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Token sales are a way to raise money for certain businesses, with different pros and cons than traditionally raising money. If you mandate use of your token for

Token sales are a way to raise money for certain businesses, with different pros and cons than traditionally raising money. If you mandate use of your token for certain actions, then take a percentage of profits to buy-and-burn the token, then it’s similar to a traditional stock. The way to properly do this is to 100% avoid the United States, or any western nation, and go offshore to a country that allows this (Antigua, Seychelles). If you think what I’ve written is a horrible scam - that’s fine! No one is making you buy such an asset. Ignore such assets. But there is a global pool of crypto investors who will, and don’t care about what country such a business is incorporated in or being unable to bring any court action. It’s “buyer-beware” and the industry operates on trust to an absurd level. There is something to be said for a model where you don’t have to grovel to moneyed VCs to raise funding. It’s alternative and it’s an experiment.

ashtonkem 7y ago
The problem is that most tokens have absolutely paper thin explanations about what the tokens are supposed to be used for, aside from speculating. Most of them have more than a whiff of fraud about them, such as Kodak’s plan to somehow put copyright on the blockchain. Dodging SEC regulations is one thing, but it’s not an argument for large scale growth and adoption. Heck, you don’t even need a cryptocurrency to do that, just list your stock in they Seychelles instead of America.
- seibelj 7y ago
  But the goal is to raise funds. Doing a traditional securities offering in the Seychelles doesn't raise funds for your blockchain project. A token offering raises funds, from a global pool of investors, without any legal resource for the investors. Like I said, this is an absurd amount of trust, and reputation is everything. It's simply a different model.
  - ashtonkem 7y ago
    Dodging SEC regulations is a use case, although I’m dubious that you need crypto for it. But more to the point this use case is extremely narrow; dodging SEC regulations doesn’t provide a reason for said blockchain company to exist or attract investors in and of itself, it’s just a tactic available to them. If you used blockchain to raise money for a non-blockchain company, that would be understandable. But that’s not the pattern I’ve observed. Usually it’s “buy token that’ll have functional utility and future monetary value”.
    - seibelj 7y ago
      I hear what you are saying. I work in this industry and am intimately involved with all of this. Let me try and explain differently. There are good reasons why a traditional stock, like Apple, would be valuable on the blockchain. Imagine Apple stock was just like any other token or cryptocurrency - it could be anonymously owned, traded on any exchange (including ones that just pop up out of nowhere), can be traded 24/7/365, and could be used as payment for coffee just as easily as cash. Clearly this is advantageous for some people who want this. From the perspective of a regulator, or citizen concerned of fraud, this is horrible! A nightmare! But to others, they prefer this situation. This is what a token is. It's like a traditional stock, but also all of the above. Plus it has utility according to however the project uses it. All of the tokens tend to match the same protocols (on Ethereum it's known as ERC20), so if a new service pops up ("Pay for Coffee with Token Service"), suddenly any new token can be used in it. It's like automated plumbing. You have to switch to the mindset of someone who is a "crypto native" person. They don't think like a normal person. They have different values and motivations.
      - ashtonkem 7y ago
        I think we’re starting to have two conversations in parallel, so I’ll do my best to keep this straight. It appears that there are two models; stocks on the blockchain, and tokens as item of utility. Stocks on the blockchain makes sense technically, especially for investing in risky non-crypto small companies. Tiny use case, but reasonable. I’m super dubious about paying with the crypto equivalent of stocks for purely social reasons; it introduces a lot of exchange risk and negotiation into the process of purchasing goods. One of the reasons money is good is that it creates a common unit of account; I don’t need to find a barista that’s interested in whatever stock I’ve got in order to buy coffee. Sure; I could sell or exchange that stock for something my barista wants, probably money, but the value to the consumers in question is getting pretty thin. I will say though that stock markets are probably the only model I’ve seen that fits cleanly into the blockchain model; stock trades pretty much stay in the stock exchange itself, eliminating the oracle problem. If blockchain latency could get lowered significantly, I wouldn’t be surprised to see stock markets on the blockchain. What I see much more of is the “token as utility” scheme. This is usually a blockchain startup offering some sort of token that has a planned utility once the company is operational. Kodak’s coin is on the top of my mind; the plan was that you could use the coins to license work on the chain and pay photographers. These utility coins always seem super shady to me, and the justifications on why the utility coin should have utility (and thus value) border somewhere between nonsense and insanity.
TheColorYellow 7y ago
SEC commissioner has alluded to the idea of a three year safe harbor for crypto tokens followed by a whole lot of regulation enforcement that would greatly open the door for these types of activities.

ashtonkem 7y ago

The problem is that most tokens have absolutely paper thin explanations about what the tokens are supposed to be used for, aside from speculating. Most of them have more than a whiff of fraud about them, such as Kodak’s plan to somehow put copyright on the blockchain. Dodging SEC regulations is one thing, but it’s not an argument for large scale growth and adoption. Heck, you don’t even need a cryptocurrency to do that, just list your stock in they Seychelles instead of America.

seibelj 7y ago
But the goal is to raise funds. Doing a traditional securities offering in the Seychelles doesn't raise funds for your blockchain project. A token offering raises funds, from a global pool of investors, without any legal resource for the investors. Like I said, this is an absurd amount of trust, and reputation is everything. It's simply a different model.
- ashtonkem 7y ago
  Dodging SEC regulations is a use case, although I’m dubious that you need crypto for it. But more to the point this use case is extremely narrow; dodging SEC regulations doesn’t provide a reason for said blockchain company to exist or attract investors in and of itself, it’s just a tactic available to them. If you used blockchain to raise money for a non-blockchain company, that would be understandable. But that’s not the pattern I’ve observed. Usually it’s “buy token that’ll have functional utility and future monetary value”.
  - seibelj 7y ago
    I hear what you are saying. I work in this industry and am intimately involved with all of this. Let me try and explain differently. There are good reasons why a traditional stock, like Apple, would be valuable on the blockchain. Imagine Apple stock was just like any other token or cryptocurrency - it could be anonymously owned, traded on any exchange (including ones that just pop up out of nowhere), can be traded 24/7/365, and could be used as payment for coffee just as easily as cash. Clearly this is advantageous for some people who want this. From the perspective of a regulator, or citizen concerned of fraud, this is horrible! A nightmare! But to others, they prefer this situation. This is what a token is. It's like a traditional stock, but also all of the above. Plus it has utility according to however the project uses it. All of the tokens tend to match the same protocols (on Ethereum it's known as ERC20), so if a new service pops up ("Pay for Coffee with Token Service"), suddenly any new token can be used in it. It's like automated plumbing. You have to switch to the mindset of someone who is a "crypto native" person. They don't think like a normal person. They have different values and motivations.
    - ashtonkem 7y ago
      I think we’re starting to have two conversations in parallel, so I’ll do my best to keep this straight. It appears that there are two models; stocks on the blockchain, and tokens as item of utility. Stocks on the blockchain makes sense technically, especially for investing in risky non-crypto small companies. Tiny use case, but reasonable. I’m super dubious about paying with the crypto equivalent of stocks for purely social reasons; it introduces a lot of exchange risk and negotiation into the process of purchasing goods. One of the reasons money is good is that it creates a common unit of account; I don’t need to find a barista that’s interested in whatever stock I’ve got in order to buy coffee. Sure; I could sell or exchange that stock for something my barista wants, probably money, but the value to the consumers in question is getting pretty thin. I will say though that stock markets are probably the only model I’ve seen that fits cleanly into the blockchain model; stock trades pretty much stay in the stock exchange itself, eliminating the oracle problem. If blockchain latency could get lowered significantly, I wouldn’t be surprised to see stock markets on the blockchain. What I see much more of is the “token as utility” scheme. This is usually a blockchain startup offering some sort of token that has a planned utility once the company is operational. Kodak’s coin is on the top of my mind; the plan was that you could use the coins to license work on the chain and pay photographers. These utility coins always seem super shady to me, and the justifications on why the utility coin should have utility (and thus value) border somewhere between nonsense and insanity.

TheColorYellow 7y ago

SEC commissioner has alluded to the idea of a three year safe harbor for crypto tokens followed by a whole lot of regulation enforcement that would greatly open the door for these types of activities.