7 ms·

Move Over Kickstarter, Crypto-Equity Is the Next Frontier

119 points by MichaelAO 12y ago

company 12y ago
No its not.
grondilu 12y ago
Pretty sure it's illegal in most countries. So it can only work for businesses that are themselves illegal.
mattbarrie 12y ago
There are very specific laws regarding the hawking of shares to the general public without variously being registered securities or having an offering document. While I could see this take off, I doubt it would be used by legal companies unless it could fit within some crowd funded equity carve out.
toufka 12y ago
>What is the legal status of the investments promoted by your platform? How will they be treated by the Securities and Exchange Commission? >Just like bitcoin, we’re launching it entirely outside the system. That's very naive. The government doesn't regulate 'The Dollar', and it doesn't regulate 'The Stock Market' - it regulates transactions, exchanges & financial instruments. Just because you don't play within existing infrastructure doesn't mean you can play without any rules. As an idea this is really clever - but I don't think one should intentionally disregard the (often useful) existing boundaries. Nor say so in an interview.
- adventured 12y ago
  Any economic unit of value that moves, in any way shape or form, within the United States - and sometimes as an extension outside of it - the US Government claims dominion over. Period. It is exceptionally naive and will come back to bite them.
  - otoburb 12y ago
    According to a Swarm founder comments above, their legal counsel may have advised that there are potential loopholes to exploit that may not make this a black and white case. Wondering how far they are willing to test this in court.
    - qq66 12y ago
      US courts don't look fondly on loopholes. For example, the Supreme Court just ruled against Aereo and stated that the legislature didn't even need to close the loophole, that the courts would do it for them.
    - GrinningFool 12y ago
      It seems a business plan built atop loopholes is not, perhaps, the best long-term strategy. Particularly when then calling attention to this fact...
- Jd 12y ago
  Swarm founder here. We have a very unusual organizational model that allows people to represent the Swarm without having an "official" status within the organization, which means that we are always at risk of some degree of misrepresentation. After this specific interview I issued a "Legal Action Plan" that specifies the particulars of our near and long-term legal strategy, such that no one makes faux pas like "we’re launching it entirely outside the system." That said, a lot of these subtleties are lost on non-native English speakers, which at the moment is probably the majority of the Swarm. The full letter can be read here: https://docs.google.com/document/d/1b6krYF6rMECtTwmTjbcZWZ0lrIbfuLO37NayMLmyVVA/edit https://docs.google.com/document/d/1b6krYF6rMECtTwmTjbcZWZ0l...
  - patcon 12y ago
    I feel like you've likely come across this regulation-related op-ed penned by Skype's previous COO, but just in case: http://www.coindesk.com/bitcoin-regulation-lessons-early-days-skype/ http://www.coindesk.com/bitcoin-regulation-lessons-early-day... > To put it bluntly – every bitcoin actor should be reading the law very carefully and finding the loopholes. You should all invest a great deal of time in this – it is hugely important. For example, are you really moving ‘currency’ or are you simply exchanging some sort of token? > Companies need to just carry on doing what they are doing, if they can make a case for themselves that they don’t need regulation, they shouldn’t even go near it. ... [They] should read the rules, argue why they are not covered by the rules and use that analysis as a defence, but they should only ask for permission if they are sure it is necessary. Regardless, great positions.
    - Jd 12y ago
      Yes, one of our legal counsels actually recommended that we read that article once. And then again. And again until it sank in. It sank in. ;)
  - waterlesscloud 12y ago
    Are you familiar with the history of Bitcoin-denominated stocks? The history of various bitcoin stock exchanges which have been shut down by the SEC? Do you know exactly what the regulations are? Are you aware of how they've actually been applied to Bitcoin in the past? Are you aware of the extensive fraud that has been perpetrated in the this space? This is not a new field, it's got a couple years of history, and very little of it is pretty. What are you doing that makes you think you'll be different?
- GFK_of_xmaspast 12y ago
  Hey, this is 2014, they're supposed to be 'disruptive.'
- Torn 12y ago
  Also doesn't the US view bitcoin like property, and so is liable for gains tax?
- baddox 12y ago
  The government definitely regulates the dollar, even under the definition you're using.
corpselord420 12y ago
this reminds me of a metafilter comment from 2012 (because it's literally what is described in the comment): "There are very interesting things you can do with bitcoin that nobody is doing yet. Bitcoin is fundamentally a globally synchronized ledger. Think of it this way, every single bank in the world has their entire transaction history available for the public, live. You can use that ledger for more than just exchanging a single currency on that ledger. Because you can accurately trace the transaction history of coins, as everything is logged, you can overload the coin to have other contractual properties, simply by creating a document that says the 0.00000100 coins derived from this single transaction counts as 100 shares of freely tradeable common stock (you'd need something like a last-in-first-out order specified in the contract). By tracing who owns individual shares, you can then give voting rights to those addresses (and because they have crypto signature built in, you can vote on board members, etc. Further, since you know the addresses for bitcoin ownership, you can issue dividends. The dividends can be priced in bitcoin, or more interestingly, the dividends can be denominated in US DOLLARS. You can specify 0.00000001 bitcoin as 1 share of an ETN, making 1 share equal to 1 USD backed by a bank. Because bitcoin supports complex transactions, you can conduct a single transaction of 1 share for 1 USD in a single atomic transaction, with no need for complex clearinghouses as we do today. Here's where things get crazy: by using distributed hash tables, such as what people use to find peers in bittorrent DHT, you can build a trading floor. The trading floor can have bid-ask spreads (although only the ask side can run without escrow), this means you can build an entire stock exchange with functionally no actual middlemen beyond the distributed bitcoin transaction ledger. All you would need to do is broadcast on the DHT peer-to-peer network an open bitcoin transaction that says "I will accept any transaction that pays me 3 bitcoin for this specially marked 0.00000001 bitcoin that is 1 share of stock in ABC Corp.", which is supported in bitcoin's protocol. Here's also where things get creepy: if you had a nation-state that recognized this as a valid corporate structure, you could build a company in which ownership is completely unknown. Also, if a hedge fund that invested in these companies, and created a machine learning algorithm that invested successfully and bid on computing power (paid for in bitocoins), and the hedge fund owner was ran over by a truck, you'd have an independent entity surviving on the network with complete agency, with no human control. There are a lot of creepy things that can happen, a lot of possibly good things (reducing middlemen in banking), either way, we've only begun to scratch the surface of what bitcoin means. If you think it's exclusively the domain for a bunch of wackjob gold bugs hating on the Federal Reserve, I think you're underestimating what bitcoin may be able do in the future." some other points: -undetectable stealth takeovers; this is a huge part of the sec's job and it will be fucking chaotic -- stealth sell shares to yourself to artificially depress the prices and boom. but that doesn't really matter because: -no legal accountability to shareholders woops! -stealth collusion and market manipulation across different corporations by stealth monopolists -like someone else said this literally only has utility for criminal enterprises because its baldly illegal in the US and probably every other country
tzs 12y ago
@corpselord420: your interesting comment is unreadable by most HN readers, because you appear to be hell banned. Only people who have enabled "show dead" can see it (or any of your other comments--looks like you got banned with your first comment).
- dang 12y ago
  We unkilled that comment. We think there's a place for unkilling comments on a case-by-case basis and will probably implement a way for users (like, in this case, tzs) to indicate when to do so.
  - tzs 12y ago
    If you do that, how about also changing the style for killed comments made visible by the show dead option so that they are readable? Right now, they are given the .dead style, which has color #dddddd, making them hard to read. If someone turns on show dead, presumably it is because they want to read the dead comments. Making them visible but hard to read seems kind of obnoxious.
    - dang 12y ago
      Seems like a fair suggestion. I'll add it to the list.
dobbsbob 12y ago
http://swarmcorp.com/faq.html http://swarmcorp.com/faq.html Is this Legal? "We believe this falls into section 1(d) of our Cryptoequity whitepaper, meaning it is allowable under U.S. law and is probably not problematic elsewere" This is 1(d): People can redeem cryptotokens at some point in the future for some service in the network. [Legal assessment: Probably fine, may limit upside of “equity” growth] So it's "probably legal" which doesn't instill much confidence
- higherpurpose 12y ago
  I don't think Kickstarter was clear-cut legal, either, was it? I think they needed to have a law passed that essentially legalized "crowdfunding".
  - presty 12y ago
    when joining a kickstarter campaign, you're donating money or paying for (the pre launch of) some product, not taking some form of equity in a company
    - makomk 12y ago
      There are existing laws covering pre-orders in order to prevent the kinds of scams we've seen on Kickstarter. It's not entirely clear that Kickstarter is actually compliant with them.
  - bdcravens 12y ago
    The law you're referring to (JOBS Act) didn't legalize crowdfunding, but the process of selling equity via crowdfunding. The Kickstarter model is very clear-cut: it's either a donation or you're buying something (rewards or product), as opposed to buying equity.
  - liveoneggs 12y ago
    kickstarter doesn't allow you to offer equity, but the JOBS act + the SEC did change this year to allow non-accredited investors (people with less than $1M in assets) to buy into a company directly; and for a company to market equity in the style of kickstarter. Here are the new rules: For income below $100,000, invest a max of $2,000 or 5% of income or net worth For income over $100,000, invest a max of 10% of income or net worth Investments made in a Title III crowdfunding transaction can’t be resold for a period of one year
paul 12y ago
If the actual business is still centralized, what prevents the operators from simply ignoring the crypto-shareholders and keeping all profits and assets for themselves?
eterps 12y ago
http://bitshares.org http://bitshares.org
Aerospark 12y ago
I feel sorry for the pre-sale investors, there is a very high probability that they will not see their BTC back. If you are considering investing, be careful. The platform charges 2% fee to all projects funded, 1% to investors, 1% to founders. The investors hold a total of 100,000,000 swarmcoin and the presale is at a rate of 5250 SWARM/BTC. At that rate, the platform would need to do over $1 billion in sales to just get a ROI, something that took kickstarter over 5 years.
- Cyther606 12y ago
  I do too. In the history of Bitcoin public offerings, never has a single company outperformed holding BTC itself over a modest time frame. SwarmCo is raising a boatload of BTC up front for a risky venture, and taking 1/3 of the funds to pay salaries. Startups are all incentivized to do BTC public offerings, but no one is incentivized to actually deliver products. IPOs are the easiest way to "earn" BTC. It's cringeworthy how so many of these pseudo-IPOs focus on the marketing and the limited time buy opportunity without so much as producing a working prototype. I'm always astounded by the amount of BTCs that get raised. It just reeks of unsophisticated investors getting sheered. From the perspective of SWARMCO, once you raise thousands of BTCs, you're golden. Your investors shoulder all the risk, because the moment they irreversibly send you the most liquid and stable crypto asset, you can effectively disappear, or keep delaying "two weeks" as Butterfly Labs is infamous for doing. If anything goes wrong, just ask Mark Karpeles for advice.
  - kolinko 12y ago
    Source? Satoshi dice outperformed holding btc, and that was during the period when btc skyrocketted from 10 to 100. Also, but I may be wrong here, asicminer did a similar trick.
    - iopq 12y ago
      I held ASIC miner and I got huge dividends AND it increased in value while I held and ended up selling
    - 12y ago
deleted 12y ago
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- yafujifide 12y ago
  This is a business opportunity to create that infrastructure.
  - icelancer 12y ago
    Many have tried and failed. This undermines credibility. I want to like Bitcoin but so much moves against it. Including the enthusiasts.
- StavrosK 12y ago
  We already do traditional banking with computers and mobile apps. Why can't we do the same with Bitcoin? Besides, you can have your hardware wallet in your pocket or safe, which will actually have to be physically stolen for someone to get your funds.
  - andrewfong 12y ago
    Electronic transactions with traditional banking are generally reversible. If I hack into your bank account and transfer all the funds to my account, your bank can usually track the funds down and have them returned to you. Moreover, most bank accounts are linked to real-world identities in some way, so there's a high risk that I'll be caught and prosecuted for aforementioned hacking attempt. Not so with Bitcoin.
  - deleted 12y ago
    [deleted]
- fragsworth 12y ago
  If you put most of your assets in a "cold storage" wallet, it will be more secure than any cash, gold, or financial instrument that you own. You put only an amount that you're willing to lose on one of today's machines, for convenience, and it works just fine. Infrastructure doesn't need to change, and it only takes a small amount of effort to learn how to be security-minded.
adventured 12y ago
There's nothing particularly revolutionary about this concept. It existed for nearly two centuries before the SEC locked down rules on investing. The sole reason it hasn't existed the last 20 or 30 years is due to the SEC, not the lack of someone 'inventing' it. Their rules restrain the ability to do it. Anonymous investing was extremely common prior to the SEC taking over full control of investing laws. It was trivial to set up anonymous shell entities and hide who owned what, making it practically untraceable.
spb 12y ago
> The crypto-equity platform is enabled through bitcoin 2.0 technology Oh, please tell me this isn't going to start becoming a thing people say. Please. I can't bear the thought of another "Web 2.0" buzzword bubble.
- haakon 12y ago
  I'm afraid it's already a thing people say, and has been for a while. But unlike "Web", Bitcoin may actually reach a version 2.0, and at that point, the confusion will probably be a constant source of amusement.
- Jd 12y ago
  I personally strongly dislike the term "Bitcoin 2.0" although I still use it quite frequently, primarily because I don't know of any other succinct way to describe all of the second generation functionality that is currently being built on top of the blockchain.
  - saraid216 12y ago
    ... "Bitcoin-based"?
kriro 12y ago
It may work, it may not. I have my doubts but I'm very happy this exists. We need more radical thinkers like this.
dmix 12y ago
> Susanne Tarkowski Tempelhof on SWARM, a Revolutionary Crowdfunding Platform I've learned to skip any article that has 'revolutionary' in the title or subheading.
tew28 12y ago
This would almost certainly fall under the definition of security under the '33 Act. Besides this, the questionable practice of calling this coin "equity" and representing that it entitles holders that gives them some kind of ownership stake in companies funded with this coin on the website, while putting the disclaimers within another document, creates the impression that the issuers want people to think this is equity so they can raise BTC. As the founder has said in a comment, the majority of the swarm consists of non-native speakers at the moment, so this distinction would be lost on them. There seems to be demand for something like this, but the lack of details or research into relevant laws give me plenty of pause. Can the founder (Joel) clarify his affiliation as well? His swarm bio at http://swarmcorp.com/team.html http://swarmcorp.com/team.html lists "#Harvard #Brown #Penn" but his LinkedIn profile seems to indicate that he did not actually get a degree from all of these institutions.
- Jd 12y ago
  There are lots of reasons for pause and our choice of the term "cryptoequity" was certainly because it does evoke the fuller idea of the potential behind these cryptoassets, something that you don't get with the weaker but more accurate "cryptotoken." Although we've issued various statements clarifying the issues including a manifesto, cryptoequity whitepaper, and legal action plan, it remains fairly complex and something that is probably not approachable to the ordinary user. I'm hoping that changes with the video explanation that we are launching on July 10th. As for me, I have my B.A. from Brown and M.A. from Penn and a smattering of various other institutions including Harvard.
- gone35 12y ago
  [Joel Dietz's] swarm bio at http://swarmcorp.com/team.html http://swarmcorp.com/team.html lists "#Harvard #Brown #Penn" but his LinkedIn profile seems to indicate that he did not actually get a degree from all of these institutions. UPenn's 257th commencement program lists one Joel Dietz among their 2012 Master of Arts recipients [1]; and Brown's undergraduate East Asian Studies 2012 alumni newsletter mentions one Joel Dietz '04 having "just finished his M.A. in the East Asian Languages and Civilizations department at the University of Pennsylvania" [2]. The founder's affiliation with Harvard is less clear-cut: apparently he took an introductory Sanskrit course through the Summer School in 2012 [3,4], but it is unclear if he was affiliated in any other more substantive or relevant capacity. For what it's worth, the founder's swarm bio now lists "#Brown #Penn #SalesforceMVP" instead; and an article from less than a month ago listed two different core team members than today [5]. Either way, it is paramount that business leaders be forthright about their academic credentials --remember Scott Thompson?--, especially in such a confidence-tricked industry, and especially when they purposedly cite them as a signal of technical ability and experience [6] --pointless credentialism, if you ask me. [1] http://www.archives.upenn.edu/primdocs/upg/upg7/upg7_2013.pdf http://www.archives.upenn.edu/primdocs/upg/upg7/upg7_2013.pd... [2] http://brown.edu/academics/east-asian-studies/sites/brown.edu.academics.east-asian-studies/files/uploads/EAS_e-newsletter_2012.pdf http://brown.edu/academics/east-asian-studies/sites/brown.ed... [3] https://github.com/fractastical/Sanskrit-at-Harvard https://github.com/fractastical/Sanskrit-at-Harvard [4] http://archive.summer.harvard.edu/courses/sans.jsp http://archive.summer.harvard.edu/courses/sans.jsp Apparently this is the only intro course Witzel teaches. [5] http://www.followthecoin.com/digital-currency-crowdfunding-startup-swarm-raises-450-btc/ http://www.followthecoin.com/digital-currency-crowdfunding-s... [6] http://www.coindesk.com/swarm-take-bitcoin-crowdfunding-new-heights/ http://www.coindesk.com/swarm-take-bitcoin-crowdfunding-new-...
drcode 12y ago
The problem with these tokens is that at the end of the day there is no direct link between a token and the asset they're linked to- Unlike a stock, which gives you voting rights and other privileges. Mind you, there is nothing wrong with a completely "unlinked" asset per se (Bitcoin has proven that) but an unlinked asset's price will, all things being equal, quickly undergo a price-discovery process that will capture the majority of future expected returns. Hence, the price for these equities at any moment in time has no expected return beyond the early floating exchange rate. Therefore, its true future returns should be modest (the same as equivalent cryptocurrencies) and it will have only modest potential as an investment. Bottom line: If the coin doesn't give me any "special powers" like a stock certificate does, it has little upside potential compared to any other cryptocurrency- Hence, it makes more sense to invest any capital I have in a more established currency, like Bitcoin. (And for those arguing "Yes, hempcoin/newcameracoin/etc DOES have value and special powers beyond Bitcoin because my hempshop/newcamerashop/etc doesn't take bitcoins but does take this specialty coin" then it should be obvious that you'd be able to perform a JIT purchase this coin using bitcoins through an exchange, which means Bitcoin holders have access to the same "special power", without needing to be long-term holders of the asset.) These types of coins will only become interesting once cryptocurrency contract technology becomes more developed, so that these coins can give holders more extensive special rights regarding the asset/project the coins are linked to.
qq66 12y ago
Without some force of law to ensure dividend distribution back to shareholders, equity doesn't really exist except at the pleasure of management.
cryptophile 12y ago
I think that Susanne really "gets it". You could build a platform and abide by all reasonable and also silly regulations across the 200+ jurisdictions around the world, or else just like bitcoin, you could cause a "grasshopper syndrome" and make the platform virtually impossible to shut down. You know how that medieval court ordered the grasshoppers to cease and desist camping on farmer John's field. They didn't leave. So, farmer John and his court just learned to live with it. Bitcoin is seriously changing the world in many unexpected ways.
warcher 12y ago
I really am a fan of the idea of all these crowd-sourced equity ideas that are getting hatched. As a boots on the ground business guy, however, the potential for fraud and abuse is staggering. I have seen things go down with 'accredited investors' trying to get into the startup gold rush that are unbelievable. To me, at least. And these same guys are on kickstarter right now, where there's no accountability whatsoever, cleaning up. All I can say about the regulation of equities is that it's an ugly solution to a very real white collar crime problem.
Nursie 12y ago
For anyone interested in micro-equity I found a site called http://crowdcube.com http://crowdcube.com recently. It doesn't have any cool crypto aspects but it is basically kickstarter with real equity (rather than just a speculative pre-order). It's UK only at the moment. I guess that must be because regulations make it difficult in the USA. But there's no blockchain aspect so I guess it can't be as cool as SWARM...
- chippy 12y ago
  Do you think that SWARM would operate easier in the UK?
  - Jd 12y ago
    As it turns out, Swarm's first legal entity is in the UK.
  - Nursie 12y ago
    As I understand it, in the USA you can only attract public investment either by gong fully public and being regulated as a public corporation, or by attracting individuals of high net worth. From what I understand this is considered a consumer protection mechanism, such that you can't lose the farm (literally) by investing in private equity schemes. So far as I know, this restriction does not exist in the UK. So yes, if SWARM operated in the UK with UK investors it might have an easier time. Personally I don't really see the need for the crypto aspect, and AFAICT investment regulations are usually a good thing, but whatever floats your boat.

119 points by MichaelAO 12y ago

company 12y ago

No its not.

grondilu 12y ago

Pretty sure it's illegal in most countries. So it can only work for businesses that are themselves illegal.

mattbarrie 12y ago

There are very specific laws regarding the hawking of shares to the general public without variously being registered securities or having an offering document. While I could see this take off, I doubt it would be used by legal companies unless it could fit within some crowd funded equity carve out.

toufka 12y ago

>What is the legal status of the investments promoted by your platform? How will they be treated by the Securities and Exchange Commission? >Just like bitcoin, we’re launching it entirely outside the system. That's very naive. The government doesn't regulate 'The Dollar', and it doesn't regulate 'The Stock Market' - it regulates transactions, exchanges & financial instruments. Just because you don't play within existing infrastructure doesn't mean you can play without any rules. As an idea this is really clever - but I don't think one should intentionally disregard the (often useful) existing boundaries. Nor say so in an interview.

adventured 12y ago
Any economic unit of value that moves, in any way shape or form, within the United States - and sometimes as an extension outside of it - the US Government claims dominion over. Period. It is exceptionally naive and will come back to bite them.
- otoburb 12y ago
  According to a Swarm founder comments above, their legal counsel may have advised that there are potential loopholes to exploit that may not make this a black and white case. Wondering how far they are willing to test this in court.
  - qq66 12y ago
    US courts don't look fondly on loopholes. For example, the Supreme Court just ruled against Aereo and stated that the legislature didn't even need to close the loophole, that the courts would do it for them.
  - GrinningFool 12y ago
    It seems a business plan built atop loopholes is not, perhaps, the best long-term strategy. Particularly when then calling attention to this fact...
Jd 12y ago
Swarm founder here. We have a very unusual organizational model that allows people to represent the Swarm without having an "official" status within the organization, which means that we are always at risk of some degree of misrepresentation. After this specific interview I issued a "Legal Action Plan" that specifies the particulars of our near and long-term legal strategy, such that no one makes faux pas like "we’re launching it entirely outside the system." That said, a lot of these subtleties are lost on non-native English speakers, which at the moment is probably the majority of the Swarm. The full letter can be read here: https://docs.google.com/document/d/1b6krYF6rMECtTwmTjbcZWZ0lrIbfuLO37NayMLmyVVA/edit https://docs.google.com/document/d/1b6krYF6rMECtTwmTjbcZWZ0l...
- patcon 12y ago
  I feel like you've likely come across this regulation-related op-ed penned by Skype's previous COO, but just in case: http://www.coindesk.com/bitcoin-regulation-lessons-early-days-skype/ http://www.coindesk.com/bitcoin-regulation-lessons-early-day... > To put it bluntly – every bitcoin actor should be reading the law very carefully and finding the loopholes. You should all invest a great deal of time in this – it is hugely important. For example, are you really moving ‘currency’ or are you simply exchanging some sort of token? > Companies need to just carry on doing what they are doing, if they can make a case for themselves that they don’t need regulation, they shouldn’t even go near it. ... [They] should read the rules, argue why they are not covered by the rules and use that analysis as a defence, but they should only ask for permission if they are sure it is necessary. Regardless, great positions.
  - Jd 12y ago
    Yes, one of our legal counsels actually recommended that we read that article once. And then again. And again until it sank in. It sank in. ;)
- waterlesscloud 12y ago
  Are you familiar with the history of Bitcoin-denominated stocks? The history of various bitcoin stock exchanges which have been shut down by the SEC? Do you know exactly what the regulations are? Are you aware of how they've actually been applied to Bitcoin in the past? Are you aware of the extensive fraud that has been perpetrated in the this space? This is not a new field, it's got a couple years of history, and very little of it is pretty. What are you doing that makes you think you'll be different?
GFK_of_xmaspast 12y ago
Hey, this is 2014, they're supposed to be 'disruptive.'
Torn 12y ago
Also doesn't the US view bitcoin like property, and so is liable for gains tax?
baddox 12y ago
The government definitely regulates the dollar, even under the definition you're using.

corpselord420 12y ago

this reminds me of a metafilter comment from 2012 (because it's literally what is described in the comment): "There are very interesting things you can do with bitcoin that nobody is doing yet. Bitcoin is fundamentally a globally synchronized ledger. Think of it this way, every single bank in the world has their entire transaction history available for the public, live. You can use that ledger for more than just exchanging a single currency on that ledger. Because you can accurately trace the transaction history of coins, as everything is logged, you can overload the coin to have other contractual properties, simply by creating a document that says the 0.00000100 coins derived from this single transaction counts as 100 shares of freely tradeable common stock (you'd need something like a last-in-first-out order specified in the contract). By tracing who owns individual shares, you can then give voting rights to those addresses (and because they have crypto signature built in, you can vote on board members, etc. Further, since you know the addresses for bitcoin ownership, you can issue dividends. The dividends can be priced in bitcoin, or more interestingly, the dividends can be denominated in US DOLLARS. You can specify 0.00000001 bitcoin as 1 share of an ETN, making 1 share equal to 1 USD backed by a bank. Because bitcoin supports complex transactions, you can conduct a single transaction of 1 share for 1 USD in a single atomic transaction, with no need for complex clearinghouses as we do today. Here's where things get crazy: by using distributed hash tables, such as what people use to find peers in bittorrent DHT, you can build a trading floor. The trading floor can have bid-ask spreads (although only the ask side can run without escrow), this means you can build an entire stock exchange with functionally no actual middlemen beyond the distributed bitcoin transaction ledger. All you would need to do is broadcast on the DHT peer-to-peer network an open bitcoin transaction that says "I will accept any transaction that pays me 3 bitcoin for this specially marked 0.00000001 bitcoin that is 1 share of stock in ABC Corp.", which is supported in bitcoin's protocol. Here's also where things get creepy: if you had a nation-state that recognized this as a valid corporate structure, you could build a company in which ownership is completely unknown. Also, if a hedge fund that invested in these companies, and created a machine learning algorithm that invested successfully and bid on computing power (paid for in bitocoins), and the hedge fund owner was ran over by a truck, you'd have an independent entity surviving on the network with complete agency, with no human control. There are a lot of creepy things that can happen, a lot of possibly good things (reducing middlemen in banking), either way, we've only begun to scratch the surface of what bitcoin means. If you think it's exclusively the domain for a bunch of wackjob gold bugs hating on the Federal Reserve, I think you're underestimating what bitcoin may be able do in the future." some other points: -undetectable stealth takeovers; this is a huge part of the sec's job and it will be fucking chaotic -- stealth sell shares to yourself to artificially depress the prices and boom. but that doesn't really matter because: -no legal accountability to shareholders woops! -stealth collusion and market manipulation across different corporations by stealth monopolists -like someone else said this literally only has utility for criminal enterprises because its baldly illegal in the US and probably every other country

tzs 12y ago

@corpselord420: your interesting comment is unreadable by most HN readers, because you appear to be hell banned. Only people who have enabled "show dead" can see it (or any of your other comments--looks like you got banned with your first comment).

dang 12y ago
We unkilled that comment. We think there's a place for unkilling comments on a case-by-case basis and will probably implement a way for users (like, in this case, tzs) to indicate when to do so.
- tzs 12y ago
  If you do that, how about also changing the style for killed comments made visible by the show dead option so that they are readable? Right now, they are given the .dead style, which has color #dddddd, making them hard to read. If someone turns on show dead, presumably it is because they want to read the dead comments. Making them visible but hard to read seems kind of obnoxious.
  - dang 12y ago
    Seems like a fair suggestion. I'll add it to the list.

dobbsbob 12y ago

http://swarmcorp.com/faq.html http://swarmcorp.com/faq.html Is this Legal? "We believe this falls into section 1(d) of our Cryptoequity whitepaper, meaning it is allowable under U.S. law and is probably not problematic elsewere" This is 1(d): People can redeem cryptotokens at some point in the future for some service in the network. [Legal assessment: Probably fine, may limit upside of “equity” growth] So it's "probably legal" which doesn't instill much confidence

higherpurpose 12y ago
I don't think Kickstarter was clear-cut legal, either, was it? I think they needed to have a law passed that essentially legalized "crowdfunding".
- presty 12y ago
  when joining a kickstarter campaign, you're donating money or paying for (the pre launch of) some product, not taking some form of equity in a company
  - makomk 12y ago
    There are existing laws covering pre-orders in order to prevent the kinds of scams we've seen on Kickstarter. It's not entirely clear that Kickstarter is actually compliant with them.
- bdcravens 12y ago
  The law you're referring to (JOBS Act) didn't legalize crowdfunding, but the process of selling equity via crowdfunding. The Kickstarter model is very clear-cut: it's either a donation or you're buying something (rewards or product), as opposed to buying equity.
- liveoneggs 12y ago
  kickstarter doesn't allow you to offer equity, but the JOBS act + the SEC did change this year to allow non-accredited investors (people with less than $1M in assets) to buy into a company directly; and for a company to market equity in the style of kickstarter. Here are the new rules: For income below $100,000, invest a max of $2,000 or 5% of income or net worth For income over $100,000, invest a max of 10% of income or net worth Investments made in a Title III crowdfunding transaction can’t be resold for a period of one year

paul 12y ago

If the actual business is still centralized, what prevents the operators from simply ignoring the crypto-shareholders and keeping all profits and assets for themselves?

eterps 12y ago

http://bitshares.org http://bitshares.org

Aerospark 12y ago

I feel sorry for the pre-sale investors, there is a very high probability that they will not see their BTC back. If you are considering investing, be careful. The platform charges 2% fee to all projects funded, 1% to investors, 1% to founders. The investors hold a total of 100,000,000 swarmcoin and the presale is at a rate of 5250 SWARM/BTC. At that rate, the platform would need to do over $1 billion in sales to just get a ROI, something that took kickstarter over 5 years.

Cyther606 12y ago
I do too. In the history of Bitcoin public offerings, never has a single company outperformed holding BTC itself over a modest time frame. SwarmCo is raising a boatload of BTC up front for a risky venture, and taking 1/3 of the funds to pay salaries. Startups are all incentivized to do BTC public offerings, but no one is incentivized to actually deliver products. IPOs are the easiest way to "earn" BTC. It's cringeworthy how so many of these pseudo-IPOs focus on the marketing and the limited time buy opportunity without so much as producing a working prototype. I'm always astounded by the amount of BTCs that get raised. It just reeks of unsophisticated investors getting sheered. From the perspective of SWARMCO, once you raise thousands of BTCs, you're golden. Your investors shoulder all the risk, because the moment they irreversibly send you the most liquid and stable crypto asset, you can effectively disappear, or keep delaying "two weeks" as Butterfly Labs is infamous for doing. If anything goes wrong, just ask Mark Karpeles for advice.
- kolinko 12y ago
  Source? Satoshi dice outperformed holding btc, and that was during the period when btc skyrocketted from 10 to 100. Also, but I may be wrong here, asicminer did a similar trick.
  - iopq 12y ago
    I held ASIC miner and I got huge dividends AND it increased in value while I held and ended up selling
  - 12y ago

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yafujifide 12y ago
This is a business opportunity to create that infrastructure.
- icelancer 12y ago
  Many have tried and failed. This undermines credibility. I want to like Bitcoin but so much moves against it. Including the enthusiasts.
StavrosK 12y ago
We already do traditional banking with computers and mobile apps. Why can't we do the same with Bitcoin? Besides, you can have your hardware wallet in your pocket or safe, which will actually have to be physically stolen for someone to get your funds.
- andrewfong 12y ago
  Electronic transactions with traditional banking are generally reversible. If I hack into your bank account and transfer all the funds to my account, your bank can usually track the funds down and have them returned to you. Moreover, most bank accounts are linked to real-world identities in some way, so there's a high risk that I'll be caught and prosecuted for aforementioned hacking attempt. Not so with Bitcoin.
- deleted 12y ago
  [deleted]
fragsworth 12y ago
If you put most of your assets in a "cold storage" wallet, it will be more secure than any cash, gold, or financial instrument that you own. You put only an amount that you're willing to lose on one of today's machines, for convenience, and it works just fine. Infrastructure doesn't need to change, and it only takes a small amount of effort to learn how to be security-minded.

adventured 12y ago

There's nothing particularly revolutionary about this concept. It existed for nearly two centuries before the SEC locked down rules on investing. The sole reason it hasn't existed the last 20 or 30 years is due to the SEC, not the lack of someone 'inventing' it. Their rules restrain the ability to do it. Anonymous investing was extremely common prior to the SEC taking over full control of investing laws. It was trivial to set up anonymous shell entities and hide who owned what, making it practically untraceable.

spb 12y ago

> The crypto-equity platform is enabled through bitcoin 2.0 technology Oh, please tell me this isn't going to start becoming a thing people say. Please. I can't bear the thought of another "Web 2.0" buzzword bubble.

haakon 12y ago
I'm afraid it's already a thing people say, and has been for a while. But unlike "Web", Bitcoin may actually reach a version 2.0, and at that point, the confusion will probably be a constant source of amusement.
Jd 12y ago
I personally strongly dislike the term "Bitcoin 2.0" although I still use it quite frequently, primarily because I don't know of any other succinct way to describe all of the second generation functionality that is currently being built on top of the blockchain.
- saraid216 12y ago
  ... "Bitcoin-based"?

kriro 12y ago

It may work, it may not. I have my doubts but I'm very happy this exists. We need more radical thinkers like this.

dmix 12y ago

> Susanne Tarkowski Tempelhof on SWARM, a Revolutionary Crowdfunding Platform I've learned to skip any article that has 'revolutionary' in the title or subheading.

tew28 12y ago

This would almost certainly fall under the definition of security under the '33 Act. Besides this, the questionable practice of calling this coin "equity" and representing that it entitles holders that gives them some kind of ownership stake in companies funded with this coin on the website, while putting the disclaimers within another document, creates the impression that the issuers want people to think this is equity so they can raise BTC. As the founder has said in a comment, the majority of the swarm consists of non-native speakers at the moment, so this distinction would be lost on them. There seems to be demand for something like this, but the lack of details or research into relevant laws give me plenty of pause. Can the founder (Joel) clarify his affiliation as well? His swarm bio at http://swarmcorp.com/team.html http://swarmcorp.com/team.html lists "#Harvard #Brown #Penn" but his LinkedIn profile seems to indicate that he did not actually get a degree from all of these institutions.

Jd 12y ago
There are lots of reasons for pause and our choice of the term "cryptoequity" was certainly because it does evoke the fuller idea of the potential behind these cryptoassets, something that you don't get with the weaker but more accurate "cryptotoken." Although we've issued various statements clarifying the issues including a manifesto, cryptoequity whitepaper, and legal action plan, it remains fairly complex and something that is probably not approachable to the ordinary user. I'm hoping that changes with the video explanation that we are launching on July 10th. As for me, I have my B.A. from Brown and M.A. from Penn and a smattering of various other institutions including Harvard.
gone35 12y ago
[Joel Dietz's] swarm bio at http://swarmcorp.com/team.html http://swarmcorp.com/team.html lists "#Harvard #Brown #Penn" but his LinkedIn profile seems to indicate that he did not actually get a degree from all of these institutions. UPenn's 257th commencement program lists one Joel Dietz among their 2012 Master of Arts recipients [1]; and Brown's undergraduate East Asian Studies 2012 alumni newsletter mentions one Joel Dietz '04 having "just finished his M.A. in the East Asian Languages and Civilizations department at the University of Pennsylvania" [2]. The founder's affiliation with Harvard is less clear-cut: apparently he took an introductory Sanskrit course through the Summer School in 2012 [3,4], but it is unclear if he was affiliated in any other more substantive or relevant capacity. For what it's worth, the founder's swarm bio now lists "#Brown #Penn #SalesforceMVP" instead; and an article from less than a month ago listed two different core team members than today [5]. Either way, it is paramount that business leaders be forthright about their academic credentials --remember Scott Thompson?--, especially in such a confidence-tricked industry, and especially when they purposedly cite them as a signal of technical ability and experience [6] --pointless credentialism, if you ask me. [1] http://www.archives.upenn.edu/primdocs/upg/upg7/upg7_2013.pdf http://www.archives.upenn.edu/primdocs/upg/upg7/upg7_2013.pd... [2] http://brown.edu/academics/east-asian-studies/sites/brown.edu.academics.east-asian-studies/files/uploads/EAS_e-newsletter_2012.pdf http://brown.edu/academics/east-asian-studies/sites/brown.ed... [3] https://github.com/fractastical/Sanskrit-at-Harvard https://github.com/fractastical/Sanskrit-at-Harvard [4] http://archive.summer.harvard.edu/courses/sans.jsp http://archive.summer.harvard.edu/courses/sans.jsp Apparently this is the only intro course Witzel teaches. [5] http://www.followthecoin.com/digital-currency-crowdfunding-startup-swarm-raises-450-btc/ http://www.followthecoin.com/digital-currency-crowdfunding-s... [6] http://www.coindesk.com/swarm-take-bitcoin-crowdfunding-new-heights/ http://www.coindesk.com/swarm-take-bitcoin-crowdfunding-new-...

drcode 12y ago

The problem with these tokens is that at the end of the day there is no direct link between a token and the asset they're linked to- Unlike a stock, which gives you voting rights and other privileges. Mind you, there is nothing wrong with a completely "unlinked" asset per se (Bitcoin has proven that) but an unlinked asset's price will, all things being equal, quickly undergo a price-discovery process that will capture the majority of future expected returns. Hence, the price for these equities at any moment in time has no expected return beyond the early floating exchange rate. Therefore, its true future returns should be modest (the same as equivalent cryptocurrencies) and it will have only modest potential as an investment. Bottom line: If the coin doesn't give me any "special powers" like a stock certificate does, it has little upside potential compared to any other cryptocurrency- Hence, it makes more sense to invest any capital I have in a more established currency, like Bitcoin. (And for those arguing "Yes, hempcoin/newcameracoin/etc DOES have value and special powers beyond Bitcoin because my hempshop/newcamerashop/etc doesn't take bitcoins but does take this specialty coin" then it should be obvious that you'd be able to perform a JIT purchase this coin using bitcoins through an exchange, which means Bitcoin holders have access to the same "special power", without needing to be long-term holders of the asset.) These types of coins will only become interesting once cryptocurrency contract technology becomes more developed, so that these coins can give holders more extensive special rights regarding the asset/project the coins are linked to.

qq66 12y ago

Without some force of law to ensure dividend distribution back to shareholders, equity doesn't really exist except at the pleasure of management.

cryptophile 12y ago

I think that Susanne really "gets it". You could build a platform and abide by all reasonable and also silly regulations across the 200+ jurisdictions around the world, or else just like bitcoin, you could cause a "grasshopper syndrome" and make the platform virtually impossible to shut down. You know how that medieval court ordered the grasshoppers to cease and desist camping on farmer John's field. They didn't leave. So, farmer John and his court just learned to live with it. Bitcoin is seriously changing the world in many unexpected ways.

warcher 12y ago

I really am a fan of the idea of all these crowd-sourced equity ideas that are getting hatched. As a boots on the ground business guy, however, the potential for fraud and abuse is staggering. I have seen things go down with 'accredited investors' trying to get into the startup gold rush that are unbelievable. To me, at least. And these same guys are on kickstarter right now, where there's no accountability whatsoever, cleaning up. All I can say about the regulation of equities is that it's an ugly solution to a very real white collar crime problem.

Nursie 12y ago

For anyone interested in micro-equity I found a site called http://crowdcube.com http://crowdcube.com recently. It doesn't have any cool crypto aspects but it is basically kickstarter with real equity (rather than just a speculative pre-order). It's UK only at the moment. I guess that must be because regulations make it difficult in the USA. But there's no blockchain aspect so I guess it can't be as cool as SWARM...

chippy 12y ago
Do you think that SWARM would operate easier in the UK?
- Jd 12y ago
  As it turns out, Swarm's first legal entity is in the UK.
- Nursie 12y ago
  As I understand it, in the USA you can only attract public investment either by gong fully public and being regulated as a public corporation, or by attracting individuals of high net worth. From what I understand this is considered a consumer protection mechanism, such that you can't lose the farm (literally) by investing in private equity schemes. So far as I know, this restriction does not exist in the UK. So yes, if SWARM operated in the UK with UK investors it might have an easier time. Personally I don't really see the need for the crypto aspect, and AFAICT investment regulations are usually a good thing, but whatever floats your boat.