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This article makes some points outside of "Web3 is a buzzword/scam". The idea is that if a startup involves tokens as a form of equity, investors can request t

This article makes some points outside of "Web3 is a buzzword/scam". The idea is that if a startup involves tokens as a form of equity, investors can request that some of those tokens be set aside for them. Then those tokens can 1) be converted to cash without needing to find an acquirer or go public 2) be used to capitalize on negative non-public information about a company without it being insider trading. In addition if the company has a traditional exit the tokens can also be sold, allowing investors to profit twice. The narrative in the article is that investors are pushing startups hard to incorporate a token pool into companies that have no need for one, in order to take advantage of these benefits. Being able to cash out tokens without an exit based on non-public info drastically reduces the risk and increases the upside. So investors can put money into many more long shot companies. This seems very bad. It's centralizing tens of billions of dollars in the startup ecosystem around one technical concept that only has utility to the investing class. They can conveniently say it's about community and decentralization, when really it's a crude tool to reduce their investing risk. If I had to guess, they will end up slowly reinventing the traditional investing system with all of the rules and regulations that come with it. But that will take years, and a lot of the investor class will benefit from low risk / high reward in the process. At least the smart ones will. There is no productive innovation for society here. Only a new way for the rich to play with numbers until they get even richer.

arcticbull 4y ago
> One entrepreneur described with great frustration that he had recently spoken to a founder at a VC mixer who was building a “decentralized” dinner reservation system. When he asked why a reservation system needed to be on the blockchain, the founder simply said: “It’s the future.” Decentralization is electrolytes. It's what plants crave. Joe: For the last time, I'm pretty sure what's killing the crops is this Brawndo stuff. Secretary of State: But Brawndo's got what plants crave. It's got electrolytes. Attorney General: So wait a minute. What you're saying is that you want us to put water on the crops. Joe: Yes. Attorney General: Water. Like out the toilet? Joe: Well, I mean, it doesn't have to be out of the toilet, but, yeah, that's the idea. Secretary of State: But Brawndo's got what plants crave. Attorney General: It's got electrolytes.
MathCodeLove 4y ago
Alternatively, the decreased risk may incentivize larger or more frequent investments and simultaneously draw in newer investors and make it easier for them to take the plunge. It does allow the rich to get richer if the company does well, but it also facilitates startup funding and could very well be the difference between a startup getting the funding it needs to be successful or it getting denied due to risk factors.
- hooande 4y ago
  > "So investors can put money into many more long shot companies."
  - MathCodeLove 4y ago
    Right but you phrase it like some horrible thing when it's a net positive for the investors, the business owners/folders, and the broader economy. Just because "the rich get richer" doesn't mean it's inherently bad and that others don't also get richer. It's not a 0 sum game.
t_mann 4y ago
Right now, IPOs are done at the whim of investment bankers. Look at the league tables [1], there's effectively a cartel of a handful of (mainly US) banks that basically dominate how corporations can raise money. They exert an amount of global control over this space that goes far beyond what would be required to fulfill the public interest of protecting small investors. European countries have tried (and largely failed) to establish players that could at least compete with the US banks and provide an alternative for European companies. If the second largest economic zone in the world doesn't manage to get a seat at the big tables, something seems off, and it probably is (see eg [2]). Current web3 token issuance lacks regulation altogether (and is unsurprisingly dominated by scams), but there's no reason to be completely against the creation of new forms of financing, even if that requires effort in the form of new regulations. [1] https://markets.ft.com/data/league-tables/tables-and-trends https://markets.ft.com/data/league-tables/tables-and-trends [2] https://en.wikipedia.org/wiki/Goldman_Sachs_controversies https://en.wikipedia.org/wiki/Goldman_Sachs_controversies
- itsoktocry 4y ago
  >Right now, IPOs are done at the whim of investment bankers. Look at the league tables [1], there's effectively a cartel of a handful of (mainly US) banks that basically dominate how corporations can raise money. This is true, but is it bad? Are there companies anywhere having difficulty raising money? >European countries have tried (and largely failed) to establish players that could at least compete with the US banks and provide an alternative for European companies. Yes, this is a problem with some regulation, and why "breaking up the banks" sentiment in the US is not thought through by proponents. Countries that allow their banking sector to grow will dominate (read: China). >but there's no reason to be completely against the creation of new forms of financing True, but no matter the mechanism, raising money from smaller/more investors will always be filled with scams. We're seeing that play out in Web3; people are losing their shirts because they have no idea what they're investing in or they're willing to risk money to get rich scamming the people coming in after them. There are higher costs of regulation with more investors.
  - t_mann 4y ago

arcticbull 4y ago

> One entrepreneur described with great frustration that he had recently spoken to a founder at a VC mixer who was building a “decentralized” dinner reservation system. When he asked why a reservation system needed to be on the blockchain, the founder simply said: “It’s the future.” Decentralization is electrolytes. It's what plants crave. Joe: For the last time, I'm pretty sure what's killing the crops is this Brawndo stuff. Secretary of State: But Brawndo's got what plants crave. It's got electrolytes. Attorney General: So wait a minute. What you're saying is that you want us to put water on the crops. Joe: Yes. Attorney General: Water. Like out the toilet? Joe: Well, I mean, it doesn't have to be out of the toilet, but, yeah, that's the idea. Secretary of State: But Brawndo's got what plants crave. Attorney General: It's got electrolytes.

MathCodeLove 4y ago

Alternatively, the decreased risk may incentivize larger or more frequent investments and simultaneously draw in newer investors and make it easier for them to take the plunge. It does allow the rich to get richer if the company does well, but it also facilitates startup funding and could very well be the difference between a startup getting the funding it needs to be successful or it getting denied due to risk factors.

hooande 4y ago
> "So investors can put money into many more long shot companies."
- MathCodeLove 4y ago
  Right but you phrase it like some horrible thing when it's a net positive for the investors, the business owners/folders, and the broader economy. Just because "the rich get richer" doesn't mean it's inherently bad and that others don't also get richer. It's not a 0 sum game.

t_mann 4y ago

Right now, IPOs are done at the whim of investment bankers. Look at the league tables [1], there's effectively a cartel of a handful of (mainly US) banks that basically dominate how corporations can raise money. They exert an amount of global control over this space that goes far beyond what would be required to fulfill the public interest of protecting small investors. European countries have tried (and largely failed) to establish players that could at least compete with the US banks and provide an alternative for European companies. If the second largest economic zone in the world doesn't manage to get a seat at the big tables, something seems off, and it probably is (see eg [2]). Current web3 token issuance lacks regulation altogether (and is unsurprisingly dominated by scams), but there's no reason to be completely against the creation of new forms of financing, even if that requires effort in the form of new regulations. [1] https://markets.ft.com/data/league-tables/tables-and-trends https://markets.ft.com/data/league-tables/tables-and-trends [2] https://en.wikipedia.org/wiki/Goldman_Sachs_controversies https://en.wikipedia.org/wiki/Goldman_Sachs_controversies

itsoktocry 4y ago
>Right now, IPOs are done at the whim of investment bankers. Look at the league tables [1], there's effectively a cartel of a handful of (mainly US) banks that basically dominate how corporations can raise money. This is true, but is it bad? Are there companies anywhere having difficulty raising money? >European countries have tried (and largely failed) to establish players that could at least compete with the US banks and provide an alternative for European companies. Yes, this is a problem with some regulation, and why "breaking up the banks" sentiment in the US is not thought through by proponents. Countries that allow their banking sector to grow will dominate (read: China). >but there's no reason to be completely against the creation of new forms of financing True, but no matter the mechanism, raising money from smaller/more investors will always be filled with scams. We're seeing that play out in Web3; people are losing their shirts because they have no idea what they're investing in or they're willing to risk money to get rich scamming the people coming in after them. There are higher costs of regulation with more investors.
- t_mann 4y ago