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Thoughts on Tokens

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Re: Thoughts on Tokens

#31

However, when considered as an alternative to classic equity financing, token sales yield a >100X increase in the available base of buyers and a >1000X improvement in the time to liquidity over traditional methods for startup finance. The three reasons why: a 30X increase in US buyers, a 20–25X increase in international buyers, and a 1000X improvement in time-to-liquidity. these token sales are successful because peo…

> These people are paying millions for API keys they can't yet use?

Comparing API keys to tokens is quite weird. I don't think they have almost anything to do with each other.

In general the blog text is pretty bad. It doesn't differentiate very well between tokesn and cryptocurrencies. Tokens are usually not mined but are more like shares in a company. Also many of these ICO's are very scammy, investors should be cautious.

Re: Thoughts on Tokens

#32
post #26

To me the two most provocative points made in this essay are that tokens could be used to fund open source projects and that tokens could be used to distribute some of the value in large successful internet companies like Google & FB to early adopters. I don't see how this would work though. I buy a token for some random open source project (say a unit testing library because they link to one as an example). And then…

Tokens ban be used to fund anything, including open source projects. However the general trend seems to be that token crowdsales are just used to fund more token crowdsales, as it doesn't really make sense to do the work when you get the money up front.

Re: Thoughts on Tokens

#33
post #29
post #26

To me the two most provocative points made in this essay are that tokens could be used to fund open source projects and that tokens could be used to distribute some of the value in large successful internet companies like Google & FB to early adopters. I don't see how this would work though. I buy a token for some random open source project (say a unit testing library because they link to one as an example). And then…

You can raise money by crowdsourcing without having to raise a single USD ever, fill forms, go through regulators and banks etc. It's not that you offer redeemable tokens. You just create a token and people buy it. Then you have money. That's how it works for at the moment.

I'm pretty sure that if you ask the regulators, they will have a different idea on how token crowdsales should be treated. Essentially they are very similar to a shares in a company. In the end when you sell those tokens you get BTC or USD, which pretty much should be treated as money if you ask the government.

Re: Thoughts on Tokens

#34

However, when considered as an alternative to classic equity financing, token sales yield a >100X increase in the available base of buyers and a >1000X improvement in the time to liquidity over traditional methods for startup finance. The three reasons why: a 30X increase in US buyers, a 20–25X increase in international buyers, and a 1000X improvement in time-to-liquidity. these token sales are successful because peo…

> These people are paying millions for API keys they can't yet use? Comparing API keys to tokens is quite weird. I don't think they have almost anything to do with each other. In general the blog text is pretty bad. It doesn't differentiate very well between tokesn and cryptocurrencies. Tokens are usually not mined but are more like shares in a company. Also many of these ICO's are very scammy, investors should be ca…

Have you guys thought about adding ETH trading? or Monero/Dash?

Re: Thoughts on Tokens

#36
post #26

To me the two most provocative points made in this essay are that tokens could be used to fund open source projects and that tokens could be used to distribute some of the value in large successful internet companies like Google & FB to early adopters. I don't see how this would work though. I buy a token for some random open source project (say a unit testing library because they link to one as an example). And then…

I can sort of see it. Let's say you have a Kickstarter and the first 100 people get a ticket to a concert. If you give them an online token that works as a ticket, it's (in theory) more easily transferable, so they could exchange it online.

This is a way of creating an online secondary market with little infrastructure. It assumes you want to encourage it. (Unlike many artists who want to discourage scalpers.) You could imagine this sort of thing happening with any other credits, like game currency or frequent flyer miles. Something usable worldwide (unlike concert tickets) would have more value.

However, I don't know how many companies who will want to hand out credits that are exchangeable worldwide in this way, since you don't know who your customers are and there is little protection against abuse. It seems like there would be a lot of potential for money laundering as well.

But, if you're desperate to raise funds, it gets you money up front (much like Kickstarter) and speculation might result in raising money faster. On the other hand, it might reduce demand due to less "fear of missing out," since people might consider buying it later (much like they buy products on ebay).

What would open source projects could give people that they would want to buy? There are games and other product-oriented stuff, but most software isn't in that category.

It's ironic that a technology supposedly based on not having to trust anyone relies so much on trust. If the company doesn't deliver on whatever the tokens are supposed to buy, they become worthless.

Re: Thoughts on Tokens

#37
post #29

Earlier quoted context omitted.

You can raise money by crowdsourcing without having to raise a single USD ever, fill forms, go through regulators and banks etc. It's not that you offer redeemable tokens. You just create a token and people buy it. Then you have money. That's how it works for at the moment.

I'm pretty sure that if you ask the regulators, they will have a different idea on how token crowdsales should be treated. Essentially they are very similar to a shares in a company. In the end when you sell those tokens you get BTC or USD, which pretty much should be treated as money if you ask the government.

I was being a bit sarcastic. :)

Re: Thoughts on Tokens

#39

However, when considered as an alternative to classic equity financing, token sales yield a >100X increase in the available base of buyers and a >1000X improvement in the time to liquidity over traditional methods for startup finance. The three reasons why: a 30X increase in US buyers, a 20–25X increase in international buyers, and a 1000X improvement in time-to-liquidity. these token sales are successful because peo…

Stopping investment scams like the current ICO bubble is exactly the reason the SEC exists. It is an absolute certainty that this party is going to end in regulation and it's also likely that a bunch of people will end up in jail. The only real question is how long it will take the regulators to figure out which one of them has jurisdiction here.

I say this as an early Bitcoin investor and current holder. Bitcoin was not a scam, but many of these ICOs are blatant cash grabs specifically designed to circumvent SEC rules about selling unregistered securities to non-accredited investors.

I'll also say that I think current SEC rules are too restrictive and to the extent ICOs represent Uber-like defiance of bad regulation, they could be a good thing. But a totally unconstrained ICO market bubble may be far too much of that good thing.

Re: Thoughts on Tokens

#40

However, when considered as an alternative to classic equity financing, token sales yield a >100X increase in the available base of buyers and a >1000X improvement in the time to liquidity over traditional methods for startup finance. The three reasons why: a 30X increase in US buyers, a 20–25X increase in international buyers, and a 1000X improvement in time-to-liquidity. these token sales are successful because peo…

This. I'm still shocked that reputable VC firms like a16z are completely throwing their weight behind cryptocurrencies without even a slight bit of skepticism.

I recently listened to an a16z podcast where they had on a founder of a blockchain hedgefund. It was enlightening to listen to them talk about all the various coins and all the use cases. Chris, in the interview, uses an analogy of this being similar to the beginning of the internet and how you could have invested in either companies or domain names, implying domains are much more of a sure bet. In their mind, buying coins is equivalent to buying domain names. I think this pretty much illustrates their whole view - either force make some bets and be seen as part of the pioneers or miss out and be seen as the late adopting skeptics.

But there are so many fundamental differences that I would argue it's not even in the same realm of similarity. For starters, there is rampant oversupply. Everyone is trying to get into blockchain and trying to initiate an ICO or trying to create their own blockchain. Then there's the actual lack of use cases for the majority of them. Even in the beginning of the internet one thing was clear - it was a breakthrough in how quickly information could be transmitted. It's not very clear what the obvious use case for blockchains are, though proponents will provide a long list of possible use cases.

Take Golem for example. On paper, it looks interesting - it's a token for computing power that's not based on a central controlling entity. So for this to even work there has to be some sort of SDK that "packages" computing work so that computers on the Golem network can ingest it. It's a given that SDK itself is a huge attack surface vector, making every computer on the network vulnerable to a bug that will eventually be found. On top of that, there will be the huge variations in computing power and capacity at any given time ensuring that any critical infrastructure cannot run on it. Let's say you run into a problem, and maybe your output was unexpected. How do you debug? Whom do you contact if things go wrong? I'm willing to bet most people will pay a little more for the benefit of having a central point of contact (like AWS).

There's also the argument for coins being used as "shares" of a company. This is probably the most dangerous use case. There's a reason why regulators exist. They were started to protect the interest of the common man (though now it can be argued they've lost their way but that doesn't mean the answer is to completely abolish them). What's stopping sophisticated scammers conducting fly by offerings and disappearing? It doesn't take much to create a top notch video and create "buzz" around something. This is like Kickstarter on steroids (in the worst possible way).

I'm interested in hearing why I'm wrong, so if you have arguments against any of my points, please reply. I really want to believe in all of this, because that seems like the right thing to do, but something in my brain isn't clicking.

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