3 ms·

I'm the author, if anyone wants to discuss!

by zherbert 9y ago

a_d 9y ago
How does one execute an ICO that is compliant? Can you please point to specific details or methodology?
- zherbert 9y ago
  While I cannot give legal advice, generally the only acceptable path is for a Reg-D filing with the SEC. This means that your token is considered a security, but the filing is technically an "exemption" filing. So far I believe the only other projects that have pursued Reg-D filings did so under the SAFT framework, which is currently under scrutiny by the SEC. We may be the first project to raise money for a token that itself is a transferrable security, and pursue filing under Reg-D. honestly it's a bit of a mess right now
  - EGreg 9y ago
    Be careful regarding its transferability. Under rule 144 you can have your original investors trade it after a lock-up period. But even with that, Reg D securities are not transferred very easily. I had to learn all this when raising money for Qbix the last 7 years. You MAY be able to have some sort of derivatives which are traded, like taxi medallion leases, and maybe they won't be considered securities since there is no expectation of profit (but then why do people buy them?) IANAL
    - zherbert 9y ago
      Under current rules, after 1-yr lockup period investors are able to sell to other accredited investors. Hopefully by then we'll have some new, regulated exchanges that can automate the process.
      - wmf 9y ago
        Hopefully the investors realized that their lockup may extend longer than they thought.
        Taek 9y ago
        I am not a lawyer, but my understanding is that accredited investors do not need an exchange or a regulated entity to sell their tokens to other accredited investors. They have some compliance burden, but can, under the right circumstances, comply with that burden absent a regulated exchange or broker dealer. I am not a lawyer, and the above paragraph may be incorrect.
- EGreg 9y ago
  Register with the SEC. Edit: Why did this get downvoted? That is the right answer to the question!
  - zherbert 9y ago
    Even so, that's what SAFTs tried to do, but it looks like the SEC may be concerned about their structure.
  - wmf 9y ago
    That's an insufficient answer considering how many different flavors of registrations the SEC has; e.g. Reg A+ vs. Reg D.
  - AlexCoventry 9y ago
    It's extremely simplistic. In some circumstances, the coin offered in an ICO might not be a security, for instance, and then it doesn't come under the SEC's jurisdiction.
    - EGreg 9y ago
      They have said that pretty much every coin offered in an ICO does qualify as a security.
      - AlexCoventry 9y ago
        Every coin the chair has looked at.
- stale2002 9y ago
  The TLDR is that you just make sure that you are only selling your unreleased token to qualified investors. A qualified investor is someone who has a million dollars in assets or something like that.
an4rchy 9y ago
Disclaimer: Not too familiar with ICOs, and this might be ignorance on my part but genuinely interested in learning. My understanding was that ICOs were basically a way to invest in companies/ideas smiliar to startups, and therefore reap the benefits if the project succeeds, ie upside. Were the Siafunds given to investors as a way to reward them for investing in the company and therefore accruing in value as it grows and succeeds? If so, is that a way to back out valuations for the company/product? (If that is the case, is it true that as more people use siacoins more revenue generated -> more profits -> value of Siafunds goes up)
- zherbert 9y ago
  I think the better way to think about it is that you are investing in the network itself (at least in Sia's case). Siafunds could be valued with an NPV of the future revenue generated by users buying storage on the Sia network. It's much harder to figure out how to value utility tokens. Here's an interesting starting point: https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7 https://medium.com/@cburniske/cryptoasset-valuations-ac83479...
EGreg 9y ago
This is also what we did when designing Intercoin (intercoin.org) In my opinion, it has just the right structure. The more communities install Intercoin's open source platform, the more ITC tokens would be worth. Thus our interest is to build the best open source software we can and literally give it away to as many organizations (colleges, cities etc.) that we can. We can even have Intercoin power other startups' business models, who would otherwise be competing with us - like Colu or Moocho. A community might use ITC tokens to back their economy in all sorts of ways: Micropayments Raising money for an actual project by selling 100% of the tokens And most of all - an internal currency and democratically controlling the monetary policy (to implement eg Unconditional Basic Income or loans). In short - you need one main token network as a store of value, and sidechains for actual spending. One coin can't be both.
marknadal 9y ago
author of a decentralized cryptographic system myself (we're ranked #2 in Blockchain on GitHub: https://github.com/topics/blockchain https://github.com/topics/blockchain), and I have some concerns: How do you prevent siacoin storage owners from forking the chain to reject the siafund storage fee? They have an incentive to do so, and technologically nothing stops them.
- nemo1618 9y ago
  The fee improves the health of the network, because it incentivizes siafund holders to do whatever they can to increase the amount of data being stored. So Nebulous Inc. (developer of Sia and the largest holder of siafunds) wants to make Sia scalable and easy to use; other siafund holders might develop third-party apps or simply buy ads for Sia. Disclosure: I co-founded Nebulous.
DennisP 9y ago
Interesting article. I'm not convinced transactions are so bad for utility token value. Token price is the token GDP (total value of goods exchanged for it) divided by velocity. If you double the number of payment transactions, you double the velocity but also the GDP, for a net zero effect on price. But it's certainly true that a fee-earning token gives a stronger incentive to developers. Sia is its own network, right? Would it be fair to say that on a project implemented on top of a blockchain like Ethereum, you would dispense with the utility token and just use ETH, and apportion the fees to the "fund" holders? I've seen a fair number of projects do this. Then people started thinking it'd be less likely to pass muster with the SEC, compared to a utility token. (But now it seems you can't avoid the SEC in any case.)
aesthethiccs 9y ago
Do you think with the first TSO's starting to come out, will we ever see attempts to remove the flaws of a TSO (accredited investors) vs crowd funding positive, at-least at some sort of happy medium, were more people can have access to vc level returns but also can understand the risk? should there be a licence process for the average person to become an accredited early stage investor. also how do you feel about the path to TSO if you wish not to ICO, build your MVP blockchain project, grow your project attempt to become profitable/ acquire further investors then go for the TSO ? thanks for the great article though !
XR0CSWV3h3kZWg 9y ago
I love what sia is doing, however I was never clear why sia wouldn't have made siacoins inflate proportional to MB*seconds available? It seems like producing some public dataset (the blockchain so far for instance) and some proof of work that is reasonable to do once and store, but unreasonable to produce for each proof of storage, make the proof of work tied to a private key and then give each user the ability to mint new coins at some discount rate for storing the blockchain. There are a couple constants there (the cost of the proof of work, the discount rate for storing the public info as opposed to a file contract) that need to be set correctly, but for some values the cost of the token should be pushed down to the cost of storing a certain amount of data for a given time. This would give a coin that is pegged to roughly what you want the contracts denominated in and would encourage network utilization. Are the constants too hard to choose (you'd probably need to modify the proof of work and discount rate)? What are y'alls thoughts? EDIT: sorry this is not the best description, I can try and find some of my older better write ups of the idea if it's not clear what I am trying to say.

I'm the author, if anyone wants to discuss!

a_d 9y ago

How does one execute an ICO that is compliant? Can you please point to specific details or methodology?

zherbert 9y ago
While I cannot give legal advice, generally the only acceptable path is for a Reg-D filing with the SEC. This means that your token is considered a security, but the filing is technically an "exemption" filing. So far I believe the only other projects that have pursued Reg-D filings did so under the SAFT framework, which is currently under scrutiny by the SEC. We may be the first project to raise money for a token that itself is a transferrable security, and pursue filing under Reg-D. honestly it's a bit of a mess right now
- EGreg 9y ago
  Be careful regarding its transferability. Under rule 144 you can have your original investors trade it after a lock-up period. But even with that, Reg D securities are not transferred very easily. I had to learn all this when raising money for Qbix the last 7 years. You MAY be able to have some sort of derivatives which are traded, like taxi medallion leases, and maybe they won't be considered securities since there is no expectation of profit (but then why do people buy them?) IANAL
  - zherbert 9y ago
    Under current rules, after 1-yr lockup period investors are able to sell to other accredited investors. Hopefully by then we'll have some new, regulated exchanges that can automate the process.
    - wmf 9y ago
      Hopefully the investors realized that their lockup may extend longer than they thought.
      - Taek 9y ago
        I am not a lawyer, but my understanding is that accredited investors do not need an exchange or a regulated entity to sell their tokens to other accredited investors. They have some compliance burden, but can, under the right circumstances, comply with that burden absent a regulated exchange or broker dealer. I am not a lawyer, and the above paragraph may be incorrect.
EGreg 9y ago
Register with the SEC. Edit: Why did this get downvoted? That is the right answer to the question!
- zherbert 9y ago
  Even so, that's what SAFTs tried to do, but it looks like the SEC may be concerned about their structure.
- wmf 9y ago
  That's an insufficient answer considering how many different flavors of registrations the SEC has; e.g. Reg A+ vs. Reg D.
- AlexCoventry 9y ago
  It's extremely simplistic. In some circumstances, the coin offered in an ICO might not be a security, for instance, and then it doesn't come under the SEC's jurisdiction.
  - EGreg 9y ago
    They have said that pretty much every coin offered in an ICO does qualify as a security.
    - AlexCoventry 9y ago
      Every coin the chair has looked at.
stale2002 9y ago
The TLDR is that you just make sure that you are only selling your unreleased token to qualified investors. A qualified investor is someone who has a million dollars in assets or something like that.

an4rchy 9y ago

Disclaimer: Not too familiar with ICOs, and this might be ignorance on my part but genuinely interested in learning. My understanding was that ICOs were basically a way to invest in companies/ideas smiliar to startups, and therefore reap the benefits if the project succeeds, ie upside. Were the Siafunds given to investors as a way to reward them for investing in the company and therefore accruing in value as it grows and succeeds? If so, is that a way to back out valuations for the company/product? (If that is the case, is it true that as more people use siacoins more revenue generated -> more profits -> value of Siafunds goes up)

zherbert 9y ago
I think the better way to think about it is that you are investing in the network itself (at least in Sia's case). Siafunds could be valued with an NPV of the future revenue generated by users buying storage on the Sia network. It's much harder to figure out how to value utility tokens. Here's an interesting starting point: https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7 https://medium.com/@cburniske/cryptoasset-valuations-ac83479...

EGreg 9y ago

This is also what we did when designing Intercoin (intercoin.org) In my opinion, it has just the right structure. The more communities install Intercoin's open source platform, the more ITC tokens would be worth. Thus our interest is to build the best open source software we can and literally give it away to as many organizations (colleges, cities etc.) that we can. We can even have Intercoin power other startups' business models, who would otherwise be competing with us - like Colu or Moocho. A community might use ITC tokens to back their economy in all sorts of ways: Micropayments Raising money for an actual project by selling 100% of the tokens And most of all - an internal currency and democratically controlling the monetary policy (to implement eg Unconditional Basic Income or loans). In short - you need one main token network as a store of value, and sidechains for actual spending. One coin can't be both.

marknadal 9y ago

author of a decentralized cryptographic system myself (we're ranked #2 in Blockchain on GitHub: https://github.com/topics/blockchain https://github.com/topics/blockchain), and I have some concerns: How do you prevent siacoin storage owners from forking the chain to reject the siafund storage fee? They have an incentive to do so, and technologically nothing stops them.

nemo1618 9y ago
The fee improves the health of the network, because it incentivizes siafund holders to do whatever they can to increase the amount of data being stored. So Nebulous Inc. (developer of Sia and the largest holder of siafunds) wants to make Sia scalable and easy to use; other siafund holders might develop third-party apps or simply buy ads for Sia. Disclosure: I co-founded Nebulous.

DennisP 9y ago

Interesting article. I'm not convinced transactions are so bad for utility token value. Token price is the token GDP (total value of goods exchanged for it) divided by velocity. If you double the number of payment transactions, you double the velocity but also the GDP, for a net zero effect on price. But it's certainly true that a fee-earning token gives a stronger incentive to developers. Sia is its own network, right? Would it be fair to say that on a project implemented on top of a blockchain like Ethereum, you would dispense with the utility token and just use ETH, and apportion the fees to the "fund" holders? I've seen a fair number of projects do this. Then people started thinking it'd be less likely to pass muster with the SEC, compared to a utility token. (But now it seems you can't avoid the SEC in any case.)

aesthethiccs 9y ago

Do you think with the first TSO's starting to come out, will we ever see attempts to remove the flaws of a TSO (accredited investors) vs crowd funding positive, at-least at some sort of happy medium, were more people can have access to vc level returns but also can understand the risk? should there be a licence process for the average person to become an accredited early stage investor. also how do you feel about the path to TSO if you wish not to ICO, build your MVP blockchain project, grow your project attempt to become profitable/ acquire further investors then go for the TSO ? thanks for the great article though !

XR0CSWV3h3kZWg 9y ago

I love what sia is doing, however I was never clear why sia wouldn't have made siacoins inflate proportional to MB*seconds available? It seems like producing some public dataset (the blockchain so far for instance) and some proof of work that is reasonable to do once and store, but unreasonable to produce for each proof of storage, make the proof of work tied to a private key and then give each user the ability to mint new coins at some discount rate for storing the blockchain. There are a couple constants there (the cost of the proof of work, the discount rate for storing the public info as opposed to a file contract) that need to be set correctly, but for some values the cost of the token should be pushed down to the cost of storing a certain amount of data for a given time. This would give a coin that is pegged to roughly what you want the contracts denominated in and would encourage network utilization. Are the constants too hard to choose (you'd probably need to modify the proof of work and discount rate)? What are y'alls thoughts? EDIT: sorry this is not the best description, I can try and find some of my older better write ups of the idea if it's not clear what I am trying to say.