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Honestly, i'm kind of annoyed by everyone offering an ICO for [insert irrelevant product here]. It's creating a misleading advertising scheme built on top of a

Honestly, i'm kind of annoyed by everyone offering an ICO for [insert irrelevant product here]. It's creating a misleading advertising scheme built on top of a current tech _craze_ that will likely leave a lot of "investors" out of money. The problem is that you're giving money to a relatively unknown company while speculating that the company will create inherent value. Unlike with stocks, you don't have ownership in the company or any voting rights. There is nothing stopping the company's creators from distributing the ICO money to themselves (there might be a board, but since the company isn't public who knows who the board is). In this case the SEC is right to step in so there aren't a ton of unregulated securities going around and a lot of consumers potentially getting screwed. Even with cryptocurrencies like Bitcoin, it can be scary. You're literally getting into the ForEx market, which is known to be one of the riskiest markets in existence. With other currencies, at least they're backed by a government that (at least at least attempts) to regulate it's value and protect it from manipulation. With bitcoin, I saw that 40% of all coins in existence are owned by less that 1,000 people. How do we know that the current price inflations aren't a manipulation (or collusion) to jack up the price, sell for USD, then crash the market? It's not illegal/collusion because Bitcoin isn't regulated. This is definitely a rant, but I have some serious concerns as to where this market is going. Would love to hear other's thoughts.

Hermel 9y ago
ICOs are in a hype. But there is real value. First, they can be used to bypass a lot of (but not all) regulation. This is good, because the financial sector is overly regulated (and wrongly regulated). Second, there are applications that are not possible in the traditional financial system. For example, the smart contracts behind the Bancor system (another overvalued ICO) provide automated market-making on the blockchain. These smart contracts have a capital buffer no one can touch and that is used for completely transparent market making, thereby ensuring that you can always buy or sell shares. I won't go into detail, but it basically solves the liquidity problem for penny stocks. In the medium run, I see ICOs as a light-weight alternative to IPOs, but not as a seed-funding instrument. This is non-sense.
- workthrowaway27 9y ago
  The SEC isn't going to let them be used to bypass regulation.
- Sangermaine 9y ago
  >First, they can be used to bypass a lot of (but not all) regulation. It's entertaining that many seem to believe this for no apparent reason, but the SEC (and other regulators around the world) doesn't seem to agree.
  - dmihal 9y ago
    They allow you to avoid regulation if you avoid countries that regulate them like the US. A number of ICOs these days seem to forbid US investors.
    - Sangermaine 9y ago
      The US isn't the only jurisdiction cracking down on ICOs: European Financial Regulator Warns Investors On ICO Risks https://www.coindesk.com/european-financial-regulator-warns-investors-ico-risks/ https://www.coindesk.com/european-financial-regulator-warns-... Germany's Securities Regulator Warns ICOs Pose 'Numerous Risks' https://www.coindesk.com/germanys-securities-regulator-warns-icos-pose-numerous-risks/ https://www.coindesk.com/germanys-securities-regulator-warns... Japanese Financial Watchdog Issues Warning over ICO Risks https://www.coindesk.com/japanese-financial-watchdog-issues-warning-over-ico-risks/ https://www.coindesk.com/japanese-financial-watchdog-issues-... I can't imagine any developed nation won't end up regulating ICOs as securities. That might be a message to which it's worth paying attention.
- exelius 9y ago
  Agreed there is real value, but creating a shadow banking system that is governed by unregulated actors isn't the solution. What's to stop a sophisticated bad actor like say, North Korea from manipulating cryptocoin markets in order to scam a bunch of Americans out of US Dollars? I know there is some belief that they're behind the recent Bitcoin rally...
Obi_Juan_Kenobi 9y ago
You mean an ICO that operates in an extremely competitive market, has no product to speak of, and doesn't leverage decentralized networks in any way, shape, or form isn't a good investment? Who would have thought?! > that 40% of all coins in existence are owned by less that 1,000 people That was a terrible piece of reporting. The reality is that 1000 addresses hold about 40% of coins. Addresses are not identities; one person can have as many addresses as they want, and businesses (like exchanges) may have a single address that holds the vast majority of their cold storage. The upshot is that we don't know how well Bitcoin is distributed. Some of those large addresses are exchanges, and are indicated as such on many sites, or held by institutions. They hold large amounts of coin, yet represent the holdings of thousands of individuals. There are also several large addresses that are very similar (i.e. each containing a given number of coinbase rewards) and are very likely to be held by a single early miner. There are also some number of "Satoshi" coins held by the creator of Bitcoin. Some estimate that Satoshi mined ~1million coins, though there is nothing definitive about this figure. There are probably at least 100,000. Bitcoin market 'manipulation' falls into two categories: 'legitimate' manipulation that requires buying and selling coins in a bid to move market sentiment in their favor, and 'illegitimate' manipulation that requires inside knowledge of an exchange, such as full view of orderbooks for stop hunting, etc. The first kind exposes the manipulator to significant risk (especially from other 'whales', and is far less lucrative than many would believe. For a net gain, they must move the price in the opposite direction from their net buys/sells. The 'illegitimate' manipulator can only affect particular exchanges (insider trading, or else hacking), and thus you can choose an exchange you trust the most.
- zachruss92 9y ago
  Makes sense about 1000 addresses not 1000 people. I didn't consider that. The cold storage aspect is interesting. What happens if the drive is corrupted? Can this type of content be raid(ed)/duplicated?
  - ifdefdebug 9y ago
    drive is irrelevant, as long as you have the private key on a piece of paper you can reconstruct your wallet anywhere
rficcaglia 9y ago
How is this dissimilar from raising VC money? > The problem is that you're giving money to a relatively unknown company while speculating that the company will create inherent value. That's what seed round VCs or angels do. Sure, they tend to invest only in peeps they know personally or through their network to try and control for too much failure. But the same could be done for ICOs...only invest in those that have teams you know well, or can meet, or who will take your call and answer your questions. >Unlike with stocks, you don't have ownership in the company or any voting rights. Same thing happens in VC rounds as later round investors dictate terms and dilution to early round investors. > There is nothing stopping the company's creators from distributing the ... money to themselves Same thing with VC money...one can hire friends, acquire companies one might have stock in already, buy a swanky office, go on lavish company parties, etc. > there might be a board, but since the company isn't public who knows who the board is Verbatim for VC-backed private companies. The "who knows" depends on the due diligence of the investor. Sure, most professional VCs will define who the board is ie. require board seats. But those boards can and do change in later rounds. It's up to the ICO investor to do due diligence. There's no law for ICOs that I cannot email or call the founders and ask about their board. If they refuse to answer, that would be a huge red flag. All that said, I completely agree: > the SEC is right to step in so there aren't a ton of unregulated securities going around and a lot of consumers potentially getting screwed. Most retail investors cannot possibly spend the time and effort and money to do proper due diligence regardless of whether it is an ICO, IPO, OTC stock, etc. Most mom-and-pop investors should just buy ETFs with zero fees. Schwab has some great examples! For professional investors...I think ICOs are a fantastic tool that adds competition to the marketplace...and should scare the hell out of VCs and PE since the days of 2 and 20 without question seem fleeting. EDIT: formatting
- zachruss92 9y ago
  The difference is huge, VC can only be provided from accredited investors.
  - bobwernstein 9y ago
    Capitalism. Just worry about yourself. No ico is forcing anyone to invest. Just like Kickstarter doesn't. Or Casino's. Or the stock market. Or equity crowndfunding.
wyager 9y ago
> will likely leave a lot of "investors" out of money. Do you think this is a bad thing? I’m on the fence. If someone’s dumb enough to buy into these obviously stupid ICOs, chances are that the person getting the money will spend it better than the buyer would have.
- benmarten 9y ago
  I've created a simple tool to address this issue: https://github.com/benmarten/CryptoETF https://github.com/benmarten/CryptoETF
cel1ne 9y ago
I'm flabbergasted about the carelessness of these companies. The world basically figured out that everyone can have their own currency, so now every little company starts to print their own money? Why are people buying monopoly/play-money for dollars? Because CPU-time was wasted to make it unforgeable? What use does unforgeable money have, if it's not irreplaceable? Why are buyers not concerned that their freshly purchased ToyCoins are rendered useless in the blink of an eye by the issuance of ToyCoin-2, perhaps by the same company?
- geezerjay 9y ago
  > The world basically figured out that everyone can have their own currency, so now every little company starts to print their own money? The so called "cryptocurrencies" aren't currencies at all. They are simply goods which exist for the sole purpose of being traded around in speculative markets. They are no more money than beans or trading cards. These companies know that and invest in the creation and promotion of a new set of trading cards to pump the value to dump them afterwards.
  - joncrocks 9y ago
    It might be useful to explain the difference between 'non-currencies' and 'currencies'. Regular currencies are also imagined-up things which have only a few practical differences. The one difference is usually various government contracts/taxes are only payable with specific currencies and therefore have value because they are 'needed' to pay obligations.
    - geezerjay 9y ago
      > Regular currencies are also imagined-up things which have only a few practical differences. That's not true. A currency is designed to serve as a medium of exchange, a unit of account, and and a store of value. These so called "cryptocurrencies" fail to meet the basic requirements of any currency as they are designed specifically to inflate their value in speculative markets while serving absolutely no purpose of being either a unit of account or even a medium of exchange. In fact, beans are far better currencies as these so called "cryptocurrencies" as their value are far more stable and are free from speculative drives such as the one discussed in this thread. Additionally, real currencies have inherent value by being adopted as the official and exclusive medium to pay taxes to governments.

Hermel 9y ago

ICOs are in a hype. But there is real value. First, they can be used to bypass a lot of (but not all) regulation. This is good, because the financial sector is overly regulated (and wrongly regulated). Second, there are applications that are not possible in the traditional financial system. For example, the smart contracts behind the Bancor system (another overvalued ICO) provide automated market-making on the blockchain. These smart contracts have a capital buffer no one can touch and that is used for completely transparent market making, thereby ensuring that you can always buy or sell shares. I won't go into detail, but it basically solves the liquidity problem for penny stocks. In the medium run, I see ICOs as a light-weight alternative to IPOs, but not as a seed-funding instrument. This is non-sense.

workthrowaway27 9y ago
The SEC isn't going to let them be used to bypass regulation.
Sangermaine 9y ago
>First, they can be used to bypass a lot of (but not all) regulation. It's entertaining that many seem to believe this for no apparent reason, but the SEC (and other regulators around the world) doesn't seem to agree.
- dmihal 9y ago
  They allow you to avoid regulation if you avoid countries that regulate them like the US. A number of ICOs these days seem to forbid US investors.
  - Sangermaine 9y ago
    The US isn't the only jurisdiction cracking down on ICOs: European Financial Regulator Warns Investors On ICO Risks https://www.coindesk.com/european-financial-regulator-warns-investors-ico-risks/ https://www.coindesk.com/european-financial-regulator-warns-... Germany's Securities Regulator Warns ICOs Pose 'Numerous Risks' https://www.coindesk.com/germanys-securities-regulator-warns-icos-pose-numerous-risks/ https://www.coindesk.com/germanys-securities-regulator-warns... Japanese Financial Watchdog Issues Warning over ICO Risks https://www.coindesk.com/japanese-financial-watchdog-issues-warning-over-ico-risks/ https://www.coindesk.com/japanese-financial-watchdog-issues-... I can't imagine any developed nation won't end up regulating ICOs as securities. That might be a message to which it's worth paying attention.
exelius 9y ago
Agreed there is real value, but creating a shadow banking system that is governed by unregulated actors isn't the solution. What's to stop a sophisticated bad actor like say, North Korea from manipulating cryptocoin markets in order to scam a bunch of Americans out of US Dollars? I know there is some belief that they're behind the recent Bitcoin rally...

Obi_Juan_Kenobi 9y ago

You mean an ICO that operates in an extremely competitive market, has no product to speak of, and doesn't leverage decentralized networks in any way, shape, or form isn't a good investment? Who would have thought?! > that 40% of all coins in existence are owned by less that 1,000 people That was a terrible piece of reporting. The reality is that 1000 addresses hold about 40% of coins. Addresses are not identities; one person can have as many addresses as they want, and businesses (like exchanges) may have a single address that holds the vast majority of their cold storage. The upshot is that we don't know how well Bitcoin is distributed. Some of those large addresses are exchanges, and are indicated as such on many sites, or held by institutions. They hold large amounts of coin, yet represent the holdings of thousands of individuals. There are also several large addresses that are very similar (i.e. each containing a given number of coinbase rewards) and are very likely to be held by a single early miner. There are also some number of "Satoshi" coins held by the creator of Bitcoin. Some estimate that Satoshi mined ~1million coins, though there is nothing definitive about this figure. There are probably at least 100,000. Bitcoin market 'manipulation' falls into two categories: 'legitimate' manipulation that requires buying and selling coins in a bid to move market sentiment in their favor, and 'illegitimate' manipulation that requires inside knowledge of an exchange, such as full view of orderbooks for stop hunting, etc. The first kind exposes the manipulator to significant risk (especially from other 'whales', and is far less lucrative than many would believe. For a net gain, they must move the price in the opposite direction from their net buys/sells. The 'illegitimate' manipulator can only affect particular exchanges (insider trading, or else hacking), and thus you can choose an exchange you trust the most.

zachruss92 9y ago
Makes sense about 1000 addresses not 1000 people. I didn't consider that. The cold storage aspect is interesting. What happens if the drive is corrupted? Can this type of content be raid(ed)/duplicated?
- ifdefdebug 9y ago
  drive is irrelevant, as long as you have the private key on a piece of paper you can reconstruct your wallet anywhere

rficcaglia 9y ago

How is this dissimilar from raising VC money? > The problem is that you're giving money to a relatively unknown company while speculating that the company will create inherent value. That's what seed round VCs or angels do. Sure, they tend to invest only in peeps they know personally or through their network to try and control for too much failure. But the same could be done for ICOs...only invest in those that have teams you know well, or can meet, or who will take your call and answer your questions. >Unlike with stocks, you don't have ownership in the company or any voting rights. Same thing happens in VC rounds as later round investors dictate terms and dilution to early round investors. > There is nothing stopping the company's creators from distributing the ... money to themselves Same thing with VC money...one can hire friends, acquire companies one might have stock in already, buy a swanky office, go on lavish company parties, etc. > there might be a board, but since the company isn't public who knows who the board is Verbatim for VC-backed private companies. The "who knows" depends on the due diligence of the investor. Sure, most professional VCs will define who the board is ie. require board seats. But those boards can and do change in later rounds. It's up to the ICO investor to do due diligence. There's no law for ICOs that I cannot email or call the founders and ask about their board. If they refuse to answer, that would be a huge red flag. All that said, I completely agree: > the SEC is right to step in so there aren't a ton of unregulated securities going around and a lot of consumers potentially getting screwed. Most retail investors cannot possibly spend the time and effort and money to do proper due diligence regardless of whether it is an ICO, IPO, OTC stock, etc. Most mom-and-pop investors should just buy ETFs with zero fees. Schwab has some great examples! For professional investors...I think ICOs are a fantastic tool that adds competition to the marketplace...and should scare the hell out of VCs and PE since the days of 2 and 20 without question seem fleeting. EDIT: formatting

zachruss92 9y ago
The difference is huge, VC can only be provided from accredited investors.
- bobwernstein 9y ago
  Capitalism. Just worry about yourself. No ico is forcing anyone to invest. Just like Kickstarter doesn't. Or Casino's. Or the stock market. Or equity crowndfunding.

wyager 9y ago

> will likely leave a lot of "investors" out of money. Do you think this is a bad thing? I’m on the fence. If someone’s dumb enough to buy into these obviously stupid ICOs, chances are that the person getting the money will spend it better than the buyer would have.

benmarten 9y ago
I've created a simple tool to address this issue: https://github.com/benmarten/CryptoETF https://github.com/benmarten/CryptoETF

cel1ne 9y ago

I'm flabbergasted about the carelessness of these companies. The world basically figured out that everyone can have their own currency, so now every little company starts to print their own money? Why are people buying monopoly/play-money for dollars? Because CPU-time was wasted to make it unforgeable? What use does unforgeable money have, if it's not irreplaceable? Why are buyers not concerned that their freshly purchased ToyCoins are rendered useless in the blink of an eye by the issuance of ToyCoin-2, perhaps by the same company?

geezerjay 9y ago
> The world basically figured out that everyone can have their own currency, so now every little company starts to print their own money? The so called "cryptocurrencies" aren't currencies at all. They are simply goods which exist for the sole purpose of being traded around in speculative markets. They are no more money than beans or trading cards. These companies know that and invest in the creation and promotion of a new set of trading cards to pump the value to dump them afterwards.
- joncrocks 9y ago
  It might be useful to explain the difference between 'non-currencies' and 'currencies'. Regular currencies are also imagined-up things which have only a few practical differences. The one difference is usually various government contracts/taxes are only payable with specific currencies and therefore have value because they are 'needed' to pay obligations.
  - geezerjay 9y ago
    > Regular currencies are also imagined-up things which have only a few practical differences. That's not true. A currency is designed to serve as a medium of exchange, a unit of account, and and a store of value. These so called "cryptocurrencies" fail to meet the basic requirements of any currency as they are designed specifically to inflate their value in speculative markets while serving absolutely no purpose of being either a unit of account or even a medium of exchange. In fact, beans are far better currencies as these so called "cryptocurrencies" as their value are far more stable and are free from speculative drives such as the one discussed in this thread. Additionally, real currencies have inherent value by being adopted as the official and exclusive medium to pay taxes to governments.