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What is an Initial Coin Offering and How Does it Work?

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Re: What is an Initial Coin Offering and How Does it Work?

#71
post #53

Earlier quoted context omitted.

> But when you have two funding systems, where one is completely open, and the other requires certain guarantees (identity, legal responsibility), the first is always going to be full of scammers. Exactly. It always cracks me up when people tout the completely deregulated nature of cryptocurrencies as a good thing.

> It always cracks me up when people tout the completely deregulated nature of cryptocurrencies as a good thing. Well, I'll acknowledge that there are real downsides, but I think it might be feasible to (over time) build opt-in layers on top of the existing layers which serve some of the same purposes as some regulations and handle some of those issues. States are good and important and all, but if we can build somet…

Just to be clear: I wasn't making an argument in favor of states, merely in favor of a regulating body.

Some industries already self-regulate precisely to preempt regulation by a government agency, as in: "we're well-behaved amongst the rules we made for ourselves, so please don't step in and start making rules we cannot control".

Re: What is an Initial Coin Offering and How Does it Work?

#72

Earlier quoted context omitted.

I wonder what percentage of ICO investors actually read through the corresponding whitepaper to try and discern the real claim of value... I truly do.

They just scroll it. And do you know who they are? The Chinese. The Chinese are the ones fueling the ICO craze. How do I know? I'm hanging out in a Slack channel full of them. I asked them how did you get into crypto? Verbatim response was that "friend said it easy money". Then he said "China full of money." Full of money indeed. In fact the majority of ICOs are not even open to Americans.

Heh, my guess all along has been that the crpytocurrency story right now is about capital flight from China and India (i.e. the recent cash ban there), and possibly from some other destabilized regions like MENA.

Re: What is an Initial Coin Offering and How Does it Work?

#74
Rather than thinking about the businesses that currently are trying to get rich by doing ICOs, I'd like to point out that the idea of creating tokens out of thin-air, and having them obtain value purely by speculation, is an interesting system we should ponder more about.

We're now capable, thanks to these consensus systems, of creating tokens that have certain properties. For instance Bitcoin is a specific kind of token which is scarce - hence will work more like gold. Other tokens (perhaps Ether or Dogecoin) instead are not scarce at all, and new tokens continue entering the system all the time.

What's interesting about these systems is that we're converting money from the "real world" into this "speculation world". And purely because of speculation, real money is essentially being converted into this digital world.

In a very abstract way, we're essentially converting FIAT real-world money into these digital tokens that are hackable and can take on a myriad of different attributes.

To me this smells like the future - even though we're still far from it. Capitalism and the banking system we have created for ourselves is certainly not going to cope with the technological automations and the sheer amounts of jobs we're going to lose (hence automate) quickly.

Universal basic income is only part of the solution - but something like a world of tokens that behave in very different ways might be part of the solution as well. Even though we might not see the possibilities nowadays, to me it's very exciting to see how something can gain value simply because of speculation.

Perhaps in the future we'll have to redefine even what "money" is, or what "valuable" means. Again, if we're thinking about fully-automated societies, perhaps the idea of having a scarce token that only banks can create (our FIAT system) is not ideal. Perhaps the future is any kid creating his own token with some funky properties for his own videogame, and living off the "likes" he gets on some social network.

Re: What is an Initial Coin Offering and How Does it Work?

#75

Earlier quoted context omitted.

I think the exchanges are the ones selling shovels and am certain that they have a horse in that race; e.g. Kraken added support for trading EOS yesterday, started at $1 now it's at $4.16. With potential ROIs like that (all across the board) I am certain that Wall Street cowboys are all over this market. But at least we have the SEC to protec..oh we don't.

I find EOS especially hilarious. Per their own FAQ[0]: "The EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities or features on the EOS Platform." And: "We believe that EOS means different things to different people. We have received numerous amazing interpretations of what EOS stand…

> At least they're honest about it.

Or, they expect legal action and they see it as a possible disclaimer.

Re: What is an Initial Coin Offering and How Does it Work?

#76
post #55

Earlier quoted context omitted.

Call me when a single of these projects that raise a ton of money from ICOs actually delivers and becomes a success. So far we have seen a lot of no strings attached cash given away to people with just an idea who would never raise money from real investors. I think it's a ponzi scheme. As far as people selling ICO tokens for 10x price, only a small number of people can logically do that and it relies on influx of ne…

Technically, I don't think you can call it a Ponzi scheme unless you're paying existing ICO owners with new, incoming ICO buyers' money. Coins sort of prevent that? I think it's technically just fraud: they take your money, convert it into worthless acorns, then when nothing happens, the acorns can't be traded for any value.

Yes, perhaps. I think most people who "invest" in ICOs follow this logic:

1) Get into the ICO race and be quicker than others so you get tokens. There is always massive demand to participate in ICOs so most people aren't quick enough to get their transactions in.

2) Wait until the new worthless token is listed on some speculative exchange which allows trading of these tokens (Poloniex). In the meantime hype the token on social media like Reddit to increase FOMO. Once it's listed those people that didn't get into ICO will rush in to buy tokens as they anticipate the price to go up by 10x.

3) The ICO investors cash out their coins from this initial spike of new money rushing in after listing on exchange.

4) Rinse and repeat.

Re: What is an Initial Coin Offering and How Does it Work?

#77

I think the cryptocurrency story is real, just like the internet story was real in 1999, but these ICOs show that the market is getting way ahead of the tech, regulations, business models, etc. I have a longer rant about it, here: https://twitter.com/jonst0kes/status/880806655067291649 (Sadly, twitter's threading model is now so broken that you have to do lots of clicking to get to the good back-and-forth dialogue in…

Why do you need a Kickstarter campaign? Most authors just go ahead and write.

Re: What is an Initial Coin Offering and How Does it Work?

#78

A lot of people are calling these things Scams. People arent wrong and to a certain degree they do attract the "quick buck" type to them. Keep in mind though that these are also very useful for companies to get the Digitial Currency and block chain into the hands of the masses without some of this money, which large parts of that may be burned, will yield some killer apps. The people doing an ICO do it to raise a bun…

> The allure for people starting a company is that you can raise millions and give 0% of your company away. Some people will scam, it's true maybe a lot will, but some will undoubtedly start something big and will want to do more than just scam. A system which enables scamming like that is a horribly broken system, and the occasional success story does nothing to change that fact. Contrast this to an IPO, where you h…

You can't "contrast this to an IPO". It's just 1000 times different. ICO are more like a seed round, accessible for everyone, not just VC firms. Seed round are counter-intuitive / highly risked investments, like ICOs.

>A system which enables scamming like that is a horribly broken system I agree, lots of people are going to get scammed, and the market/ the ICO structure is going to evolve, that's natural. People are already digging and you can already see very well documented due dilligence about ICOs.

I don't think it's a broken system, it's just a young system that is evolving quickly.

Re: What is an Initial Coin Offering and How Does it Work?

#79

I think the cryptocurrency story is real, just like the internet story was real in 1999, but these ICOs show that the market is getting way ahead of the tech, regulations, business models, etc. I have a longer rant about it, here: https://twitter.com/jonst0kes/status/880806655067291649 (Sadly, twitter's threading model is now so broken that you have to do lots of clicking to get to the good back-and-forth dialogue in…

Seems like a project worthy of its own ICO ;)

Re: What is an Initial Coin Offering and How Does it Work?

#80
post #74

Rather than thinking about the businesses that currently are trying to get rich by doing ICOs, I'd like to point out that the idea of creating tokens out of thin-air, and having them obtain value purely by speculation, is an interesting system we should ponder more about. We're now capable, thanks to these consensus systems, of creating tokens that have certain properties. For instance Bitcoin is a specific kind of t…

> creating tokens out of thin-air, and having them obtain value purely by speculation, is an interesting system we should ponder more about

There's a rich history of this in the securities world. Note that many times across multiple countries, joint-stock companies' stock ended up becoming interchangeable with government- or metal-backed currency. John Law's currency scheme for France was a sale of stock and bills, not modern cash [1].

[1] https://en.wikipedia.org/wiki/John_Law_(economist)

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