
Half of ICOs Die Within Four Months After Token Sales Finalized - chollida1
https://www.bloomberg.com/news/articles/2018-07-09/half-of-icos-die-within-four-months-after-token-sales-finalized
======
hudon
You can see the state (volume, # daily users) of some of these promised
"dapps" here: [https://dappradar.com](https://dappradar.com) . It is indeed a
barren wasteland. And when a new popular ICO comes along, the Ethereum network
struggles and fees skyrocket.

It's weird because people compare it to the early days of the Internet... but
the early Internet was useful from its beginning: you could at least send
messages and files across the network, which was incredibly useful to academia
and the military and was orders of magnitude more efficient than any
alternative.

Now, all we see is rampant fraud and a complete disregard for the environment
[0] with no gain in efficiency. It's high time we hold "crypto-anarchists"
accountable for these issues.

[0] The Ethereum network consumes more electricity than Iceland
[https://digiconomist.net/ethereum-energy-
consumption](https://digiconomist.net/ethereum-energy-consumption)

~~~
darawk
> It's weird because people compare it to the early days of the Internet...
> but the early Internet was useful from its beginning

That really depends on where you put 'beginning'. But more to the point,
blockchains are useful now, just like the internet was. They're just not
useful for all the things that are being promised (yet). Also, just like the
internet wasn't.

> Now, all we see is rampant fraud and a complete disregard for the
> environment [0] with no gain in efficiency.

People never tire of pointing this out. Yet it completely ignores the fact
that there are solutions to this problem that are in the works, and have been
planned for a long time.

There are lots of problems with the crypto space. Fraud is rampant. Energy
consumption is wasteful, temporarily. It's also not clear that dis-
intermediating human institutions is actually what we want to do. But if you
think it's _all_ a fraud, or that there is _no_ value, then you're just not
thinking very hard.

~~~
madeofpalk
> But more to the point, blockchains are useful now, just like the internet
> was. They're just not useful for all the things that are being promised
> (yet)

How long do we have to wait to find a valid use case for blockchains? It's
been 10 years now and we're still asking the same question.

~~~
api
The main use case for block chains is quite obviously to skirt government
regulation: black markets, unregulated securities and quasi-securities, etc. A
secondary and related use case is to avoid the hassle and complexity of old
fashioned equity and other fund raising constructs and to make easier
international wire transfers.

Putting ethical concerns aside: these are very large market segments.
Cryptocurrencies may be overvalued but there's definitely a real use case.
It's just not a use case that governments, banks, or conventional VCs like.

I feel like all the claims to the effect that cryptocurrencies have no use
case are ignoring the obvious.

~~~
imesh
Ignoring tax evasion and other white collar crimes, selling drugs alone is a
$36 trillion dollar a year industry.

~~~
gehwartzen
I think maybe you mean billion. The Gross World Product is around 78T USD.

------
chollida1
So I've been doing alot of thinking lately about traditional VC and PE vs
ICO's for work.

Its pretty rare for VC and PE firms to just be blatantly ripped off like a
good portion of ICO investors are.

As far as I can this is due to 3 things.

1) Geography, Most VC/PE firms only invest in a particular country and know
the laws as they relate to the contracts they sign with companies. This
ensures that they can atleast try and go after the founders, legally speaking,
if any "shenanigans" occur.

2) KYC, most will only invest after performing due diligence, which always
includes meeting the team and confirming through lawyers that the team is who
they say they are and they own the IP they say they do.

3) Contracts, I've participated in a few ICO's and never signed anything. I
realized I was essentially giving money to a complete stranger with nothing
more than an IOU from someone who I'll never meet and in many ICO cases, never
have any way to find them.

Fortunetly for ICO's as a legit means to raise money these are all solvable.
They just require "adults in the room.".

If you look at the successful ICO's from a professional investors angle(VC,PE)
they all followed the above 3 steps.

~~~
pembrook
> They just require "adults in the room."

You mean like regulators and trusted intermediaries? Due diligence conducted
by independent third parties? Like the real financial system has always had?

So basically, we went through this whole ICO bubble to realize that things are
the way they are for a reason.

~~~
JumpCrisscross
> _we went through this whole ICO bubble to realize that things are the way
> they are for a reason_

That may be overly reductive. My views on several rules changed as a result of
observing the ICO phenomenon.

For example, I used to be skeptical about accredited investor requirments.
Turns out, they're super necessary! On the other hand, I think Regulation D
could be massively simplified--from a required paperwork perspective--to lower
the cost of selling unregistered securities.

~~~
xur17
> For example, I used to be skeptical about accredited investor requirements.

I agree that we should probably have regulations in place to protect people
from scams, but accredited investors are just people with > $1M or > $200k in
income over the past 2 years. Basically a way to filter for 'wealthy' people
that can afford to lose the money.

~~~
JumpCrisscross
> _a way to filter for 'wealthy' people that can afford to lose the money_

The part I didn't appreciate is it's also a filter for people who can hire a
lawyer/adviser to conduct basic diligence. Raising $1 million in $10,000
cheques guarantees virtually zero oversight. That, much more than anything
legitimate, has been what ICOs have enabled.

------
mrnobody_67
I'm so surprised that smart contracts aren't being used to release the funds
over some set of time, with the ability for community to vote to block it if
they feel team has stalled. Nobody needs $20 or $50m on day 1.

~~~
asdsa5325
I'm not surprised. ICO investors are crazy and ignorant. If they thought
straight, they wouldn't invest at all.

~~~
vkou
Many of them are investing because there is money to be made over the course
of a pump and dump.

They don't actually want any pre-order tokens that entitle them to 2 GB of
storage on a distributed crypto-file-system, or whatever the ICO promises.

Think ticket scalping, except that the tickets are for a concert that may or
may not happen. (Because the band hasn't actually written any songs, found a
drummer, rehearsed anything, rented a venue, or even bought any instruments.)

------
startupfounder
Original Boston College Paper that this article is based on:
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3182169](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3182169)

Conclusion:

"We also show that there is a positive and convex relationship between (log)
market cap and (log) number of Twitter users, that nearly all ICO capital is
raised by crypto-companies that continue to be active (on Twitter) after 120
days, and that _daily Twitter intensity is associated with positive returns
that day but negative returns in the future_ , suggesting overreaction and
reversals. "

"It suggests that scams, while plentiful in number, _are not as important in
terms of stolen capital_ because investors are shrewd enough to spot (and
underfund) them."

------
craigc
Haha what do you know. Another day, another anti-crypto article on the top of
Hacker News.

In this case, I agree with the overall sentiment. I don’t think these
companies are actually “dying” though, but rather they were probably created
as get rich quick schemes, so they took the millions of dollars they raised
and then sailed off to some island somewhere.

From the report

> We use intensity of tweets from the cryptocurrency official Twitter account
> after the ICO to estimate that the survival rate for startups after 120 days
> (from the end of the ICO) is only 44.2%, assuming that all firms inactive on
> Twitter in the fifth month did not survive.

Not sure how I feel about that methodology, but probably many of these
companies never planned to actually issue a product in the first place so it
may very well be accurate.

~~~
xbkingx
I love it and agree. It's like this at the start of every major change that
has an impact on all levels of society. Even if these tokens are failing, they
exist because they caught some unique insight into how the tech will change
the world and they were able to communicate that clearly enough to get many,
many investors. That they failed or were money making schemes is irrelevant
because someone will see the core idea once the sector has matured and use
that to build something cool and useful.

It should also be pointed out that 50% of small businesses fail within 5
years, and between 70-96% fail within 10. You'd think people so incompetent at
identifying success would know when to STFU by now. "Hey, our industry is the
go to source for how to run a business. Businesses have a 96% failure rate.
Please continue to listen to us. Why are you laughing?"

[https://www.fool.com/careers/2017/05/03/what-percentage-
of-b...](https://www.fool.com/careers/2017/05/03/what-percentage-of-
businesses-fail-in-their-first.aspx) [https://www.inc.com/bill-
carmody/why-96-of-businesses-fail-w...](https://www.inc.com/bill-
carmody/why-96-of-businesses-fail-within-10-years.html)

------
vkou
"Still, all investors should probably sell their coins within the first six
months, the study found."

If all investors should sell their coins, who is the counterparty that should
buy them?

~~~
aphextron
Shhh

~~~
mockingbirdy
He knows too much. Better put him at the top of our pyramid scheme so he loses
his integrity in exchange for money like Mr. McAffee.

~~~
vkou
How much money will you give me, and what coin do I have to shill for it?

------
ashishb
Are there any ICOs which resulted in a successful product? Please exclude
crypto-exchanges like Binance.

~~~
cslarson
Golem is live. Augur is going live today. MakerDAO has a very interesting
stablecoin called Dai that's live. Status' mobile app is now mainnet by
default. DigixDAO is live. And many more in testnet phases. But don't let
reality mess with the cynical perception that the hn crowd wants to portray!

~~~
avhwl
Both Augur [0] and MakerDAO [1] have centralized points of failure that would
allow the owners of the contracts that define the tokens to halt transfers,
withdraw funds, or in the case of MakerDAO, mint tokens out of thin air.

[0]
[https://etherscan.io/address/0x9f8f72aa9304c8b593d555f12ef65...](https://etherscan.io/address/0x9f8f72aa9304c8b593d555f12ef6589cc3a579a2#code)
(Line 453) [1] [https://github.com/AugurProject/augur-
core/search?q=onlyInBa...](https://github.com/AugurProject/augur-
core/search?q=onlyInBadTimes)

------
fairpixels
That’s actually a conservative number. We [1] design UI/UX for all sorts of
startups and the last year a good chunk of that was for ICO related projects.
The vast majority dies somewhere during the sales period.

[1] [http://fairpixels.pro](http://fairpixels.pro)

~~~
dougmccune
So you actively seek out and work for companies that you believe are most
likely pure scams? I don't mean this to come off as too judgmental, I'm
honestly curious what your take on it is. Does the fact that you know your
client is trying to rip people off factor into the decision to take on a
project?

Or do you think the ICOs you design for are all well-intentioned and just so
happen to all fail after/during their token sales?

~~~
fairpixels
We never seek them out specifically and it’s impossible to tell if someone is
planning to scam people. Pretty much each of those projects start of with
seemingly great founders, boards of advisors and even tech. Some projects did
succeed and others are in progress right now so who knows how things will
evolve.

------
rm_-rf_slash
The research in the article was not quite clear. Was their only “sign of life”
measured by tweets? What about capitalization, transaction volume...anything?

~~~
garmaine
It’s almost like... they got busy and started working on what they promised to
do.

~~~
MBCook
Or they ran away with the money and don’t want to be as easy to track.

~~~
garmaine
Missing the point. TFA uses a metric which is unable to distinguish between
success (working instead of tweeting) and failure (scam). That's beyond
wrong...

~~~
s73v3r_
If they were working on it, though, one would think they'd be delivering
updates to show their progress.

~~~
garmaine
As someone who has actually worked on such things, you'd expect updates to
drop off to a trickle on an actually productive engineering project. At least
compared to the pre-ICO hype. A few regular blog posts every other week, vs. a
constant storm of promotional material and hype.

~~~
chipotle_coyote
I've actually worked on such things, too, and in my experience, "I'm too busy
programming to let you know my company is still around" isn't a particularly
good excuse even at tiny two- and three-person shops. When I've seen that
happen at cottage software companies in the past, it has _never_ been a sign
of health: more often than not, when they finally communicate again, it's to
tell us that they're closing shop.

And more to the point, tiny two- and three-person shops probably aren't doing
ICOs. If your company is big enough to undertake a public offering of any
kind, it's damn well big enough to have someone on staff whose
responsibilities explicitly include some kind of community relations work.

~~~
garmaine
That's misrepresenting what I said... the amount of communication pre-ICO will
be a lot more than post-ICO, but not nothing.

------
tehabe
"Still, all investors should probably sell their coins within the first six
months, the study found."

This is a baffling statement, mostly because if you sell your "coins" to
someone and they keep them too long, they will lose everything. Which could
lead to liability questions.

I mean, you buy those coins and sell them as fast as you can, because you know
that they won't be worth anything within in days or weeks, it could be argued
that you committed security fraud. Well it could also argued that the ICO
itself is already fraud, because of the huge risk involved.

~~~
tim333
Shares and similar tokens don't work like that on the secondary markets like
stock and token exchanges. One person clicks sell and another buy and very
seldom does anyone worry too much legally about the reason why, insider
trading being the occasional exception.

Issuing shares from scratch is different and there you can get done for fraud.

------
drngdds
Is there a legitimate reason why ICO-backed projects seem to need so much
money before even making a working prototype? Don't startups normally have to
have a basic product to show off before they get investors?

~~~
tomglynch
Almost all successful ICOs in the past 6 months have working prototypes. Only
in the very early stages, June 2017 - November 2017 was this not the case.

------
Animats
And that's for a really weak definition of "fail". How many made it to

\- claimed product became operational

\- claimed product achieved positive cash flow

\- claimed product repaid investors.

------
christianbryant
In contrast, the ICO for SingularityNET has actually done quite well and
received 5 times the amount of demand expected for their token sale; they
postponed the end of their token sale date to properly handle the overwhelming
demand. Feels most ICO sites are giving them 4/5 rating on average, but we'll
how that goes. I think the reason this one in particular is doing so well is
that the purpose of the sale feels useful, which is "to let anyone create,
share, and monetize AI services at scale". According to them, the world’s
first "decentralized AI network" has arrived.

Anyone have thoughts as to why this ICO could be different? ICO Drops says it
was a whitelisted ICO:

[https://icodrops.com/singularitynet/](https://icodrops.com/singularitynet/)

Interesting note from the website: "While we are aware that the AGI token is
currently being traded on some exchanges, we do not encourage or facilitate
this exchange trading in any manner. Speculative secondary trading is against
the spirit of the AGI token and SingularityNET project. We strongly discourage
speculative secondary trading and officially ask AGI token holders to act
accordingly."

~~~
mikeschmatz
> I think the reason this one in particular is doing so well

What makes you think it is doing so well?

~~~
christianbryant
If one compares IPO->ICO, in that context then the SingularityNET ICO may not
seem to have to forecast of "profitability" that one would usually associate
with a successful public offering. However, in the context of the purpose of
the AGI Token they offer, the initial demand was high and in fact overshot,
pointing to anticipation (or hype, but I believe it was genuine anticipation)
for the coin. It sold 500 million tokens, reaching the ceiling in 24 hours.
Sales dates were pushed to allow more sales due to overselling. That points to
an initial success, I think.

Looking at the purpose of the AGI Token which is to create an open AI exchange
(if I understand it correctly), where AI developers use their services in
exchange for the AGI token, or for other services, then looking back at that
anticipation and over-sale of tokens, it appears there are interested and
active investors who are looking to make this coin work. To me, that is
successful in comparison to simply having a Public Offering where lots of
people invest, often to only lose that money later. This seems to have a
purpose.

What points to current success, the "doing so well", is the more than decent
ratings a large portion of ICO watchdog sites are giving it for now (although
many ICO watchers acknowledge the level of hype to date has been high).

Looking at the current numbers, you're probably going to say "meh"; especially
considering the ICO hype pushed the price up, then it dwindled down to a low
ebb and flow. But that isn't why I see high expectation, still, for this coin,
right? It still has intentional use built into it, and according to the
website the Platform Beta Release is coming in the next month or so, at which
time the coin will begin to do its work.

So, for me, "doing so well" means there was meaning behind the ICO beyond just
economics, the interest was there and was overwhelming, the project has code
tied to the coin that is going to go live soon and (from what I read)
anticipation is still there within the AI community and the investors.

But again, I ask the question here because compared to the statistics in the
article above, SingularityNET appears to be... doing well.

------
putlake
The headline is misleading. It says ICOs "die". The actual article says that
after 3-6 months, returns from a cryptocurrency are no better than the overall
crypto market.

This is like saying after 6 months of an IPO, the stock does not outperform
the S&P 500. It doesn't mean the IPO is dead, or the stock is dead.

------
granaldo
ICO die is one extreme, ICO that has too much hype like Tron
[https://www.coingecko.com/en/coins/tron](https://www.coingecko.com/en/coins/tron)
is the other spectrum of questionable

------
agotterer
How is this possible? Most of these ICOs are raising way more money than a
tradition VC backed seed/series A round. Shouldn’t they have enough funding to
limp along for few years? I wonder if it takes 4 months to give up on the idea
or steal the funds?

~~~
jopsen
Isn't it mostly the valuations that are high?

------
cjlars
The article gleefully ignores the positive side of these investments
documented by the authors of the study:

>We find evidence of significant ICO underpricing, with average returns of
179% from the ICO price to the first day’s opening market price, over a
holding period that averages just 16 days. Even after imputing returns of
-100% to ICOs that don’t list their tokens within 60 days and adjusting for
the returns of the asset class, the representative ICO investor earns 82%.

Not saying I want to participate in any ICOs, especially now that a lot of
frothiness has gone out of the market, but this article is clickbait garbage
if they can't even summarize some of the main points from the abstract.

~~~
granaldo
which make it not healthy. old time miners do not expect instant return mining
coins, and today ico investors want out fast

------
lamontcg
"die" is a funny way to spell "exit scam"

------
blocked_again
Like it or not blockhains are here to stay. Nobody is going to run behind VCs
looking for elite money in 20 years from now. Isnt it obvious? Blockhains are
going to redistribute the wealth from the wealthy elite few to the masses.
More and more wealth is being generated from nowhere. Just because there are
some spammy ICOs now doesn't mean it's the end of the blockhain and ICO. This
is going to be another rare instance in which hacker news is going to be wrong
like Dropbox incident. Mark my words.

~~~
lucasmullens
How would blockchains redistribute wealth away from the wealthy?

~~~
ENGNR
Securities deregulation. On the one hand, investors deserve protections. On
the other, has the regulation gone too far by design, locking out the middle
class it used to serve so well. Why do companies wait until most of the value
is already realized before they IPO these days

Crypto could be Uber for securities, ignoring the regulator and using
technology to self regulate, or by operating out of countries with lighter
regulation

~~~
zackmorris
This is a fallacy. Generally regulations tend to protect consumers or
vulnerable groups from harm. The recent global trend towards deregulation and
austerity moves in the opposite direction of social democratic movements in
Germany, Scandinavian countries and much of the EU. The end result being more
of a wild west free for all that results in something more like the Gilded Age
of the 19th century than a well-optimized free market like imagined on the
Jetsons.

That said, there are certainly cases where financial market regulations have
hurt the middle class. For example, a pattern day trader rule was imposed in
February 2001 which required a $25,000 minimum balance to trade on margin:

[http://www.finra.org/investors/day-trading-margin-
requiremen...](http://www.finra.org/investors/day-trading-margin-requirements-
know-rules)

More about trading on margin (in the most basic sense - potentially doubling
your gains but wiping you out if your total stock holdings equal what you
borrowed, triggering a margin call):

[https://www.investopedia.com/university/margin/](https://www.investopedia.com/university/margin/)

The pattern day trader rule was introduced after the dot bomb with several
stated goals like protecting inexperienced investors or limiting volatility.
But it was really yet another tactic to keep the most lucrative forms of
trading in the hands of wealthy/institutional investors and leave the masses
in the slow lane of trading with their own money.

It's extremely important to know the nuances of regulations and their
unintended consequences. But instead we only generally hear about deregulation
from politicians, because they know that insiders (their base and lobbyists)
will always win over the masses in a fully deregulated economy.

P.S. I didn't downvote you, because the sentiment you expressed is widespread
and needs to be addressed

~~~
airstrike
> But it was really yet another tactic to keep the most lucrative forms of
> trading in the hands of wealthy/institutional investors and leave the masses
> in the slow lane of trading with their own money.

This is entirely subjective and it actually also happens to be wrong.

~~~
zackmorris
That's the great thing about subjectivity, I could say the same thing about
your comment unless you have proof that no day traders were negatively
affected.

BTW I got interested in this sort of thing after this law blocked the start of
my day trading career :-P

~~~
airstrike
You're the one making the wild claim without proof, so our comments are not
the same. The burden of proof is on you.

I don't have to prove that day traders weren't negatively affected. In fact,
even if one of us proved they were affected, this wouldn't support the
argument that the _intention_ of the bill was "to keep the most lucrative
forms of trading in the hands of wealthy". That's just unsubstantiated hot
air.

Most importantly, you haven't even proven that day trading is "the most
lucrative" form of trading and that's probably an even wilder claim! While the
burden of proof is on you again, I can already think of two reasons why it is
incorrect: (1) day trading incurs in significant transaction costs due to the
frequency of the trades and (2) though you may get outsized results on a given
trade if your gamble pays off, it's just speculation so it will never beat the
market on a risk-adjusted basis. Unless you're a hedge fund with significant
resources to take on huge positions and minimize transaction costs, there is
really no easy alpha left in the market. Everything's already priced in these
days.

------
ThomPete
Most companies built on the TCP/IP protocol dies.

I really don't think this is very meaningful metric for anything.

Sure where there is a lot of money there is a lot of people trying to weasel
their way in. But so far the usage has grown.

Much more companies will fail just like on "the internet" but the blockchain
just like the TCP/IP protocol is here to stay and the coming generations will
adopt it as if it's the most natural thing in the world just like we did with
the internet.

------
analog31
To put this in perspective, how does 50% failure rate compare with other ways
of funding startups?

------
arisAlexis
how is this different from startups failed purportedly at 99% rate? It's only
faster

------
matte_black
Is there legit money to be made in ICOs without running a fraud?

~~~
NathanCH
Forget money, I would like to know of one legit ICO. One single ICO that has a
product. One.

~~~
HammadB
I think the RNDR token is the only one I've seen that really makes sense.
[https://rendertoken.com/](https://rendertoken.com/). And the people behind it
(Otoy) are very reputable.

~~~
fabricexpert
There's no product though, just a roadmap. The first item of which is "raise
ICO money"

------
jillesvangurp
Some thoughts from the inside. My company (Inbot) is currently in the pre ICO
phase: we're selling tokens but not on the blockchain yet. We're very hesitant
to move to the next phase precisely because of the tendency of many ICO
companies to collapse almost straight away. Investors dumping your coin on the
day of the ICO is kind of deadly for its valuation and if your ICO is
attracting that kind of investors, something is indeed wrong. Quite many ICOs
are set up such that this is actually the goal rather than something they want
to avoid (pump and dump). We're kind of going against the trend here by
planning to survive this initial phase (hard).

The reason many companies are doing ICOs regardless is because it actually
makes sense if you look at it as a financial instrument that gets you funded
quickly to the extend where you get similar capitalization comparable to a big
series A or even B round.

Like with high risk investments, ROI is pretty bad; except when it is not.
Most ICOs will fail but some will not. This space continues to be so hot on
the premise that there are a few unicorn ICOs out there that are actually
going to make it. Ironically, this is leading to a lot of misguided
investments by, well, idiots. This in turn is leading to a lot of successful
attempts to separate these idiots from their cash. Blame the idiots, not the
ICOs. Hence Dogecoin, PonziCoin V3 (this is a thing !!!), and similarly poorly
veiled scams. I applaud these people for being able to make so much money with
so little effort.

There are many issues with dapps. IMHO it doesn't make any sense to write
dapps right now unless your roadmap spans several years because the technology
is very immature, the infrastructure is not there, and the fixes are years out
from becoming proven to the point where you can rely on them to function as
advertised. This requires more than proof of concept. Ethereum and bitcoin are
out there with many users that are trying to exploit it in any way they can.
That makes it battle tested. Alternative technology stacks exist but lack this
type of user base and scrutiny.

Most of these alternative stacks still have serious flaws conceptually and
practically. Quite a few of them seem to be moving the problem rather than
solving it. What's needed is orders of magnitude improvements to throughput
and scale for dapps to be usable by the masses. 50k transactions sounds nice
until you realize that is globally and needs to service the entire ecosystem
of dapp applications. That's not a lot compared to a modern db running on off
the shelf hardware. Once users actually show up, that kind of traffic can be
caused by a spike in usage on a single dapp. If you have many of those, that
will be happening all the time.

Right now the only things dapps make sense for are things that are relatively
high value so you can justify the cost and have enough per transaction revenue
and very low in transaction volume so that the whole thing doesn't collapse
when you actually get some traction. That pretty much narrows it down to
limited amount of trading of coins on top of ethereum, which is indeed the
dominant type of dapp in use today.

Some successful ICOs are actually about fixing this problem. They are long
term investments in tech companies that are likely to fail but very lucrative
if they don't. E.g. Telegram is a high risk investment but they are now well
funded and have enough runway to execute whatever it is they are doing for the
next few years. And they have a decent tech team. Similarly IOTA, QTUM,
HashGraph, and others are well funded companies well capable of executing
roadmaps that will take quite long to deliver results. Are those bad
investments? Not if they succeed. Is that any different from e.g. the likes of
Google bank rolling Magic Leap? Or indeed any kind of VC tech investment?

------
jacquesm
That's long. I would have expected the end to come within hours of the funds
being released to the perps. Err. Entrepreneurs.

~~~
jerf
I imagine the facade must be maintained long enough for the checks to
irrevocably clear, which can actually take a while. The big bad evil fiat
government money system has the advantage and disadvantage of being able to
claw back transactions for quite a while, since it's basically the fundamental
primitive of the system that ensures integrity of the system. (That is, at the
foundation, the money system tends not to be about _preventing_ fraud so much
as being able to _remediate_ it after the fact. There are many higher layers
that are about preventing it too, of course. But at the very bottom, it's
about remediation.) If you're going to hike away with investor money, the
whole system needs to clear all those tentacles away from your Cayman Islands
(or whatever the hot destination is) account first.

~~~
JumpCrisscross
> _fiat government money system has the advantage and disadvantage of being
> able to claw back transactions for quite a while_

Recently helped a friend extract his company from a wire fraud scam. Wires,
particularly international wires, are surprisingly irrevocable. You basically
have to get the receiving bank to agree to send the money back.

~~~
jacquesm
That's worthy of a blog post in its own right.

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izzydata
I thought the whole idea of an ICO was a joke from the comedy Silicon Valley.
It seemed too ludicrous.

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polski-g
They're called shitcoins for a reason.

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arisAlexis
not commenting on weather facts are sane or not. bloomberg has consistently
been publishing negative cryptocurrency articles each time the market goes up
to the point of suspicion

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tiglionabbit
Do you all have any idea what this is talking about? I've never heard of ICO
and you're all using it as if it's some familiar and obvious thing with no
explanation.

~~~
Captain_Usher
An ICO is an "Initial Coin Offering", it's supposed to be like an IPO except
instead of offering shares, you're selling cryptocurrency coins. ICOs are
usually framed as a way to fund a project or business, usually related to
cryptocurrencies or blockchain technology in some way. The idea is that the
project's success will increase the value of the coins you bought and you'll
be able to sell them for more later.

The main difference is that the coin is just a coin, buying it won't make you
a shareholder and you aren't subject to the regulation that IPOs and
shareholders are. That regulation makes it difficult to scam investors by
starting a dummy company, pretending it's a valuable operation, selling shares
in an IPO, and then running away with the money. Doing this with an ICO is
much easier, and there's a lot of concern about how many ICOs are frauds.

~~~
themagician
Is the company required to buy back the coins?

I’m not sure I get the point of an ICO. It seems like a company issuing
monopoly money. It even seems like this would have been possible before
crypto—literally just Monopoly money to people and let them trade amongst
themselves.

I guess Monopoly money is easy to duplicate… but so is crypto in a way because
you can just start your own currency that uses the same block chain to create
more tokens.

~~~
RIMR
Do you understand the concept of a stock share?

Well, just remove the company, the product, and the regulation, and that's an
ICO.

The issuer of the coins/tokens do not have to buy anything back. The idea is
that they will increase in value and function, and others will want to buy
them from you.

It goes like this:

1\. "RichCoin" is created and the creators begin selling them at 5,000
Richcoins for 1 Bitcoin. Ads are pushed across social media platforms and web
communities are seeded with information that encourages people to invest.

2\. 50,000 people spend a total of 1000 Bitcoins buying the first 5,000,000
RichCoins.

3\. After public launch, 5,000 people sell their RichCoins to late investors,
netting ~20% profits.

4\. The remaining 45,000 people "HODL", hoping that their $1 RichCoins will
one day become $100 RichCoins so that they can move to a private island and
never work again.

5\. RichCoins fall to 10% or less of their ICO value as all official websites
disappear.

6\. The creators of RichCoin, who long ago converted their 1000 Bitcoins to
$5,000,000 USD, move to a private island and never work again.

~~~
mikeschmatz
> 6\. The creators of RichCoin, who long ago converted their 1000 Bitcoins to
> $5,000,000 USD, move to a private island and never work again.

Is it that easy to turn BTC to cash? I heard most exchanges have no way to
withdraw real dollars.

~~~
aiCeivi9
Shouldn't be a problem with coinbase or other large exchanges. Getting the
cash out of bank might be actually harder, AML systems will flag huge
transfers from known crypt-exchanges.

