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Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

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Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#41

Boggles my mind that the SEC would give the tick to an ICO with heavily discounted tokens. You gave founders, employees and investors tokens at $0.00012. Then you sold discounted tokens at $0.12. Now you're pumping the pyramid scheme further with a public sale at $0.30. It's a nice way to pump a 2500x return for yourself and investors before any exchange listing. Can't wait for the SEC to endorse that behavior across…

How is that different/worse than a startup? Early founders/employees get stock at a lower price, and then the price goes up if the company makes progress. There's only a return if the market values it.

So if an unregulated ICO does it, it's bad. But if a regulated ICO does it, that's cool, just regular startup scene behavior. Pump and dump those return multiples on unsophisticated public investors. The VC leeches will love this new short-cycle SEC-endorsed wealth channel.

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#42
post #38
post #37

Earlier quoted context omitted.

Has the BlockStack Proof-of-Work been chosen yet?

See the "Tunable Proofs" discussion in Seciton 2 of the whitepaper 2.0 https://blockstack.org/whitepaper.pdf Initially, we rely heavily on proof-of-burn when the native hashpower on the network is lower. We're currently looking at memory-hard hash functions for the native PoW part.

> memory-hard hash functions

You may want to look at asymmetric memory-hard PoW as well (instant memoryless verification)

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#43

Boggles my mind that the SEC would give the tick to an ICO with heavily discounted tokens. You gave founders, employees and investors tokens at $0.00012. Then you sold discounted tokens at $0.12. Now you're pumping the pyramid scheme further with a public sale at $0.30. It's a nice way to pump a 2500x return for yourself and investors before any exchange listing. Can't wait for the SEC to endorse that behavior across…

It gets better; there's something like 130M tokens sold to founders & other insiders that have no transfer or time lock associated with them. Guess which ones will be the first traded at full pop?

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#44

Boggles my mind that the SEC would give the tick to an ICO with heavily discounted tokens. You gave founders, employees and investors tokens at $0.00012. Then you sold discounted tokens at $0.12. Now you're pumping the pyramid scheme further with a public sale at $0.30. It's a nice way to pump a 2500x return for yourself and investors before any exchange listing. Can't wait for the SEC to endorse that behavior across…

Thanks for pointing this out. From direct text from our FAQ:

"Why were Stacks Tokens valued/sold at $0.00012 prior to the 2017 accredited sale at $0.12? Founders and early employees of Blockstack PBC received tokens at $0.00012 per token in October 2017 based on an independent valuation from Foresight Valuation Group, LLC when the Stacks Token was still in its earliest stage of development and before the publication of the token white paper at the end of that month. This grant was subject to a three-year time lock commencing upon the introduction of the genesis block to the Blockstack network in November 2018, and the nominal price reflected the early, high-risk support of founders and early employees.

Holders of Blockstack's Series A convertible preferred stock who had invested a total of $5.1 million as of late 2016 and funded Blockstack's early growth and development before the decision to create a token, or the drafting or publication of any white papers—were also provided an opportunity to purchase tokens at the $0.00012 per token price. This opportunity to participate at a nominal price was given in return for their early support and in proportion to their equity ownership, and it was based on their reasonable expectation as early investors that they would receive tokens if Blockstack ever decided to create a digital token. These tokens are subject to a three-year time lock, commencing upon the introduction of the genesis block to the Blockstack network in November 2018."

Now more context here:

I purchased my shares in Blockstack PBC in 2013 for $42, as does any other startup founder. Will I get a 23809x return if I sell my shares for 1,000,000? No, I'm earning these by the 5+ years of work and no reasonable person would assume that it's a 23809x return. The grant is "free" or at "$0" and the $42 number (standard practice in startups) is there for a tax cost basis.

Exact same logic applies to founder/employee token grants, as we structured our token grants after equity grants.

We did not sell "discounted tokens" at $0.12. That was the price the market was able to bear in Fall 2017. If you consider that a "Series A" price. A 2.5x multiple for a "Series B" is, again, totally standard and rather at the low end for traditional startups. Same thing applies here.

Finally, we are disclosing all this information so investors can make informed decisions. Not the standard practice in other token offerings. I believe disclosures and transparency is a good thing and that's why we took this approach and worked with regulators.

My one request would be to view this from a "what would it look like in a traditional startup?" angle vs. a "how is this project trying to scam me with a pyramid scheme?" angle. Thank you!

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#45
They are selling 180K tokens.

The question is, how many tokens have been pre-mined/created on a non-mined basis (if any).

Who owns these pre-mined / created tokens.

Half the time these blockchain scammers have the public only get access to 10% of the actual tokens, resulting in totally crazy valuations for the premined token's they are sitting on. Someone should be able to run the numbers.

Ie, pre-mined tokens not offered * offer valuation per token = supposed value they've created with platform.

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#46

Boggles my mind that the SEC would give the tick to an ICO with heavily discounted tokens. You gave founders, employees and investors tokens at $0.00012. Then you sold discounted tokens at $0.12. Now you're pumping the pyramid scheme further with a public sale at $0.30. It's a nice way to pump a 2500x return for yourself and investors before any exchange listing. Can't wait for the SEC to endorse that behavior across…

It gets better; there's something like 130M tokens sold to founders & other insiders that have no transfer or time lock associated with them. Guess which ones will be the first traded at full pop?

If by this you mean tokens that were locked for 1 year under Reg D and then unlock monthly since the launch of the Stacks blockchain in Nov 2018, then yes there is a subset of tokens that are unlocked following the unlocking procedures that other holders also follow.

Union Square Ventures, myself, and my co-founder are one of the largest holders of such tokens. We have restrictions from the SEC on selling these on the open market (given >5% ownership of Blockstack PBC). Restrictions which are also disclosed in the offering circular. Happens all the time with IPOs.

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#47

Boggles my mind that the SEC would give the tick to an ICO with heavily discounted tokens. You gave founders, employees and investors tokens at $0.00012. Then you sold discounted tokens at $0.12. Now you're pumping the pyramid scheme further with a public sale at $0.30. It's a nice way to pump a 2500x return for yourself and investors before any exchange listing. Can't wait for the SEC to endorse that behavior across…

How is that different/worse than a startup? Early founders/employees get stock at a lower price, and then the price goes up if the company makes progress. There's only a return if the market values it.

That's the case for equity. Tokens here don't represent equity in the company.

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#48
post #44

Boggles my mind that the SEC would give the tick to an ICO with heavily discounted tokens. You gave founders, employees and investors tokens at $0.00012. Then you sold discounted tokens at $0.12. Now you're pumping the pyramid scheme further with a public sale at $0.30. It's a nice way to pump a 2500x return for yourself and investors before any exchange listing. Can't wait for the SEC to endorse that behavior across…

Thanks for pointing this out. From direct text from our FAQ: "Why were Stacks Tokens valued/sold at $0.00012 prior to the 2017 accredited sale at $0.12? Founders and early employees of Blockstack PBC received tokens at $0.00012 per token in October 2017 based on an independent valuation from Foresight Valuation Group, LLC when the Stacks Token was still in its earliest stage of development and before the publication…

> Finally, we are disclosing all this information so investors can make informed decisions.

This is great, and I plaud that. I also think you guys are genuinely trying to be honest here.

Unfortunately, a sane level of skepticism (and sarcasm) has to be expected, in general, especially here on Hacker News.

Re: Launch HN: Stacks (YC S14) – The first SEC-qualified crypto token offering

#50

They are selling 180K tokens. The question is, how many tokens have been pre-mined/created on a non-mined basis (if any). Who owns these pre-mined / created tokens. Half the time these blockchain scammers have the public only get access to 10% of the actual tokens, resulting in totally crazy valuations for the premined token's they are sitting on. Someone should be able to run the numbers. Ie, pre-mined tokens not of…

If only there were some sort of centralized disclosure document to address all of these questions...
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