and Monero, so I don't really have a horse in this race, but what's your objection to having optional in the clear transactions? It just sounds like the flimsy Monero shilling that predictably pops up on any public forum when privacy coins are mentioned.
- KomradeKeeks 9y agoYou make/invest heavily into an ICO, send your CP/ordered hit/fentanyl proceeds into it, and then sell your ICO tokens for ETH. Most ICOs don't do KYC; if they're asking for crypto-based investments they likely aren't asking for conventional investors and aren't vetting the speculators who only want to know how long they have to hold the token before dumping on the market
- crypt1d 9y agothats no longer true. Now-a-days, ICOs ask for all kind of KYC documents - passports, utility bills, etc.
- the_stc 9y agoA few maybe. It's definitely the reason we (Pink) went ICO for funding, to be able to raise money because real-world contacts didn't like the potential link to funding our venture.
- woah 9y agoI read your site last night and was intrigued by the bold use of traditional finance language to describe your ICO. "Token-shares", dividends, etc. You're not worried about US securities law?
- the_stc 9y agoWe are worried about the SEC as much as we're worried about any government action. We're operating very tightly. It's a travesty that some of these companies raise millions without giving up equity, voting, or dividends.
- sillysaurus3 9y agoMonero certainly is. Money laundering is now solved thanks to this. Want to hide your money? Use Monero. There are even services that fulfill BTC orders: you send them Monero, they send BTC to the specified address. There are also services that go the other way. It uses ring encryption and appears to be well-implemented. It will be with us for a long time.
- droffel 9y agoMonero might obscure the origin of the funds, but so does using cash. Money laundering requires an extra step - finding a plausible alternative origin of the dirty funds. Monero in and of itself is fungible, but it doesn't 'solve' money laundering.
- qeternity 9y agoExactly. It's never been difficult to move money around freely if you know how to. It's the "layering" which is the hard part i.e. avoiding questions from the relevant authorities of "where did this money come from". Monero doesn't provide good answers to those, and if anything it would raise suspicions.
- sillysaurus3 9y agoSomeone can send someone else $1M in Monero and there's nothing you can do to know about it. You can't do that very easily with cash. It's trivial with Monero. As far as raising questions, it's like cash, but it's also extremely convenient to transfer large amounts.
- deleted 9y ago[deleted]
- notahacker 9y agoI received my first Bitcoin-related spam call from an overseas callcentre this week. If his English had been a little more intelligible, I'd have been interested to find out whether he was shilling for an ICO or a fake exchange.
- ringaroundthetx 9y agoThe M1 money supply in any currency is always a tiny fraction of the money supply in comparison to the M2, M3, and MB, which are illiquid and used for speculation. It isn't mysterious that this is also the result in cryptocurrency as well. An oft parroted rebuttal is that bitcoin is being used for speculation and very little is being used for purchases of goods and services, even though that fits the same behavior of national currencies it is used to discredit bitcoin's use as a currency. It looks like it is growing the way one would expect.
- JumpCrisscross 9y ago> An oft parroted rebuttal is that bitcoin is being used for speculation and very little is being used for purchases of goods and services, even though that fits the same behavior of national currencies Are you asserting that a sizeable fraction of U.S. dollar M3 or even M2 is sitting idle speculating on the future value of the U.S. dollar? Rates are built into modern currencies in a way they were not for gold. That's Bitcoin's fundamental problem. It's a 19th-century currency relearning old economics.
- ringaroundthetx 9y ago> Are you asserting that a sizeable fraction of U.S. dollar M3 or even M2 is sitting idle speculating on the future value of the U.S. dollar? No. But that also happens whether it is inadvertently just sitting there, or in bonds as part of a massive carry trade Secondly did you read the article? It is about sizeable portions of bitcoin being used to invest in ICOs, which I was agreeing with and pointing out how otherwise illiquid portions of national currencies are used this way as well
- JumpCrisscross 9y ago> that also happens whether it is inadvertently just sitting there, or in bonds Bonds fund useful activity. Most ICOs have yet to finance a single developer's salary.
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- RichardHeart 9y agoThat's roughly 100 percent price correlated. tether, iota, emercoin and few others aren't as correlated. Not a good diversification when they all go up and down together. (If you're diversifying to reduce risk.)
- cperciva 9y agoDepends what type of risk you're trying to reduce. Trying to reduce the risk of prices dropping? Not very useful. Trying to reduce the risk of them turning out to be scams? If you diversify enough you might end up with one which isn't.
- polemic 9y ago> "One of the fundamentals of markets is that value needs to go to work." Indeed. And since there is little real (read: economically useful) work that Bitcoin can actually do, speculators pile them into other types of coin that are, at best, an additional level of indirection between Bitcoin and real value. Hm, creating complicated financial derivatives to hide the underlying non-viability of the core product. Now why does that sound familiar.
- pjmorris 9y agoNext thing you know, someone will be making $500,000 ICO loans to retail workers, and selling on the loans to be bundled into AAA-rated securitizations. I wonder if Moody's rates ICO's?
- alexasmyths 9y ago... and developers will be paid in 'coins', issued by the company. "Join my startup, your salary is 100 Million Kangaroo coins per year. We call them 'ru-bucks' because we're cool like that."
- im3w1l 9y agoMany devs people get part of their compensation in stock grants. For stocks that pay no dividend.
- jacquesm 9y agoIn most cases the difference between stock in a start-up and Ru-bucks is negligible.
- alexasmyths 9y agoI will admit that in many cases, especially if the company does not do well, stocks = ru-bucks. But if a company does well, stocks >>> ru-bucks. Or at least they should ... Sadly, I actually believe my little satire will become reality very soon, as I believe coins will be handed out as comp ... I'll bet a Kik, very soon.
- sonink 9y agoThe author might be missing the woods for the trees. ICO's are at heart a rethink on the angel-vc-ipo funding cycle. ICO's offer very clear advantages in terms of increasing distribution, decreasing friction, aligning investors to product success and builds upon emerging ideas around equity/control structuring. That they offer a diversification of bitcoin is merely an oversight in the grand scheme of things.
- alexasmyths 9y agoThe most important advantages to ICO issuers are: lack of transparency, reporting requirements, no dilution, no oversight, the ability to 'print coins' as they please. In other words, absolute power over the speculators that buy them. I'm not sure if I want to be on the other end of that deal ...
- coconutrandom 9y agoThis is mostly inaccurate, the code behind the token creation and distribution is public. And while it's technically possible, in practice most token contracts do not give the creators the ability to mint to tokens on a whim.
- alexasmyths 9y agoYes, 'technologically', sure. However, as we see with stocks, there's nothing stopping an entity from doing whatever they please in the end. Like issuing a second set of coins, at par or equal value to the 'current coins'. Possibly requiring that the first tranche be redeemed for the second. Or whatever shenanigans they want. With the Kik ICO, they've kept a huge flood of coins to do with as they please. And they will in fact do whatever they please with them. For these 'company managed' coins, I think they serve as a de-facto 'central bank'. They'll find a way to change the rules if they choose to.
- woah 9y agoYour connection between developers keeping a large portion of the coins, and being able to "change the rules" doesn't make any sense. Developers keeping coins is actually very positive, and if I were to buy into an ICO, I would greatly prefer this. Otherwise the developers have no incentive to keep working hard and meeting milestones, since they already have more cash than they would be able to increase the value of their holdings by.
- factsaresacred 9y agoGiven that a bearish Bitcoin market sinks all cryptocurrency ships there's not a whole lot in the way of diversification benefit right now. ICOs appear to be more like Kickstarter with tokens. Some are in it for speculation and possible wealth, others really like the underlying product/game/app.* For example, French indie game 'Beyond the void' is integrated with an Ethereum blockchain. People fund the dev and receive tokens to use in the game. "Investors" win when the game is live. That their token can be changed for other currencies is secondary. People will get burned. Just see the scammy ICO ads on your Facebook feed. As with Kickstarter (with its 21% tech project success rate), diligence is required. But that any one of us can relatively easily exchange objects of value across hundreds of different projects is just about revolutionary. * Currencies like Monero and Litecoin are more truly speculative in that their value rests solely in perceived future utility and adoption.
- zdkl 9y ago> Currencies like Monero and Litecoin are more truly speculative in that their value rests solely in perceived future utility and adoption. You have bitcoin & litecoin reversed there friend. Compare organic looking transaction count and volume, adjusting for market cap.
- psyc 9y agoIt's a mixed bag of legit projects, outright scams, and that grey-area of tech-bro charlatans. It's the last one that concerns me: CEO - Serial Blockchain Entrepreneur. In this for the long haul! CTO - "Crypto expert" == Business guy who understands blockchain superficially CFO - This guy is real, of course. Working code! = Fork Whitepaper = Buzzword language that just says their going to tokenize something. 'LegitCoin will tokenize the derivatives market for solar!' Create positive pump articles and videos for us for free tokens! My non-technical brother in law asks me every other day to look into one of these turds for him, and I have to deflate his bubble.
- factsaresacred 9y agoSpot on. Shitcoins, as they call them. At this very early stage of adoption, most people who are smart enough to figure out how to trade crypto should be smart enough to do some research before buying 1000 vaporware coins. As the doors open to the wider population, though, it's inevitable that hucksters will try to separate regular folk from their hard earned cash. The notion is reprehensible (and goes against the spirit of cryptocurrencies) so some regulation around accountability would not be unwelcome.
- 127 9y agoThe dream of getting rich quick is what is driving most of ICOs, if not all. There's no rhyme or reason to it. People just want to 100x their money quickly as possible and see ICOs as their chance. It's basically gambling, but lately much better returns than the casinos.
- sp4ke 9y agoTell me how is this objectively different than VCs ? Other than it's now available to everyone instead reserved to the elite ? In both cases, you are well aware most of your investments will fail and you're expecting one 10x or 100x that will make it up for other losses . aka gambling ...
- im3w1l 9y agoKeeping things to the elite is unfair to common people, but it is also a pragrammatic way of protecting stupid people from themselves.
- sp4ke 9y agoAh the famous "I know what's good for you" argument that was used the same way by the church to forbid access to book printing ! I think these coming technologies will prove all people can think for themselves ;)
- rocqua 9y agoWith VCs, there is reason to believe that the expected value of your total investments is positive. With ICOs, the claim is that many people mean to cash out by selling before the bubble bursts.
- sp4ke 9y ago>>> there is reason to believe that the expected value of your total investments is positive Hmm, I wonder if the zero interest rate "trickle down" free money that is keeping stocks artificially inflated has anything to do with this assumption ? >>> With ICOs, the claim is that many people mean to cash out by selling before the bubble bursts. Yeah totally not the same as founders rushing to growth with bullshit things like "growth hacking", then rushing to exit to cashout before everyone realizing their business is not actually solving a real problem. ( like all the messenger apps/chat bot frenzy of last year)
- jondubois 9y agoIt's more than that; it's to provide additional capacity to the cryptocurrency 'inter-net'. A single blockchain cannot physically scale beyond a certain number of transactions (based on Amdahl's law), but the amount of value that passes through a single network can in fact keep going up indefinitely (e.g. when the price of the coin goes up, the value of transactions go up, even though the actual number of transactions stay the same) - But the flat transaction fees become prohibitively high and only suitable for large transactions; that's why you need new networks with lower-priced coins and fees to handle the load of smaller transactions.
- tryingagainbro 9y agoalso, IMO, quite a few think of it as lottery money. Maybe they mined it early or bought in very cheap, now they have a lot of money. So what do you do when you get a bunch of money almost all of the sudden?
- gorm 9y agoDiversification is supposed to be done in different asset classes. Also a good rule is to only diversify when the asset is cheap.
- sygma 9y agoEven better: diversification should be done across weakly-correlated (ideally negatively correlated) assets.
- paulpauper 9y agoBut they are not. Altcoin value relative to Bitcoin peaked in june 2017
- paulgb 9y agoThat characterization doesn't really tell the whole story though. By my reading of this chart[1] altcoins went from ~15% of the total market cap to ~62% before falling to ~52%. That's still a lot more of the value in altcoins than at the beginning of the year. 1: https://coinmarketcap.com/charts/#dominance-percentage https://coinmarketcap.com/charts/#dominance-percentage
- l33ty 9y agoEthereum tokens are apps,basically, they are not even a currency... And some ICOs nowadays raise money to tokenify real world finance, look up genesis vision