I missed the part where this was ever a good project.
Cryptocurrency mining has to use the cheapest available power, or else it loses money because the mining rewards float at just above the cost of the world's cheapest power. Because many companies prefer renewable power (such as data center operators who want to claim they are carbon-neutral) and there's a limited supply, renewable power will always be at a premium over the cheapest power.
A big problem with successful ICOs is that the companies immediately have too many shareholders to let them pivot. The idea could probably be morphed into something that works, but not with 100s of retail shareholders demanding progress on the idea they originally backed.
> I missed the part where this was ever a good project.
Agreed.
> Cryptocurrency mining has to use the cheapest available power
Mostly agreed.
> A big problem with successful ICOs is that the companies immediately have too many shareholders to let them pivot.
An ICO doesn't give you shareholders. Some ICOs outright call the money you give them "contributions" or "donations". (Tezos, who had a very successful coin offering and then hit somewhat similar challenges as this lot was very explicit: "Any contribution made to TEZOS during the Contribution Period as described below is qualified as a non-refundable donation...") But even the ones who label the money as an investment aren't giving out anything remotely resembling ownership, control, or voting rights to the purchasers.
I don't see any reason why a pivot wouldn't be possible. And, cynically, a lot of ICOs do pivot almost immediately, from "building the product they promised" to "spending the money they raised". :)
> not with 100s of retail shareholders demanding progress
They can "demand" all they like, but what can they do? They have no ownership, no control, and no votes. The company is apparently owned by one Matthias Woestmann; as the article notes, he doesn't even have to listen to the founders. He certainly doesn't need to listen to the people who participated in the ICO.
Agree to all of those points. The part where any "investors" essentially have no say, control, or equity in the company would certainly defy any possible reason for a sentient angel or corporate investor to make an investment. There's an abundance of red flags that people need to seriously look at.
Other gems from the article:
> “I know most of the I.C.O.s out there are either fraud or won’t deliver on their promises,” he said. Envion, he believed, was different.
Uhh...
> Seif Shieshakly, an adviser to Envion who is based in the United Arab Emirates, said that the I.C.O. structure had “cut out so many middlemen” and created new investment opportunities, but that “the lack of regulations, again because of the infancy of I.C.O.s, carries risks that regulated environments would generally have far less of.”
This one again speaks for itself.
> The investors have also turned up evidence that some of the founders sold their own tokens before the current mess spilled into the public.
Wow... so I guess with a lack of regulation, insider trading is suddenly cool again.
> But he said the funds added up to only $50 million at this point, not the $100 million that the founders had claimed. Mr. Woestmann said the founders hadn’t raised as much money as they claimed. And the declining price of virtual currencies has dropped the value of the various digital tokens Envion is holding.
So they not only willingly defrauded investors, but also basically used the money like a bank instead of a company, and just purchased other crypto assets to trade and earn from.
> Jessica Smith, a 21-year-old in England, said she had put $28,000 into Envion — almost all of the money she had made over the last two years of trading cryptocurrencies nearly full time. She said she was now looking for new work.
That's a very painful lesson about putting all your eggs in one basket, but one she will probably learn from.
I found the term "contributions" odd, and when Googling it, found the following, which seems to be the epitome of the sort of ICO you describe, the "Useless Ethereum Token":
>100s of retail shareholders demanding progress on the idea they originally backed.
They have no guarantee or protections when buying into an ICO. They may try to pivot and get some disgruntled worthless-token-holders as a result, but if crypto has shown anything it's that even outright scams will maintain an unfortunately strong community of supporters.
This is similar to how people raising money on crowdfunding sites decide to change/improve the product after beating their targets. This also results in failure usually because they don't deliver the original product and don't really know what they are doing except trying to spend the money they have raised.
If electricity were easily stored and transported, you might have a case that renewable power is always more expensive.
But renewable power is sometimes generated in inconvenient places or times. For example, the power lines needed might not be built yet, or it might be using the wind blowing at night. Sometimes crypto mining is in the best position to take advantage of that.
That seems like a shocking lapse in planning when installing very expensive solar arrays. Can you point to an example? Does this happen frequently enough that there’s nearly always somewhere to run a miner?
"[Bitcoin mines] are often built beside hydroelectric plants set up along mountain streams. These plants often produce more energy than they can sell to China's state grid, and some plant owners have found they can either sell the surplus to bitcoin mines or set up their own mines."
They have a huge transmission line across Texas for Wind Power. I’ve heard sometimes electricity prices go negative at night due to excess wind power. There are actually tons of free nights electricity plans to match.
What will actually happen is the power producers buying what are, effectively, space heaters. You can never rely on negative power prices sticking around.
I think they are saying that let's say you install wind turbines. Great, you use them as much as possible during the day when electric demand is high. So, then it is night and the supply exceeds the demand due to the fact that this energy can't be stored (or only in a limited fashion). This "wasted" electricity might be a great way to extract value from otherwise wasted electricity. I've said this to friends, I don't know why the power companies wouldn't be mining with electricity that would otherwise be dumped. It is just another channel of demand.
«renewable power will always be at a premium over the cheapest power.»
That's patently false. The share of global electricity that's going into crypto mining is small enough—less than 0.5%—that it's too small to directly affect the price of renewables.
In fact some mining ventures are even starting to build their own private power plants (one example: https://news.bitcoin.com/20mw-solar-farm-set-to-power-crypto...) There is no reason why this would increase the cost of renewables. More money, more R&D, more infrastructure deployments will in fact in the long term push prices downward for the rest of us (economies of scale):
"A big problem with successful ICOs is that the companies immediately have too many shareholders to let them pivot. "
I don't quite understand. What could you pivot .... to?
You were either going to the ICO... or what could you possibly be geared to do?
I know ICOs are all "techy" but outside that I don't see any reason someone offering an ICO would be good at anything else but that. It seems like a one shot business ... it either happens or it doesn't.
I think what's being suggested is that if you launch an ICO to "build an amphibious sheep ranch" or whatever, and raise $100m, and then it turns out that no such sheep exist, you don't have to just shrug, go "oh well", and spend the $100m on Lamborghini's. You could pivot and do something else.
Here the company had an ICO to raise funds to build mobile crypto-mining rigs to move to where green energy was cheapest; if that's not viable, maybe they could build mobile crypto-mining rigs to move to where non-green energy is cheapest. Or maybe get into the green energy business directly. Or, I dunno, start making cooking shows, why not?
> What could you pivot .... to?
The suggestion isn't that they should pivot from "doing an ICO" as their business plan; that wasn't (meant to be) the business plan. The suggestion is that now that they've done the ICO, maybe they can pivot from their original business plan to something viable.
...or they can just spend the next few years suing each other and spending the money. That works too.
When I think of a pivot I just sort of assume there is some core competency there that could be used in another way.
Someone wants to start a hip blogging site, that doesn't work, well some other web service.... after all they've got people who kinda know that, and it's not that far off..
Just going from "we're gonna mine a bunch of coins" to, I just can't imagine how much capability you have to do anything else.
Granted you don't have to pivot to something close, but man your odds of success have to drop pretty quick the farther you get from what you were built for. Even big successful companies fail at trying new things all the time, because nobody there gets it. Cisco's hilarious dip into consumer tech for a while with flip video, their hyper expensive video conferencing stuff is my favorite example.
If you just read SEC reports on public companies at random (weird, I know), you will find a bunch of tiny non-Delaware companies that have no idea what they want to be when they grow up - they are just evaluating different businesses to try, and often have a history of different ventures that failed. Sometimes people do a reverse merger with one of them as a convenient way of going public without a regular IPO. It all seems quaint compared to the crypto craze, but anyway, it is kind of similar to what you're describing.
>"Cryptocurrency mining has to use the cheapest available power, or else it loses money because the mining rewards float at just above the cost of the world's cheapest power."
How much energy is being wasted each year due to power plant and grid inefficiencies?
Envion said it would use the money collected from investors to build mobile rigs, filled with computers designed to “mine” or digitally create new Bitcoin. The rigs could be moved between sources of renewable electricity, which would power the mining computers
Good project?? Sounds absolutely pie-in-the-sky. Another ridiculous idea that raised an insane amount of money from extremely naive investors. In other words, just another ICO.
It was extremely naive, they had a budget of $1000 for delivery and connection. The first container shots were empty, and the dashboard showing earnings was mock data.
Anywhere these are outside in the winter they will ingest snow with those fans.
Lots of red flags everywhere and yet still extremely successful.
How much of this ICO story is simply rediscovering things that old finance had already found?
All this talk about being able to trust the entrepreneurs, that they were building a real business in good faith, it's not exactly a new problem.
The solution, before blockchain muddied the waters, was that you'd find a reputable investment bank, which would stake its reputation on your sincerity, and they'd introduce you to people who would be willing to invest. There would be a bunch of rituals to go through, like a road show, presentations, meetings. And that's not all; there was a regulatory process they would show you how to pass as well.
Is this a running joke or something? I've seen the misspelling of Ethereum several times now on hackernews and it's a tell-tale sign that the people talking about it haven't invested much time researching it or delving in to the space in any way.
> Given the regular and massive losses due to breakins, scams, and fraud, I have to wonder if this is the most efficient way to learn these lessons.
Where there is money changing hands, there are scams and fraud. The difference with crypto is that you can follow / track the money at all times. It doesn't mean you can get it back, but it does increase the chances that somewhere along the line the attacker will slip up and reveal themselves once they try to buy something or exit in to fiat currency.
The bottom line is that crypto exists because the banking system is perceived as broken by many. It's slow, expensive and corrupt as far as the average person on the street is concerned.
I agree that fraud, scams, and crime happen everywhere. Which makes it a useless statement. My point is that it seems to happen way more in the crypto space than elsewhere. Are you claiming that it happens the same or less? If so, I'd love to see your data. Because I suspect comparing the failure rate of, say, IPOs vs ICOs would show a significant difference.
And I think you're wrong about why cryptocurrencies exist. Philosophically they're rooted in an anti-government, technoutoptian, anarchocapitalist line of thinking. You could digitally transfer money for a decade before Bitcoin existed, and more if you count things like Western Union.
It of course didn't really get going until the hucksters and the speculators discovered you could make a lot of money. At which point, any real effort to be "electronic cash" went out the window, because although deflation and volatility are bad for currencies, they're great for hype and speculation.
I definitely agree that the banking system is antiquated, and that there's plenty of room for improvement. But cryptocurrencies do almost nothing to solve that problem. In comparison, look at M-Pesa. It started at about the same time as Bitcoin, but has had major success in serving the unbanked.
I've been watching this one very closely as I'm a fairly large miner. This was a scam or failure from day one.
Totally over-engineered and zero experience running an actual mining operation. They put so much effort (patents!?) into those MMU shipping containers that there is no way for them to compete with all the other people who are just building a simple box and throwing miners into it.
The MMU had substantial airflow design issues as well. To the point that something as simple as opening the door of the container would throw everything off balance. How about putting 90+ holes on the side for sucking dirt and bugs into the container? I could keep going on and on...
The also heavily moderate their community. Anyone who speaks up with hard questions, is silenced with blocking and removal from their group.
To watch it get to the point where it has is quite entertaining to the say the least.
HydroMiner is a far more interesting project, run by two sisters, with actual long term experience in this industry. Nicole got ripped on the math for this article [1] which was directed at Envion, but at some level, she is pretty right. There was no way that Envion would ever pay back what they claimed they would.
The founders of the company ... set it up in Switzerland...
...problems had begun even before the project started fund-raising late last year because of the chief executive the founders brought in, Matthias Woestmann.
According to Mr. Martin, the founders gave Mr. Woestmann what they thought was temporary control of their shares in the company. Mr. Woestmann later refused to give them back, and then diluted the shares of the other owners, providing him with control of the money that was raised.
This is exactly the same problem Tezos had. What's the deal with people giving up control of their money?
If you give someone ownership of your company, obviously they're not obligated to give it back. It's their company now. You were dumb enough to give it away; why do you think they'd make the same mistake?
Also, to the extent that this had worked, it feels like an attempt at setting up a straw transaction to hide control of the company. Why exactly did they thing they needed to "temporarily" transfer ownership of the company?
Jessica Smith, a 21-year-old in England, said she had put $28,000 into Envion — almost all of the money she had made over the last two years of trading cryptocurrencies nearly full time. She said she was now looking for new work.
RED FLAG: CLAIMS OF HIGH, GUARANTEED RETURNS: Not quite 'guaranteed', but seems quite inflated... https://www.envion.org/en/ico/
RED FLAG: CLAIMS OF “SEC-COMPLIANT”: Yes, https://www.envion.org/en/faq/ "Our token is fully compliant with regulations set by the SEC and Swiss financial regulators and outside auditors from one of the Big Four auditing firms will vet every aspect of the business, including prior to the ICO."
RED FLAG: INVESTING WITH A CREDIT CARD: Yes, https://www.envion.org/en/faq/ "We accept Ethereum (ETH) and Bitcoin (BTC) cryptocurrencies and credit card payments with Visa or Mastercard."
RED FLAG: PUMP AND DUMP SCAMS: Yes, look at the current price.
"Buying EVN by credit card will result your token to end up in a locking period of 4–12 months (see envion.org/faq). This locking period is a protection for our investors needed for credit card payments."
>a plan to bring clean energy to the computers that manage Bitcoin.
This doesn’t even make sense. Not surprising this failed and I don’t feel sorry for idiots that invested in a project that makes no sense. Bad projects must fail.
The JOBS act was a push towards securitized crowdfunding but it had too many strings and never took off like many hoped. ICO's are proof that there is demand for real-time trading in private companies with micro-investment, but it also has obvious issues.
My hope is securitized-ICO's develop that make it easier to raise money from a global pool of investors, and the investors also have liquidity and legal rights. We need regulation that improves the situation without destroying it.
There's demand but there is no supply. No serious company is going to crowdfund away actual equity. Only the very worst companies are going to go out on the street and beg randos for capital hence ICOs. The reality is that the public will never have access to high quality deals. But there is a lot of money being left on the table that is flowing into scammy ICOs and badly managed Kickstarter projects. It's really too bad the IRS has nothing on the spectrum between private foundations and highly regulated public charities. There's a case to be made for "micro-foundations" that could be crowdfunded for a common purpose and would be barred from issuing ownership shares or taking on debt. (At dissolution time all "profits" of the charity must be disbursed to another charity.) There's a real failure of imagination here at the IRS: the internet makes it ever easier people to collaborate but it's very difficult to effectively pool capital which leads to Kickstarter and ICOs both of which are very sub-optimal solutions for everybody.
ICOs are proof that there is demand for real-time trading in private companies with micro-investment
Is it? Or is it proof that people will put up with really sketchy structures to chase potential 10x-10,000x returns? Prudent token offerings like Sia have had low demand.
It's bigger than that. It's about disenfranchisement of the people. Less than 2% of accredited investors are black, less than 5% women. Capitalism in tech can be thought of as voting for the future with your money.
The JOBS act is like saying blacks and women can vote, but only on 10% of issues and their votes aren't counted as heavily.
Right now there's the biggest disenfranchisement of our lives and most people don't even see it. It's selling the future out from under the public, and not even giving them a chance to buy in. It's racist and sexist to start off with, then it gets worse as you look. And it's completely state sponsored through authoritarian laws built for 'protection'.
My biggest takeaway from the past few weeks is that POW based distributed cryptocurrency is a bit like communism; it only works on paper.
The reality is that, even with Bitcoin, the power to stave off attacks has consolidated to a few big players. The massively distributed protocol and massive power usage is a huge wast at this point. If your gonna need a few big players anyway, might as well build a trusted circle from the start and eliminate the rest of the waste.
The coins that can actually be used for day-to-day transactions are vulnerable to attacks. The largest and most secure player, Bitcoin, has reached the point where transaction fees are too high and speeds to slow; nobody takes it anymore.
Where does it go from here? I predict governments are gonna crack the whip and altcoins, along with ICOs, will be a footnote in history.
EOS has DPOS (Delegated Proof of Stake) which is not wasteful like PoW, it is a trusted circle model, and transactions are free, and it is easier to distribute ICO-like tokens, I think it might go there from here
Cryptocurrency mining has to use the cheapest available power, or else it loses money because the mining rewards float at just above the cost of the world's cheapest power. Because many companies prefer renewable power (such as data center operators who want to claim they are carbon-neutral) and there's a limited supply, renewable power will always be at a premium over the cheapest power.
A big problem with successful ICOs is that the companies immediately have too many shareholders to let them pivot. The idea could probably be morphed into something that works, but not with 100s of retail shareholders demanding progress on the idea they originally backed.