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I think there are some interesting use cases that probably aren't even considered by a lot of people. But I'm not sure how they'll play out. For example; there

I think there are some interesting use cases that probably aren't even considered by a lot of people. But I'm not sure how they'll play out. For example; there could be a time in the future where smaller companies decide to go public through a token (i.e. an ICO, but with a company, not a utility token) at a fraction of the cost it currently takes to do an IPO. I'm not talking about scammy pump and dumps, but an actual company with employees, assets and a business model. Underwriter banks generally 1) sell IPO shares below value to their investors to cause a first day trading pop, meaning less money into the pockets of the company; and 2) take between 3 to 10% of the raised capital as fees for their efforts. On tens, hundreds of millions or billions of dollars. I could see crypto being a more efficient way of doing that, cutting out the middleman, and where a token represents a share.

gtlondon 8y ago
Jay Clayton (Chairman of the SEC) was talking about this last week. He was saying that the cost / overhead difference between ICO and IPO is so large that they either need to make IPO'ing easier or perhaps integrate into crypto in future -- otherwise companies will just ICO instead. So it could be that crypto helps traditional systems, while reducing costs for both parties.
- charlesdm 8y ago
  Yes, absolutely. ICOs are the wild west right now, but I think most developed countries will eventually introduce IPO-light regulation for token issuers so that this becomes a completely legal and viable way to raise capital. Mind: this is longer term, not for tomorrow. Legal and other costs should come down a lot as well, as these things will end up being more standardised. You won't need to pay millions in legal fees, perhaps tens or (at most) hundreds of thousands. In general I think the value in crypto will come from offering liquidity in certain situations by tokenising (perhaps smaller) assets (e.g. make it easy to sell a property ownership share with rental income in a SF office building through some token to an investor in Germany), and generally making a lot of "expensive" things more efficient by cutting out the middleman.
- estro 8y ago
  Do you have a link for this discussion? This is interesting.
  - gtlondon 8y ago
    I can find a shortened version of the full interview: https://youtu.be/wFr1ooaVPjY?t=8m59s https://youtu.be/wFr1ooaVPjY?t=8m59s IPO stuff is from 9 mins, but the whole video is crypto related / fairly interesting.
bjl 8y ago
So if you lose your private keys you're out all your shares? Or maybe you get hacked and lose your retirement savings? The reason IPOs cost money is because the solutions to problems like the above cost money, and crypto-tokens don't change that simple fact.
- paulsutter 8y ago
  One goal is to automate most of the work of a transfer agent, not to eliminate them completely. And that’s the open question: how many roles in the process can be simplified and to what degree? https://www.sec.gov/fast-answers/answerstransferagenthtm.html https://www.sec.gov/fast-answers/answerstransferagenthtm.htm...
- smileysteve 8y ago
  > So if you lose your private keys you're out all your shares? Or maybe you get hacked and lose your retirement savings? You act as if identity and account theft aren't things. A private key sounds a lot better than a 9 digit number with predictabilities and a bit of social engineering.
gomox 8y ago
In strict fairness this also happens in ICOs, it's just that the underwriter banks are replaced to an extent by presale investors who buy at a discount.
tcbawo 8y ago
The investment bank syndicate often takes on some or all of the risk of a failure to sell a new issue. Also, in the equity markets, there is a legal and regulated way for the syndicate to prop up the initial price to maintain the target sale price. So, even with an ICO, the role of an investment bank syndicate may be necessary. Also all of the equivalent safeguards against insider trading, self-dealing, and restricted transfer protections would need to be created.

gtlondon 8y ago

Jay Clayton (Chairman of the SEC) was talking about this last week. He was saying that the cost / overhead difference between ICO and IPO is so large that they either need to make IPO'ing easier or perhaps integrate into crypto in future -- otherwise companies will just ICO instead. So it could be that crypto helps traditional systems, while reducing costs for both parties.

charlesdm 8y ago
Yes, absolutely. ICOs are the wild west right now, but I think most developed countries will eventually introduce IPO-light regulation for token issuers so that this becomes a completely legal and viable way to raise capital. Mind: this is longer term, not for tomorrow. Legal and other costs should come down a lot as well, as these things will end up being more standardised. You won't need to pay millions in legal fees, perhaps tens or (at most) hundreds of thousands. In general I think the value in crypto will come from offering liquidity in certain situations by tokenising (perhaps smaller) assets (e.g. make it easy to sell a property ownership share with rental income in a SF office building through some token to an investor in Germany), and generally making a lot of "expensive" things more efficient by cutting out the middleman.
estro 8y ago
Do you have a link for this discussion? This is interesting.
- gtlondon 8y ago
  I can find a shortened version of the full interview: https://youtu.be/wFr1ooaVPjY?t=8m59s https://youtu.be/wFr1ooaVPjY?t=8m59s IPO stuff is from 9 mins, but the whole video is crypto related / fairly interesting.

bjl 8y ago

So if you lose your private keys you're out all your shares? Or maybe you get hacked and lose your retirement savings? The reason IPOs cost money is because the solutions to problems like the above cost money, and crypto-tokens don't change that simple fact.

paulsutter 8y ago
One goal is to automate most of the work of a transfer agent, not to eliminate them completely. And that’s the open question: how many roles in the process can be simplified and to what degree? https://www.sec.gov/fast-answers/answerstransferagenthtm.html https://www.sec.gov/fast-answers/answerstransferagenthtm.htm...
smileysteve 8y ago
> So if you lose your private keys you're out all your shares? Or maybe you get hacked and lose your retirement savings? You act as if identity and account theft aren't things. A private key sounds a lot better than a 9 digit number with predictabilities and a bit of social engineering.

gomox 8y ago

In strict fairness this also happens in ICOs, it's just that the underwriter banks are replaced to an extent by presale investors who buy at a discount.

tcbawo 8y ago

The investment bank syndicate often takes on some or all of the risk of a failure to sell a new issue. Also, in the equity markets, there is a legal and regulated way for the syndicate to prop up the initial price to maintain the target sale price. So, even with an ICO, the role of an investment bank syndicate may be necessary. Also all of the equivalent safeguards against insider trading, self-dealing, and restricted transfer protections would need to be created.