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South Korea bans raising money through initial coin offerings

204 points by omarchowdhury 9y ago

simonh 9y ago
The whole ICO gold rush really looks like a crazy bubble. Accepting for the moment that crypto currencies can have a viable place in the finance system, how many of these do we need? What differential value do these new crypto coins offer that Bitcoin, Dogecoin, Etherium or the other existing coins don’t already provide? Honest question, the articles I can find on this don’t really answer this.
- slyfocks 9y ago
  In some cases, they actually contribute a novel feature (e.g. Monero adding features that enhance privacy). In most cases (all but a handful), they add nothing. It’s a money grab—so much so, that a somewhat self-aware crypto enthusiast created a parody coin, Useless Ethereum Token, whose sole feature was that it had none. It raised $40k in 3 days and was, at its peak, worth $160k, which is a pretty lofty valuation for a joke.
  - corford 9y ago
    See also the Fuck Token (http://www.fucktoken.io http://www.fucktoken.io), which raised over $30K in 30 minutes :)
    - bhaak 9y ago
      Hey, FUCK at least has a real use case. Making it possible to give a fuck or give no fuck digitally. That's what the world has waited for! /shill mode off
      - Semaphor 9y ago
        I tend to say I can't give a FUCK because I don't have any FUCK left to give. So just by existing they already enriched my life, a truly glorious token.
    - padobson 9y ago
      This is surely the funniest thing I'm going to see today. I'm going back to bed.
  - woah 9y ago
    That's not quite true. A lot of these ICOs at least claim to be trying to add some kind of unique features. A lot of them are "utility tokens" which are supposed to be used to pay for the services of a decentralized network. I agree that most of them are garbage, but this isn't like the crapcoins of a few years ago when they were literally just forks of bitcoin with tweaked constants.
- 1ba9115454 9y ago
  Most of the new offerings are tokens. A whitepaper will list the benefits to the user, usually a % of profits of some new product that the team will bring to the market. So they are acting as company shares. I'm not trying to justify this and I don't buy them myself, but I am watching teams raise serious amounts of cash. To me this seems an easier way to raise cash than going to a bunch of VC's becuase with the ICO craze the due diligince is negligable.
  - empath75 9y ago
    Defrauding people is definitely easier than building a legitimate business.
    - vasilipupkin 9y ago
      how do you defraud people by doing an ICO? if you raise the cash and don't attempt to build a business, you will be caught for fraud and go to jail. It doesn't seem like a great vehicle for fraud
      - empath75 9y ago
        Lots of people do it.
        vasilipupkin 9y ago
        do what? I mean it's one thing to defraud someone and disappear, but in the case of ICO, you put your name out there - there is no escape.
        vkou 9y ago
        You then pay yourself salary for the next three years, as well as a generous contract to your uncle Bob's consulting firm, which is supposed to build the product. Sometime in 2020, you post about your incredible journey on your blog, say that all the money has been spent, and the project failed. Whoops, sorry guys. At least, that's a legal way to take ICO money and run. It's not even fraud if you put some effort into delivering on what you promise.
- corford 9y ago
  As 1ba9115454 says, most of these ICOs are for tokens. Like the dotcom bubble of 1999/2000, the majority are garbage or pie in the sky but some are interesting and backed by decent teams. A few that are at least plausible (in no particular order and with no implied comment by me on their chances of success/utility): https://funfair.io https://funfair.io https://omg.omise.co https://omg.omise.co https://cosmos.network https://cosmos.network https://0xproject.com https://0xproject.com
- dreit1 9y ago
  Sans ethereum what do you think the market cap of all ico’d tokens is? It’s absolutely tiny. Maybe 5-10 billion? This bubble is overstated to extremes imo
  - empath75 9y ago
    Lol 5 billion tiny.
- deleted 9y ago
  [deleted]
- padobson 9y ago
  This seems like a market reaction to increased SEC regulation that has led a lot of companies to delay their IPO. As others have said, there are pink sheet OTC stocks and then there are companies like Snap and Square that only IPO so private equity can make a profit. For average joe investors looking to find opportunities like in the late 90's tech bubble, ICO's seem to be the answer.
thisisit 9y ago
Australian Securities and Investment Commission has done a good job how and when ICOs should be used: https://news.ycombinator.com/item?id=15357549 https://news.ycombinator.com/item?id=15357549
- CamelCaseName 9y ago
  I love that their acronym is ASIC.
deleted 9y ago
[deleted]
subroutine 9y ago
ICO investments are inherently flawed. I simply do not understand why anyone would throw significant money at a startup without them providing legal equity in their company. Sure, the value of their coin may rise for a while, but if they are successful enough, some of them will get acquired by a large corporation with no interest in their cryptocurrency; and they may even get absorbed into an existing product of the corp. This would leave a coin on the market with the name of a company that doesn't even exist.
- cslarson 9y ago
  The risk of that happening depends on how dependent the functioning of the token is on the company that held the ICO. It's precisely why the effort to decentralise governance for the project and give token holders influence is such a crucial consideration when investing. Unfortunately it seems there has not been too much pressure recently for projects to incorporate decentralised governance models.
- mathgenius 9y ago
  It's musical chairs: just don't be the last one standing when the music stops.
  - lettergram 9y ago
    We call that a Ponzi scheme...
    - jiggunjer 9y ago
      A pyramid. A ponzi is more abstract and could still reward the last people but be harmful to the rest.
      - jstarfish 9y ago
        I like to think of it as a reverse funnel system.
      - nerfhammer 9y ago
jondubois 9y ago
One possible loophole: You can give away all your tokens for free... So if you want to get your new coin into circulation, you can donate some to open source projects or charities.
- jiggunjer 9y ago
  So an upvote doesn't give karma, but karmacoin™
  - tolas 9y ago
    Yep. See Steemit.
KasianFranks 9y ago
Time to buy - "Japan's FSA Gives Official Endorsement to 11 Cryptocurrency Exchanges" https://www.usnews.com/news/technology/articles/2017-09-29/japans-fsa-approves-11-companies-as-operators-of-crypto-currency-exchanges https://www.usnews.com/news/technology/articles/2017-09-29/j...
hendzen 9y ago
The citizens of South Korea love to trade financial instruments. The KOSPI 200 index future used to be the most liquid equity index future in the world - mostly fueled by Korean retail traders [0]. Eventually, then, as now, the government had to step in to prevent things from getting too out of hand. [0] - https://www.ft.com/content/231fa13a-e4f4-11de-817b-00144feab49a https://www.ft.com/content/231fa13a-e4f4-11de-817b-00144feab....
milansuk 9y ago
You don't need ICO. Bitcoin started from scratch and it's still #1! Crypto currency is software which is very cheap to make and distribute(compare to hardware). Also the most of internet startups get seed money under $200K, so I don't understand why are ICO's designed for $1M and more?
- homero 9y ago
  Because they're a scam, most will disappear with the funds they raised
  - CryptoPunk 9y ago
    There's really no evidence at all to support your claim. I wouldn't throw the word 'scam' around so lightly. You're essentially libeling anyone who has organized a token sale. I can only think of one group that has disappeared after raising millions. You can caution people about tokens being overvalued without making baseless accusations of outright fraud.
    - homero 9y ago
      I'll see you in a year
      - CryptoPunk 9y ago
        I very much look forward to us revisiting this in a year.
- jiggunjer 9y ago
  Bitcoin had an ICO...
  - kwikiel 9y ago
    Ethereum had an ICO, first bitcoins were aquired in mining, there was no ICO/premine
deleted 9y ago
[deleted]
seanalltogether 9y ago
Off topic, does everyone who used to have an MT Gox account get spammed with ICO crap almost daily? Losing money on their exchange was bad enough, but now getting spammed constantly is salt in the wound.
- LeoPanthera 9y ago
  Never used mtgox, still get ico spam daily. It's useful, though. Anything I receive any notable amount of spam advertising is very likely to be some kind of scam.
nadam 9y ago
The amount of misinformation in this topic is frightening. Guys, most of the serious cryptotokens are about making some markets more efficient, eliminating lots of middlemen. I have no time to go into details, but some coins I am currently invested in: iExec BAT DASH Factom These (and some others) are serious projects with huge potentials. I am not only speaking about huge investment potentials. I am speaking about potentials to add value to society, make markets more efficient. 99% of the tokens out there are crap, but why is it important? 99% of startups are also crap, but nobody cares. I am also very sad that most people here are against making the investment landscape more meritocrtic than it is currently with all the privileged VCs, angles and lawyers born into lucky countires.
- wils1245 9y ago
  There's also lots of hype from people reassuring everyone that the coins they just happen to have invested in are rock solid, with nothing to back their arguments up.
  - nadam 9y ago
    In my opinion none of the coins I mentioned is rock solid, but I have researched lots of coins, and currently these are the ones which I find most valuable compared to market cap. 3 years ago I made a very good bet with Ripple (almost exclusively invested in Ripple for 3 years, and achieved more than 30x returns), now we will see.
- s73ver_ 9y ago
  "Guys, most of the serious cryptotokens are about making some markets more efficient" I'm willing to bet those are probably a tiny fraction of the cryptotokens out there. "I am also very sad that most people here are against making the investment landscape more meritocrtic than it is currently with all the privileged VCs, angles and lawyers born into lucky countires." That's not the case at all, and to try and phrase it like that is quite dishonest.
  - CryptoPunk 9y ago
mhluongo 9y ago
Banned raising money through ICOs for securities. It looks like they're taking a more even-handed approach than the article maintains. The r/ethereum post has link to translated announcements, etc [0]. [0] - https://www.reddit.com/r/ethereum/comments/734qv4/south_korea_banning_icos/ https://www.reddit.com/r/ethereum/comments/734qv4/south_kore...
aptituder 9y ago
It seems like every time we get some good upward movement, some sort of stupid fud hits again.
- WWKong 9y ago
  FUD? You want the general population to gamble away their life savings in what effectively are some shiny slides? Completely unregulated? Would you like to invest in this bridge I have here for you? Hey, you want to get in now before everyone wants in and the prices go 10x.
amalgan 9y ago
This shouldn't come as a surprise. Early this month SK announced they would be banning them.
EternalData 9y ago
I wonder whether Trump's SEC will consider doing the same -- so far, they've been very lax in terms of enforcement (for better or for worse).
I_am_someone 9y ago
I have a feeling this is going to start happening more and more. The golden age of the ICO's was over a few months ago before everyone and their dog started one.
throw2016 9y ago
Crypto has unleashed an epidemic of greed. Only people with a feeble understanding of the world, economics and finance will seriously engage with the idea one can make money out of thin air, wasting electricity. The only way crypto gains value in the world we live in is if established interests decide to support it, at which it point it perpetuates entrenched interests and is subsumed into the whole. So bitcoin is not going to disrupt anything. And all the 'revolutionaries' and 'liberatarians' who spend hours sitting idly in front of their PCs mining and then let loose periodic outbursts on 'freedom' and 'innovation', will happily cash out to the devil himself quietly burying their incredible claims.
- julian_1 9y ago
  > Only people with a feeble understanding of the world, economics and finance will seriously engage with the idea one can make money out of thin air, You don't need an econ degree, to understand fiat money multipliers but it helps, https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wiki/Money_multiplier > wasting electricity Is it fair to cite this as a blanket criticism, given the number of projects seriously looking at non POW consensus?

204 points by omarchowdhury 9y ago

The whole ICO gold rush really looks like a crazy bubble. Accepting for the moment that crypto currencies can have a viable place in the finance system, how many of these do we need? What differential value do these new crypto coins offer that Bitcoin, Dogecoin, Etherium or the other existing coins don’t already provide? Honest question, the articles I can find on this don’t really answer this.

slyfocks 9y ago
In some cases, they actually contribute a novel feature (e.g. Monero adding features that enhance privacy). In most cases (all but a handful), they add nothing. It’s a money grab—so much so, that a somewhat self-aware crypto enthusiast created a parody coin, Useless Ethereum Token, whose sole feature was that it had none. It raised $40k in 3 days and was, at its peak, worth $160k, which is a pretty lofty valuation for a joke.
- corford 9y ago
  See also the Fuck Token (http://www.fucktoken.io http://www.fucktoken.io), which raised over $30K in 30 minutes :)
  - bhaak 9y ago
    Hey, FUCK at least has a real use case. Making it possible to give a fuck or give no fuck digitally. That's what the world has waited for! /shill mode off
    - Semaphor 9y ago
      I tend to say I can't give a FUCK because I don't have any FUCK left to give. So just by existing they already enriched my life, a truly glorious token.
  - padobson 9y ago
    This is surely the funniest thing I'm going to see today. I'm going back to bed.
- woah 9y ago
  That's not quite true. A lot of these ICOs at least claim to be trying to add some kind of unique features. A lot of them are "utility tokens" which are supposed to be used to pay for the services of a decentralized network. I agree that most of them are garbage, but this isn't like the crapcoins of a few years ago when they were literally just forks of bitcoin with tweaked constants.
1ba9115454 9y ago
Most of the new offerings are tokens. A whitepaper will list the benefits to the user, usually a % of profits of some new product that the team will bring to the market. So they are acting as company shares. I'm not trying to justify this and I don't buy them myself, but I am watching teams raise serious amounts of cash. To me this seems an easier way to raise cash than going to a bunch of VC's becuase with the ICO craze the due diligince is negligable.
- empath75 9y ago
  Defrauding people is definitely easier than building a legitimate business.
  - vasilipupkin 9y ago
    how do you defraud people by doing an ICO? if you raise the cash and don't attempt to build a business, you will be caught for fraud and go to jail. It doesn't seem like a great vehicle for fraud
    - empath75 9y ago
      Lots of people do it.
      - vasilipupkin 9y ago
        do what? I mean it's one thing to defraud someone and disappear, but in the case of ICO, you put your name out there - there is no escape.
        vkou 9y ago
        You then pay yourself salary for the next three years, as well as a generous contract to your uncle Bob's consulting firm, which is supposed to build the product. Sometime in 2020, you post about your incredible journey on your blog, say that all the money has been spent, and the project failed. Whoops, sorry guys. At least, that's a legal way to take ICO money and run. It's not even fraud if you put some effort into delivering on what you promise.
corford 9y ago
As 1ba9115454 says, most of these ICOs are for tokens. Like the dotcom bubble of 1999/2000, the majority are garbage or pie in the sky but some are interesting and backed by decent teams. A few that are at least plausible (in no particular order and with no implied comment by me on their chances of success/utility): https://funfair.io https://funfair.io https://omg.omise.co https://omg.omise.co https://cosmos.network https://cosmos.network https://0xproject.com https://0xproject.com
dreit1 9y ago
Sans ethereum what do you think the market cap of all ico’d tokens is? It’s absolutely tiny. Maybe 5-10 billion? This bubble is overstated to extremes imo
- empath75 9y ago
  Lol 5 billion tiny.
deleted 9y ago
[deleted]
padobson 9y ago
This seems like a market reaction to increased SEC regulation that has led a lot of companies to delay their IPO. As others have said, there are pink sheet OTC stocks and then there are companies like Snap and Square that only IPO so private equity can make a profit. For average joe investors looking to find opportunities like in the late 90's tech bubble, ICO's seem to be the answer.

thisisit 9y ago

Australian Securities and Investment Commission has done a good job how and when ICOs should be used: https://news.ycombinator.com/item?id=15357549 https://news.ycombinator.com/item?id=15357549

CamelCaseName 9y ago
I love that their acronym is ASIC.

deleted 9y ago

[deleted]

subroutine 9y ago

ICO investments are inherently flawed. I simply do not understand why anyone would throw significant money at a startup without them providing legal equity in their company. Sure, the value of their coin may rise for a while, but if they are successful enough, some of them will get acquired by a large corporation with no interest in their cryptocurrency; and they may even get absorbed into an existing product of the corp. This would leave a coin on the market with the name of a company that doesn't even exist.

cslarson 9y ago
The risk of that happening depends on how dependent the functioning of the token is on the company that held the ICO. It's precisely why the effort to decentralise governance for the project and give token holders influence is such a crucial consideration when investing. Unfortunately it seems there has not been too much pressure recently for projects to incorporate decentralised governance models.
mathgenius 9y ago
It's musical chairs: just don't be the last one standing when the music stops.
- lettergram 9y ago
  We call that a Ponzi scheme...
  - jiggunjer 9y ago
    A pyramid. A ponzi is more abstract and could still reward the last people but be harmful to the rest.
    - jstarfish 9y ago
      I like to think of it as a reverse funnel system.
    - nerfhammer 9y ago

jondubois 9y ago

One possible loophole: You can give away all your tokens for free... So if you want to get your new coin into circulation, you can donate some to open source projects or charities.

jiggunjer 9y ago
So an upvote doesn't give karma, but karmacoin™
- tolas 9y ago
  Yep. See Steemit.

KasianFranks 9y ago

Time to buy - "Japan's FSA Gives Official Endorsement to 11 Cryptocurrency Exchanges" https://www.usnews.com/news/technology/articles/2017-09-29/japans-fsa-approves-11-companies-as-operators-of-crypto-currency-exchanges https://www.usnews.com/news/technology/articles/2017-09-29/j...

hendzen 9y ago

The citizens of South Korea love to trade financial instruments. The KOSPI 200 index future used to be the most liquid equity index future in the world - mostly fueled by Korean retail traders [0]. Eventually, then, as now, the government had to step in to prevent things from getting too out of hand. [0] - https://www.ft.com/content/231fa13a-e4f4-11de-817b-00144feab49a https://www.ft.com/content/231fa13a-e4f4-11de-817b-00144feab....

milansuk 9y ago

You don't need ICO. Bitcoin started from scratch and it's still #1! Crypto currency is software which is very cheap to make and distribute(compare to hardware). Also the most of internet startups get seed money under $200K, so I don't understand why are ICO's designed for $1M and more?

homero 9y ago
Because they're a scam, most will disappear with the funds they raised
- CryptoPunk 9y ago
  There's really no evidence at all to support your claim. I wouldn't throw the word 'scam' around so lightly. You're essentially libeling anyone who has organized a token sale. I can only think of one group that has disappeared after raising millions. You can caution people about tokens being overvalued without making baseless accusations of outright fraud.
  - homero 9y ago
    I'll see you in a year
    - CryptoPunk 9y ago
      I very much look forward to us revisiting this in a year.
jiggunjer 9y ago
Bitcoin had an ICO...
- kwikiel 9y ago
  Ethereum had an ICO, first bitcoins were aquired in mining, there was no ICO/premine

deleted 9y ago

[deleted]

seanalltogether 9y ago

Off topic, does everyone who used to have an MT Gox account get spammed with ICO crap almost daily? Losing money on their exchange was bad enough, but now getting spammed constantly is salt in the wound.

LeoPanthera 9y ago
Never used mtgox, still get ico spam daily. It's useful, though. Anything I receive any notable amount of spam advertising is very likely to be some kind of scam.

nadam 9y ago

The amount of misinformation in this topic is frightening. Guys, most of the serious cryptotokens are about making some markets more efficient, eliminating lots of middlemen. I have no time to go into details, but some coins I am currently invested in: iExec BAT DASH Factom These (and some others) are serious projects with huge potentials. I am not only speaking about huge investment potentials. I am speaking about potentials to add value to society, make markets more efficient. 99% of the tokens out there are crap, but why is it important? 99% of startups are also crap, but nobody cares. I am also very sad that most people here are against making the investment landscape more meritocrtic than it is currently with all the privileged VCs, angles and lawyers born into lucky countires.

wils1245 9y ago
There's also lots of hype from people reassuring everyone that the coins they just happen to have invested in are rock solid, with nothing to back their arguments up.
- nadam 9y ago
  In my opinion none of the coins I mentioned is rock solid, but I have researched lots of coins, and currently these are the ones which I find most valuable compared to market cap. 3 years ago I made a very good bet with Ripple (almost exclusively invested in Ripple for 3 years, and achieved more than 30x returns), now we will see.
s73ver_ 9y ago
"Guys, most of the serious cryptotokens are about making some markets more efficient" I'm willing to bet those are probably a tiny fraction of the cryptotokens out there. "I am also very sad that most people here are against making the investment landscape more meritocrtic than it is currently with all the privileged VCs, angles and lawyers born into lucky countires." That's not the case at all, and to try and phrase it like that is quite dishonest.
- CryptoPunk 9y ago

mhluongo 9y ago

Banned raising money through ICOs for securities. It looks like they're taking a more even-handed approach than the article maintains. The r/ethereum post has link to translated announcements, etc [0]. [0] - https://www.reddit.com/r/ethereum/comments/734qv4/south_korea_banning_icos/ https://www.reddit.com/r/ethereum/comments/734qv4/south_kore...

aptituder 9y ago

It seems like every time we get some good upward movement, some sort of stupid fud hits again.

WWKong 9y ago
FUD? You want the general population to gamble away their life savings in what effectively are some shiny slides? Completely unregulated? Would you like to invest in this bridge I have here for you? Hey, you want to get in now before everyone wants in and the prices go 10x.

amalgan 9y ago

This shouldn't come as a surprise. Early this month SK announced they would be banning them.

EternalData 9y ago

I wonder whether Trump's SEC will consider doing the same -- so far, they've been very lax in terms of enforcement (for better or for worse).

I_am_someone 9y ago

I have a feeling this is going to start happening more and more. The golden age of the ICO's was over a few months ago before everyone and their dog started one.

throw2016 9y ago

Crypto has unleashed an epidemic of greed. Only people with a feeble understanding of the world, economics and finance will seriously engage with the idea one can make money out of thin air, wasting electricity. The only way crypto gains value in the world we live in is if established interests decide to support it, at which it point it perpetuates entrenched interests and is subsumed into the whole. So bitcoin is not going to disrupt anything. And all the 'revolutionaries' and 'liberatarians' who spend hours sitting idly in front of their PCs mining and then let loose periodic outbursts on 'freedom' and 'innovation', will happily cash out to the devil himself quietly burying their incredible claims.

julian_1 9y ago
> Only people with a feeble understanding of the world, economics and finance will seriously engage with the idea one can make money out of thin air, You don't need an econ degree, to understand fiat money multipliers but it helps, https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wiki/Money_multiplier > wasting electricity Is it fair to cite this as a blanket criticism, given the number of projects seriously looking at non POW consensus?