8 ms·

In the World of Cryptocurrency, Even Good Projects Can Go Bad

84 points by petethomas 8y ago

adwhit 8y ago
Envion said it would use the money collected from investors to build mobile rigs, filled with computers designed to “mine” or digitally create new Bitcoin. The rigs could be moved between sources of renewable electricity, which would power the mining computers Good project?? Sounds absolutely pie-in-the-sky. Another ridiculous idea that raised an insane amount of money from extremely naive investors. In other words, just another ICO.
- Maybestring 8y ago
  It would be a great idea, had only cryptocurrency been invented before powerlines.
  - EnFinlay 8y ago
    Powerlines are far from lossless, so there is still an advantage to being close to the power source. https://en.wikipedia.org/wiki/Electric_power_transmission#Losses https://en.wikipedia.org/wiki/Electric_power_transmission#Lo...
    - Maybestring 8y ago
      Hauling trailers around isn't lossless either.
- tgtweak 8y ago
  It was extremely naive, they had a budget of $1000 for delivery and connection. The first container shots were empty, and the dashboard showing earnings was mock data. Anywhere these are outside in the winter they will ingest snow with those fans. Lots of red flags everywhere and yet still extremely successful.
tlb 8y ago
I missed the part where this was ever a good project. Cryptocurrency mining has to use the cheapest available power, or else it loses money because the mining rewards float at just above the cost of the world's cheapest power. Because many companies prefer renewable power (such as data center operators who want to claim they are carbon-neutral) and there's a limited supply, renewable power will always be at a premium over the cheapest power. A big problem with successful ICOs is that the companies immediately have too many shareholders to let them pivot. The idea could probably be morphed into something that works, but not with 100s of retail shareholders demanding progress on the idea they originally backed.
- Havoc 8y ago
  If you need to pivot an ICO then it's already game over I reckon.
  - lawnchair_larry 8y ago
    This can be shortened to "If you ICO then it's already game over" ICO anything is a really strong signal that nothing good can come of whatever you are reading.
- to_bpr 8y ago
  >have too many shareholders to let them pivot Token purchasers in ICOs aren't shareholders. >100s of retail shareholders demanding progress on the idea they originally backed. They have no guarantee or protections when buying into an ICO. They may try to pivot and get some disgruntled worthless-token-holders as a result, but if crypto has shown anything it's that even outright scams will maintain an unfortunately strong community of supporters.
  - tlb 8y ago
    OK, "stakeholders". Can you point to an example of a company successfully pivoting after an ICO?
    - 8y ago
deleted 8y ago
[deleted]
lordnacho 8y ago
How much of this ICO story is simply rediscovering things that old finance had already found? All this talk about being able to trust the entrepreneurs, that they were building a real business in good faith, it's not exactly a new problem. The solution, before blockchain muddied the waters, was that you'd find a reputable investment bank, which would stake its reputation on your sincerity, and they'd introduce you to people who would be willing to invest. There would be a bunch of rituals to go through, like a road show, presentations, meetings. And that's not all; there was a regulatory process they would show you how to pass as well.
- wpietri 8y ago
  Definitely. So much of cryptocurrency world seems hell-bent on rediscovering why current financial regulation exists. At one point in US history, it was relatively easy to create a bank, and the banks could issue their own private currencies: https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking This provided relatively little value and quite a lot of failure, so it was taken as a "let's never do that again" lesson. The Etherium fork after the DAO theft was in my view people rediscovering the value of having a regulator. Given the regular and massive losses due to breakins, scams, and fraud, I have to wonder if this is the most efficient way to learn these lessons.
  - jesusthatsgreat 8y ago
    > Etherium Is this a running joke or something? I've seen the misspelling of Ethereum several times now on hackernews and it's a tell-tale sign that the people talking about it haven't invested much time researching it or delving in to the space in any way. > Given the regular and massive losses due to breakins, scams, and fraud, I have to wonder if this is the most efficient way to learn these lessons. Where there is money changing hands, there are scams and fraud. The difference with crypto is that you can follow / track the money at all times. It doesn't mean you can get it back, but it does increase the chances that somewhere along the line the attacker will slip up and reveal themselves once they try to buy something or exit in to fiat currency. The bottom line is that crypto exists because the banking system is perceived as broken by many. It's slow, expensive and corrupt as far as the average person on the street is concerned.
seibelj 8y ago
The JOBS act was a push towards securitized crowdfunding but it had too many strings and never took off like many hoped. ICO's are proof that there is demand for real-time trading in private companies with micro-investment, but it also has obvious issues. My hope is securitized-ICO's develop that make it easier to raise money from a global pool of investors, and the investors also have liquidity and legal rights. We need regulation that improves the situation without destroying it.
- JumpCrisscross 8y ago
  > ICO's are proof that there is demand for real-time trading in private companies ICOs are proof all the retail investor protections I used to think were irrelevant are unbelievably important.
- wmf 8y ago
  ICOs are proof that there is demand for real-time trading in private companies with micro-investment Is it? Or is it proof that people will put up with really sketchy structures to chase potential 10x-10,000x returns? Prudent token offerings like Sia have had low demand.
- dnomad 8y ago
  There's demand but there is no supply. No serious company is going to crowdfund away actual equity. Only the very worst companies are going to go out on the street and beg randos for capital hence ICOs. The reality is that the public will never have access to high quality deals. But there is a lot of money being left on the table that is flowing into scammy ICOs and badly managed Kickstarter projects. It's really too bad the IRS has nothing on the spectrum between private foundations and highly regulated public charities. There's a case to be made for "micro-foundations" that could be crowdfunded for a common purpose and would be barred from issuing ownership shares or taking on debt. (At dissolution time all "profits" of the charity must be disbursed to another charity.) There's a real failure of imagination here at the IRS: the internet makes it ever easier people to collaborate but it's very difficult to effectively pool capital which leads to Kickstarter and ICOs both of which are very sub-optimal solutions for everybody.
- 8y ago
BurningFrog 8y ago
Hey kids, good projects can go bad in all worlds!
wmf 8y ago
The founders of the company ... set it up in Switzerland... ...problems had begun even before the project started fund-raising late last year because of the chief executive the founders brought in, Matthias Woestmann. According to Mr. Martin, the founders gave Mr. Woestmann what they thought was temporary control of their shares in the company. Mr. Woestmann later refused to give them back, and then diluted the shares of the other owners, providing him with control of the money that was raised. This is exactly the same problem Tezos had. What's the deal with people giving up control of their money?
- Lazare 8y ago
  I read the same passage and did a double take. If you give someone ownership of your company, obviously they're not obligated to give it back. It's their company now. You were dumb enough to give it away; why do you think they'd make the same mistake? Also, to the extent that this had worked, it feels like an attempt at setting up a straw transaction to hide control of the company. Why exactly did they thing they needed to "temporarily" transfer ownership of the company?
duxup 8y ago
What about this ICO made it a good product compared to others?
- orthecreedence 8y ago
  It had a whitepaper.
Rapzid 8y ago
My biggest takeaway from the past few weeks is that POW based distributed cryptocurrency is a bit like communism; it only works on paper. The reality is that, even with Bitcoin, the power to stave off attacks has consolidated to a few big players. The massively distributed protocol and massive power usage is a huge wast at this point. If your gonna need a few big players anyway, might as well build a trusted circle from the start and eliminate the rest of the waste. The coins that can actually be used for day-to-day transactions are vulnerable to attacks. The largest and most secure player, Bitcoin, has reached the point where transaction fees are too high and speeds to slow; nobody takes it anymore. Where does it go from here? I predict governments are gonna crack the whip and altcoins, along with ICOs, will be a footnote in history.
- ojr 8y ago
  EOS has DPOS (Delegated Proof of Stake) which is not wasteful like PoW, it is a trusted circle model, and transactions are free, and it is easier to distribute ICO-like tokens, I think it might go there from here
flashman 8y ago
Jessica Smith, a 21-year-old in England, said she had put $28,000 into Envion — almost all of the money she had made over the last two years of trading cryptocurrencies nearly full time. She said she was now looking for new work. Put it all on red!
granaldo 8y ago
Bad projects may perceive as good Good may perceive as bad The market dont know better
latchkey 8y ago
I've been watching this one very closely as I'm a fairly large miner. This was a scam or failure from day one. Totally over-engineered and zero experience running an actual mining operation. They put so much effort (patents!?) into those MMU shipping containers that there is no way for them to compete with all the other people who are just building a simple box and throwing miners into it. The MMU had substantial airflow design issues as well. To the point that something as simple as opening the door of the container would throw everything off balance. How about putting 90+ holes on the side for sucking dirt and bugs into the container? I could keep going on and on... The also heavily moderate their community. Anyone who speaks up with hard questions, is silenced with blocking and removal from their group. To watch it get to the point where it has is quite entertaining to the say the least. HydroMiner is a far more interesting project, run by two sisters, with actual long term experience in this industry. Nicole got ripped on the math for this article [1] which was directed at Envion, but at some level, she is pretty right. There was no way that Envion would ever pay back what they claimed they would. [1] https://medium.com/@hydrominer/why-there-is-no-161-profit-in-mining-a876ebb91443 https://medium.com/@hydrominer/why-there-is-no-161-profit-in...
JohnJamesRambo 8y ago
>a plan to bring clean energy to the computers that manage Bitcoin. This doesn’t even make sense. Not surprising this failed and I don’t feel sorry for idiots that invested in a project that makes no sense. Bad projects must fail.
latchkey 8y ago
From: https://www.investor.gov/howeycoins https://www.investor.gov/howeycoins RED FLAG: CLAIMS OF HIGH, GUARANTEED RETURNS: Not quite 'guaranteed', but seems quite inflated... https://www.envion.org/en/ico/ https://www.envion.org/en/ico/ RED FLAG: CLAIMS OF “SEC-COMPLIANT”: Yes, https://www.envion.org/en/faq/ https://www.envion.org/en/faq/ "Our token is fully compliant with regulations set by the SEC and Swiss financial regulators and outside auditors from one of the Big Four auditing firms will vet every aspect of the business, including prior to the ICO." RED FLAG: INVESTING WITH A CREDIT CARD: Yes, https://www.envion.org/en/faq/ https://www.envion.org/en/faq/ "We accept Ethereum (ETH) and Bitcoin (BTC) cryptocurrencies and credit card payments with Visa or Mastercard." RED FLAG: PUMP AND DUMP SCAMS: Yes, look at the current price.
- ksahin 8y ago
  "The world as we know it, will change" ... It seems like a Bitconnect punchline !! Seriously, how can they treat this ICO as a "good project". You are right, the landing page is full of red flags.
  - latchkey 8y ago
    People who invested with a credit card have their funds locked for up to a year! https://www.envion.org/en/news/how-to-invest-short-instruction https://www.envion.org/en/news/how-to-invest-short-instructi... "Buying EVN by credit card will result your token to end up in a locking period of 4–12 months (see envion.org/faq). This locking period is a protection for our investors needed for credit card payments."

84 points by petethomas 8y ago

Envion said it would use the money collected from investors to build mobile rigs, filled with computers designed to “mine” or digitally create new Bitcoin. The rigs could be moved between sources of renewable electricity, which would power the mining computers Good project?? Sounds absolutely pie-in-the-sky. Another ridiculous idea that raised an insane amount of money from extremely naive investors. In other words, just another ICO.

Maybestring 8y ago
It would be a great idea, had only cryptocurrency been invented before powerlines.
- EnFinlay 8y ago
  Powerlines are far from lossless, so there is still an advantage to being close to the power source. https://en.wikipedia.org/wiki/Electric_power_transmission#Losses https://en.wikipedia.org/wiki/Electric_power_transmission#Lo...
  - Maybestring 8y ago
    Hauling trailers around isn't lossless either.
tgtweak 8y ago
It was extremely naive, they had a budget of $1000 for delivery and connection. The first container shots were empty, and the dashboard showing earnings was mock data. Anywhere these are outside in the winter they will ingest snow with those fans. Lots of red flags everywhere and yet still extremely successful.

tlb 8y ago

I missed the part where this was ever a good project. Cryptocurrency mining has to use the cheapest available power, or else it loses money because the mining rewards float at just above the cost of the world's cheapest power. Because many companies prefer renewable power (such as data center operators who want to claim they are carbon-neutral) and there's a limited supply, renewable power will always be at a premium over the cheapest power. A big problem with successful ICOs is that the companies immediately have too many shareholders to let them pivot. The idea could probably be morphed into something that works, but not with 100s of retail shareholders demanding progress on the idea they originally backed.

Havoc 8y ago
If you need to pivot an ICO then it's already game over I reckon.
- lawnchair_larry 8y ago
  This can be shortened to "If you ICO then it's already game over" ICO anything is a really strong signal that nothing good can come of whatever you are reading.
to_bpr 8y ago
>have too many shareholders to let them pivot Token purchasers in ICOs aren't shareholders. >100s of retail shareholders demanding progress on the idea they originally backed. They have no guarantee or protections when buying into an ICO. They may try to pivot and get some disgruntled worthless-token-holders as a result, but if crypto has shown anything it's that even outright scams will maintain an unfortunately strong community of supporters.
- tlb 8y ago
  OK, "stakeholders". Can you point to an example of a company successfully pivoting after an ICO?
  - 8y ago

deleted 8y ago

[deleted]

lordnacho 8y ago

How much of this ICO story is simply rediscovering things that old finance had already found? All this talk about being able to trust the entrepreneurs, that they were building a real business in good faith, it's not exactly a new problem. The solution, before blockchain muddied the waters, was that you'd find a reputable investment bank, which would stake its reputation on your sincerity, and they'd introduce you to people who would be willing to invest. There would be a bunch of rituals to go through, like a road show, presentations, meetings. And that's not all; there was a regulatory process they would show you how to pass as well.

wpietri 8y ago
Definitely. So much of cryptocurrency world seems hell-bent on rediscovering why current financial regulation exists. At one point in US history, it was relatively easy to create a bank, and the banks could issue their own private currencies: https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking This provided relatively little value and quite a lot of failure, so it was taken as a "let's never do that again" lesson. The Etherium fork after the DAO theft was in my view people rediscovering the value of having a regulator. Given the regular and massive losses due to breakins, scams, and fraud, I have to wonder if this is the most efficient way to learn these lessons.
- jesusthatsgreat 8y ago
  > Etherium Is this a running joke or something? I've seen the misspelling of Ethereum several times now on hackernews and it's a tell-tale sign that the people talking about it haven't invested much time researching it or delving in to the space in any way. > Given the regular and massive losses due to breakins, scams, and fraud, I have to wonder if this is the most efficient way to learn these lessons. Where there is money changing hands, there are scams and fraud. The difference with crypto is that you can follow / track the money at all times. It doesn't mean you can get it back, but it does increase the chances that somewhere along the line the attacker will slip up and reveal themselves once they try to buy something or exit in to fiat currency. The bottom line is that crypto exists because the banking system is perceived as broken by many. It's slow, expensive and corrupt as far as the average person on the street is concerned.

seibelj 8y ago

The JOBS act was a push towards securitized crowdfunding but it had too many strings and never took off like many hoped. ICO's are proof that there is demand for real-time trading in private companies with micro-investment, but it also has obvious issues. My hope is securitized-ICO's develop that make it easier to raise money from a global pool of investors, and the investors also have liquidity and legal rights. We need regulation that improves the situation without destroying it.

JumpCrisscross 8y ago
> ICO's are proof that there is demand for real-time trading in private companies ICOs are proof all the retail investor protections I used to think were irrelevant are unbelievably important.
wmf 8y ago
ICOs are proof that there is demand for real-time trading in private companies with micro-investment Is it? Or is it proof that people will put up with really sketchy structures to chase potential 10x-10,000x returns? Prudent token offerings like Sia have had low demand.
dnomad 8y ago
There's demand but there is no supply. No serious company is going to crowdfund away actual equity. Only the very worst companies are going to go out on the street and beg randos for capital hence ICOs. The reality is that the public will never have access to high quality deals. But there is a lot of money being left on the table that is flowing into scammy ICOs and badly managed Kickstarter projects. It's really too bad the IRS has nothing on the spectrum between private foundations and highly regulated public charities. There's a case to be made for "micro-foundations" that could be crowdfunded for a common purpose and would be barred from issuing ownership shares or taking on debt. (At dissolution time all "profits" of the charity must be disbursed to another charity.) There's a real failure of imagination here at the IRS: the internet makes it ever easier people to collaborate but it's very difficult to effectively pool capital which leads to Kickstarter and ICOs both of which are very sub-optimal solutions for everybody.
8y ago

BurningFrog 8y ago

Hey kids, good projects can go bad in all worlds!

wmf 8y ago

The founders of the company ... set it up in Switzerland... ...problems had begun even before the project started fund-raising late last year because of the chief executive the founders brought in, Matthias Woestmann. According to Mr. Martin, the founders gave Mr. Woestmann what they thought was temporary control of their shares in the company. Mr. Woestmann later refused to give them back, and then diluted the shares of the other owners, providing him with control of the money that was raised. This is exactly the same problem Tezos had. What's the deal with people giving up control of their money?

Lazare 8y ago
I read the same passage and did a double take. If you give someone ownership of your company, obviously they're not obligated to give it back. It's their company now. You were dumb enough to give it away; why do you think they'd make the same mistake? Also, to the extent that this had worked, it feels like an attempt at setting up a straw transaction to hide control of the company. Why exactly did they thing they needed to "temporarily" transfer ownership of the company?

duxup 8y ago

What about this ICO made it a good product compared to others?

orthecreedence 8y ago
It had a whitepaper.

Rapzid 8y ago

My biggest takeaway from the past few weeks is that POW based distributed cryptocurrency is a bit like communism; it only works on paper. The reality is that, even with Bitcoin, the power to stave off attacks has consolidated to a few big players. The massively distributed protocol and massive power usage is a huge wast at this point. If your gonna need a few big players anyway, might as well build a trusted circle from the start and eliminate the rest of the waste. The coins that can actually be used for day-to-day transactions are vulnerable to attacks. The largest and most secure player, Bitcoin, has reached the point where transaction fees are too high and speeds to slow; nobody takes it anymore. Where does it go from here? I predict governments are gonna crack the whip and altcoins, along with ICOs, will be a footnote in history.

ojr 8y ago
EOS has DPOS (Delegated Proof of Stake) which is not wasteful like PoW, it is a trusted circle model, and transactions are free, and it is easier to distribute ICO-like tokens, I think it might go there from here

flashman 8y ago

Jessica Smith, a 21-year-old in England, said she had put $28,000 into Envion — almost all of the money she had made over the last two years of trading cryptocurrencies nearly full time. She said she was now looking for new work. Put it all on red!

granaldo 8y ago

Bad projects may perceive as good Good may perceive as bad The market dont know better

latchkey 8y ago

I've been watching this one very closely as I'm a fairly large miner. This was a scam or failure from day one. Totally over-engineered and zero experience running an actual mining operation. They put so much effort (patents!?) into those MMU shipping containers that there is no way for them to compete with all the other people who are just building a simple box and throwing miners into it. The MMU had substantial airflow design issues as well. To the point that something as simple as opening the door of the container would throw everything off balance. How about putting 90+ holes on the side for sucking dirt and bugs into the container? I could keep going on and on... The also heavily moderate their community. Anyone who speaks up with hard questions, is silenced with blocking and removal from their group. To watch it get to the point where it has is quite entertaining to the say the least. HydroMiner is a far more interesting project, run by two sisters, with actual long term experience in this industry. Nicole got ripped on the math for this article [1] which was directed at Envion, but at some level, she is pretty right. There was no way that Envion would ever pay back what they claimed they would. [1] https://medium.com/@hydrominer/why-there-is-no-161-profit-in-mining-a876ebb91443 https://medium.com/@hydrominer/why-there-is-no-161-profit-in...

JohnJamesRambo 8y ago

>a plan to bring clean energy to the computers that manage Bitcoin. This doesn’t even make sense. Not surprising this failed and I don’t feel sorry for idiots that invested in a project that makes no sense. Bad projects must fail.

latchkey 8y ago

From: https://www.investor.gov/howeycoins https://www.investor.gov/howeycoins RED FLAG: CLAIMS OF HIGH, GUARANTEED RETURNS: Not quite 'guaranteed', but seems quite inflated... https://www.envion.org/en/ico/ https://www.envion.org/en/ico/ RED FLAG: CLAIMS OF “SEC-COMPLIANT”: Yes, https://www.envion.org/en/faq/ https://www.envion.org/en/faq/ "Our token is fully compliant with regulations set by the SEC and Swiss financial regulators and outside auditors from one of the Big Four auditing firms will vet every aspect of the business, including prior to the ICO." RED FLAG: INVESTING WITH A CREDIT CARD: Yes, https://www.envion.org/en/faq/ https://www.envion.org/en/faq/ "We accept Ethereum (ETH) and Bitcoin (BTC) cryptocurrencies and credit card payments with Visa or Mastercard." RED FLAG: PUMP AND DUMP SCAMS: Yes, look at the current price.

ksahin 8y ago
"The world as we know it, will change" ... It seems like a Bitconnect punchline !! Seriously, how can they treat this ICO as a "good project". You are right, the landing page is full of red flags.
- latchkey 8y ago
  People who invested with a credit card have their funds locked for up to a year! https://www.envion.org/en/news/how-to-invest-short-instruction https://www.envion.org/en/news/how-to-invest-short-instructi... "Buying EVN by credit card will result your token to end up in a locking period of 4–12 months (see envion.org/faq). This locking period is a protection for our investors needed for credit card payments."