
What is an Initial Coin Offering and How Does it Work? - discombobulate
https://www.fxempire.com/education/article/ico-initial-coin-offering-work-418446
======
Animats
Mastercoin, mentioned in the article, is now down to 85th place on Coin Market
Cap.

Despite all this smart contract stuff, few of these "ICO coins" give the
holders any authority over anything. It's not like 51% of the coin holders can
fire management.

Ethereum now has half the market cap of Bitcoin, despite the total failure of
the DAO, the one big application of the smart contract technology. See "Use
Cases Of Ethereum In Different Sectors 2016".[1] It's been six months; what's
actually working?

* Branche.io - payday loans. Got as far as the initial token offering 6 months ago. Then, nothing. Did they take the money and run?

* Iconomi.net - "digital asset management platform" \- site says "Coming in 2017".

* Augur.net - prediction/gambling platform. Not yet operating for real, but there's a play-money beta.

* RexMLS.com - distributed real estate listing service. Was supposed to have test listings live in April 2017. Didn't happen.

* truststamp.net - distributed identity system to detect fake social accounts. "Connect your Social Networks. The more accounts you connect, the higher your potential Trust Score! Your account information is not stored and your privacy is protected." Not working yet. If it did work, spammers could defeat it by creating interlinked fake accounts on Twitter, Facebook, etc., which some already do.

* chainy.info - store misc. info such as URL shortening bindings on the Etherium blockchain. This seems to work, but isn't used much. If it caught on like tinyurl, the Ethereum blockchain would choke on the traffic.

* uport.me - "self sovereign identity". Still at "sign up for alpha".

* dynamisapp.com - supplementary unemployment insurance that checks LinkedIn to see if you're employed. Not working. Last blog update January 2016.

* ico.inchain.io - insurance against cyber hacks. Site not responding.

* ujomusic.com - some kind of music platform. Not working yet.

* peertracks.com - distributed music royalty system. Not working yet.

* singulardtv.com - distributed video payment system. 5000 Twitter followers! Not working yet.

* beyond-the-void.net - game with Ethereum contracts for in-game currency. Beta version downloadable. At least it's running.

* firstblood.io - e-sports where you can put up money on your play. Alpha available, no beta yet.

* etherplay.io - "Play games and win tokens" \- "Coming Soon".

* akasha.world - distributed social network. There's a downloadable alpha.

* vdice.io - online gambling. Like Satoshi Dice, but for Etherium. "Coming soon".

* slock.it - the guys with the DAO and the IoT door lock. That didn't end well.

* electricchain.org - buy and sell solar power over the Ethereum block chain. Lots of PR. May actually be working on a tiny scale.

* lo3energy.com - another energy trading system. Lots of PR, no operating installations.

So that's what people are actually doing with Ethereum. Not all that much.
Even the online gambling startups aren't fully operational.

[1] [https://www.ethnews.com/use-cases-of-ethereum-in-
different-s...](https://www.ethnews.com/use-cases-of-ethereum-in-different-
sectors-2016)

~~~
dandero
"Ethereum now has half the market cap of Bitcoin, despite the total failure of
the DAO, the one big application of the smart contract technology. See "Use
Cases Of Ethereum In Different Sectors 2016"

It's funny how tech people can't understand that innovation is a trial and
error path. Ethereum is doing something that has never been done, trying to
disrupt the concept of finance and you are talking here about the DAO failure
of one year ago that was already fixed with an hard fork solution. Do you
really believe that with the hundreds of millions and the back up of some of
the most successful companies in the world they will not be able to take the
invention to phase 3? You are a really pessimistic folk man.

~~~
calafrax
I hear this "you just don't understand" claim a lot: from my teenage kids and
*coin proponents.

------
wyldfire
Previously, we had a filter screening new altcoins (expletive deleted) in that
you had to know enough about bitcoin to at least fork the repo, build it and
make some modest changes to create a new namespace. We could see whether those
coins are worth anything by looking to see if there was a novel PoW or other
network changes, premine, etc.

Now, Counterparty and much moreso Ethereum have created an opportunity for
anyone to mostly click through to a new asset/token and make claims about some
abstract business idea. FOMO drives folks to invest in the pump-n-dump of the
day. Very few of these have any real claim of value.

Please, tell your friends not to invest in these ludicrous scams.

~~~
richardknop
Exactly my thoughts. This is pure gambling. Lots of people will end up losing
money while a small amount of people will make millions from these scams.

~~~
sillysaurus3
True, though it's probably best to go further:

 _Any_ money into any cyptocoin is pure gambling. Don't put any money in you
can't afford to lose. If anyone is saying the word "investment" while talking
about a cryptocoin, smile and nod while slowly receding in the other
direction.

As a gambling vehicle, cryptocoins are one of the finest ever created. But
people should at least admit to themselves that it's not investing.

That's a little bit of a No True Scotsman, but there's a grain of truth to it.
Yes, abstractly cryptocoins are going to create a lot of value for the world.
But that value is abstract, at least for now. It's different from the sort of
value that a startup creates: at least a startup is trying to affect the world
in a tangible way that can usually be explained in a couple of sentences.

EDIT: I think it's possible to invest in cryptocoin, but you have to be
willing to put money in and then not touch the coins for years. What bugs me
about ICOs is that it's pandering _solely_ to a get-rich-quick mindset. That's
nearly the definition of any "initial X offering."

~~~
leovailati
> It's different from the sort of value that a startup creates: at least a
> startup is trying to affect the world in a tangible way that can usually be
> explained in a couple of sentences.

I agree that it is different. Arguably, though, if Bitcoin gains enough
traction, it would affect the world too.

~~~
lumberjack
>Arguably, though, if Bitcoin gains enough traction, it would affect the world
too.

But even then, the ways in which it would affect the world is unpredictable
and any predictions are pure speculation.

In 2011 people where thinking that when 1BTC reaches $1000 in value, there
would be mass adoption and it will be used as a currency for mundane everyday
purchases. Well that didn't happen and it doesn't seem like Bitcoin will ever
be use in that way.

~~~
colecut
I bought OJ, milk, eggs, veggies yesterday with BTC via my Shift Card.

This hasn't caught on mainstream yet but the infrastructure is there, and it's
growing.

[https://www.shiftpayments.com/card](https://www.shiftpayments.com/card)

~~~
richardknop
The fees are quite high for that card.

And you are not paying with BTC. If it's a debit card then you have to have
fiat in a bank account. I guess they exchange BTC to USD when you top up your
shift card.

~~~
colecut
Can you please elaborate on what fees are high?

I paid $10 for the card. $0.00 annual fee $0.00 Domestic transactions

BTC is converted to fiat at the time of purchase, also with no fee, no need to
"top up" the shift card..

~~~
richardknop
International fees are high.

But also conversion from BTC to USD is not for free. Whoever is doing the
conversion is charging a fee.

Probably as part of exchange rate where they add a markup. So you don't see an
explicit fee in your statement but they use little worse exchange rate and
that is their cut.

Also whoever is their payment processor (whoever they partnered with to print
those debit cards as they don't have license to do it themselves) is charging
some fees.

~~~
colecut
I could be wrong, but I haven't seen any evidence of these fees.

Coinbase charges a 1.49% fee when transferring to/from my Bank changing
between USD and BTC.

GDAX, which is owned by Coinbase, does not appear to charge me this fee.

I don't see evidence of the Shift card charging it either.

------
blhack
I can't believe there is no mention of tezos here
([https://www.tezos.com/](https://www.tezos.com/)).

Which currently has raised $123,317,760.00 in bitcoins and $68,709,765.86 in
ethereum. Almost $200,000,000 raised for something that doesn't even exist
yet, all so that the founders can create it.

It's basically $200,000,000 into a kickstarter. What the absolute frell is
going on there I have no idea.

~~~
lrvick
Tezos has a working testnet available to anyone on request and a functional
(albeit early) platform. They also took extra time and delayed their ICO to
get proper accountability systems in place via good legal standing for the
Tezos Foundation.

Tezos asks a vital question. Can cryptocurrency governance be decentralized?
Can we do better than the anarchy of management for Bitcoin and Ethereum with
chain splits being the solution to dispute?

I for one gambled some of my portfolio I am willing to lose to find out and
spent a lot of time researching their code, and team before doing so. I am as
interested in seeing Tezos fail (and thus further indicate anarchy and splits
are unavoidable) and seeing my ETH/BTC holdings continue to rise as I am in
seeing Tezos succeed and overshadow everything by proving it can rapidly
evolve and incorporate the best features of other coins without forking.

~~~
richardknop
You think 200 million in funding for a blockchain implementation in Ocaml
written by one developer is reasonable?

Because to me it seems absolutely ridiculous. For comparison, Docker has so
far raised around 180 million in 5 funding rounds. It has somewhere between
300-400 employees.

~~~
simias
Yeah that's the most perplexing thing with those ICOs IMO. We could argue all
day whether this and that idea has some merit or not, but many of those start
ups end up raising orders of magnitude more money than they should ever need
to build their thing. Many of these projects could be completed by a modest
team in a few months. That's just absurd and a complete waste of resources.

------
jcousins
I've been investing in this space since 2012. "Investing" in the loosest sense
of the term, because I was simply looking for ways to grow my bitcoin stash.
It started out as a naive attempt at diversification. In reality, I had no
clue what I was doing, lost a lot of bitcoin to scam investments, made some
bitcoin on fruitful investments. I became diligent and conservative with my
bitcoin over time and ethereum happened to be one of the investments I made in
2014. I look at my ethereum presale investment as dumb luck.

Long before the term ICO was coined (no pun intended), there were multiple
markets for bitcoin securities dating back to 2012 - possibly earlier. I am
referring to business ventures here, not clones of the bitcoin repo with a
modified PoW mechanism or similar. There were many scams for every one
legitimate venture. Many legitimate ventures eventually mutated into scams.
Investors that started out as bitcoin maximalists were often crying to the SEC
for help getting their bitcoin back. Some of those ventures run to this day.

The market was chump change back then. Tens of millions maybe. With ERC20 and
ICO mania, we have front row seats for failure on a grand scale. The
exuberance is terrifying to me given what I experienced years ago with bitcoin
securities. For that reason I stopped making investments in May and started
doing some real diversification. For many investors, ICOs will be their first
taste of "a fool and his money are soon parted." For many projects who have
conducted an offering, ICOs will be their first taste of what it's like when
the SEC come knockin'.

I'm quite sure there will be some success stories a few years down the line,
but they will be accompanied by a plethora of scams and all the media
attention that comes with bad news. I think this form of funding is a vague
peek into the future of project funding. Ethereum is not necessarily the
specific answer, and the ICO framework will have to burn to the ground a few
times before it evolves into something useful.

------
sktrdie
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.

~~~
hudon
> 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.

You talk as if we were never able of issuing digital tokens before. All you
need is a MySQL database and Apache. World of warcraft has tokens,
Counterstrike has tokens (skins), Airmiles has tokens, Microsoft has tokens.

Tokens are not new. Having them on the blockchain is new. And what does that
give you? censorship resistance. This is the first time that these tokens can
be issued and traded with very little regulatory oversight. This is because in
theory, anyone can be a transaction validator, and in theory you can have
pretty good privacy on the blockchain.

However, existing financial instruments (and tokens) will always be more
efficient on a centralized platform, because it cuts through coordination and
communication costs. But when you centralize, now you need to govern and
report to authorities. So you cannot do transactions that are great for the
blockchain: buying drugs, political donations, capital flight, funding
activism, etc.

~~~
nicksdjohnson
Censorship resistance isn't the main thing that blockchains enable;
trustlessness is. If you host them on your own SQL database, people have to
trust that you're acting honestly.

------
skywhopper
A: It's a scam, and it works by scamming people.

The text as written on this site describes a conspiracy to commit tax and
securities fraud. I have no idea if it will ever be prosecuted as such, but
that is what is being proffered here.

The subtext is that a bunch of finance quants read Cryptonomicon and think the
blockchain is the answer to their dream of becoming the gangster bosses of the
anarcho-capitalist hellscape from Snow Crash.

~~~
hudon
I'm curious to know if you erased all of modern civilization (governments,
laws, et. all) and replaced it with decentralized apps and a blockchain-based
currency, would it work? I read Snow Crash and I can see how fascinating the
concepts are to libertarian technocrats, but I would like to see a rebuttal to
it.

I know the _transition_ to this model seems impossible and this is what most
people in the blockchain-space blissfully ignore.

> The subtext is that a bunch of finance quants read Cryptonomicon and think
> the blockchain is the answer to their dream of becoming the gangster bosses
> of the anarcho-capitalist hellscape from Snow Crash.

This made my day, it's a shame it's too long to tweet

~~~
api
It would be gamed.

Real resistance to gaming requires continuous adaptation. Google "red Queen's
race." All closed form systems would fall.

------
jonstokes
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](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 there.)

Anyway, I'm sort of toying with the idea of doing a kickstarter for a big
explainer book on blockchain, cryptocurrencies, and DLT in general, which
would basically be like my CPU architecture book ("Inside the Machine"), but
for this topic. (I'm spending all my spare mental bandwidth right now on
understanding this tech, mostly so I can think through shorting this space
eventually, but I'm not convinced it's worth my time to try to explain it to
the general public... a kickstarter would help me price that. I dunno though,
I've never even backed anything on kickstarter so I'd have to spend a bunch of
time figuring out how to set up a successful campaign, first.)

But to sum up, people I've talked to in this space think the ICO thing is a
frothy mess, but it's also set to get worse as the general public gets more
opportunities to buy in. A lot of these ICOs are built on top of ETH, and the
path to USD liquidity is through ETH, so despite the platform's issues it
seems likely that ETH is going to get much of the benefit of this bubble (and
much of the negative impact when the bubble pops).

I'm keeping an eye on the upcoming ETH exchange-traded trust, and I think
there will be an ETH ETF that will eventually launch and get bid up.

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

~~~
jonstokes
It's not clear to me from this reply that you know very much about authors,
advances, and the like. Maybe I'm wrong.

Anyway, writing a book is an actual job for some people, and not a hobby, a
passion project, a speculative endeavor, a side gig, or a way to boost your
leverage in compensation negotiations with potential employers. Seeing as how
it's an actual job that entails a bunch of really hard work that I don't have
to do and, frankly, don't particularly enjoy more than N number of other
things I'm doing right now and that I'm good at, I'm not interested in doing
it unless it can replace some subset of the paid work I'm currently doing that
I enjoy (and learn from).

~~~
nradov
The only authors who receive significant advances are those who previously
wrote books that sold well, plus a few outliers who are already famous for
other reasons. Most authors have to find other ways to support themselves
prior to getting published (and often afterwards as well).

------
claudiulodro
All the people crying "Scam!", I have a question for you:

How is this fundamentally different than pre-orders? It seems to me like these
ICOs are selling future access to some software that hasn't been built yet.
Game companies sell pre-orders to the public all the time to finance the
development of the software.

(I don't have any money in cryptocurrencies, but the ICO seems like a good way
to fund a seed round for certain types of software, as far as I can tell)

~~~
stanleydrew
This is a reasonable question. I'm not an expert by any means, but the
difference appears to be that with a pre-order, you have some right to own
something in the future, and an expectation of delivery. If delivery is not
received, you might expect a refund.

When you buy a new coin you get the right to use that coin in some future
micro-economy. What rights and expectations go along with that purchase? What
if the micro-economy doesn't value the coin the way you originally thought?
What if it never materializes?

Both pre-orders and ICOs can be scams. The difference with ICOs appears to be
an added layer of misdirection that could perhaps enable more successful
scams.

------
BurningFrog
So I read half the article and still don't feel like I know what an ICO _is_.
Only the 101 ways it's different from an IPO...

I understand that I could create a FrogCoin by cloning Bitcoin or Ethereum.
And then I sell investors... what exactly?

Individual coins? Are coins not mined in this scenario?

Would FrogCoin be tied to some real world asset that makes them inherently
valuable and/or practical?

Or are ICOs just gambles that maybe FrogCoin will be the winning currency? It
can't be _that_ stupid? Right?

~~~
ksahin
Several years ago, ICOs were a way to crowdfund and distribute a new crypto
currency. With your example you would sell "pre-mined" FrogCoin and there
wouldn't be any real world asset that make them valuable, only speculation.

Today, most of the ICOs are made on the Ethereum blockchain, it's a way to
crowdfund distributed/decentralized application and protocol. It's not about
currencies anymore.

The tokens that are sold are "API keys" that will be needed to use the
protocol / application.

Lots of things are good candidate to decentralisation : VPN, cloud computing,
cloud storage, social media plateform, Quora, Reddit, HN, any service that
make the bridge between users and take a HUGE commission : Uber, Airbnb ...

I don't know if any of these decentralized application will ever succeed but
the business model / crowdunding model is evolving and in some area, like open
source projects it makes lot of sense to create / use decentralized services.

~~~
skewart
So, from the token buyer's perspective, how is it different from a company
that pre-sold a bunch of regular old API keys without any connection to any
cryptocurrency or blockchain?

I get the trustlessness of 'smart contracts', but with tokens-as-API-keys I
still have to trust that your company's products will work and that those API
keys will continue to work.

Or, is the idea that the code my API key gives me access to is also defined
and executed on the blockchain? That would reduce the trust I would need to
have in the company pre-selling the API keys. At the same time, buying access
to immutable code where functionality can't be enhanced and bugs can't be
fixed is kind of lame too.

~~~
ThrustVectoring
There's a much healthier secondary market for these API keys, since there's an
algorithm for using your API key to grant someone else the use of your API
key.

On second thought, I don't think that helps all that much, since that could
just be an API endpoint on the company's server instead.

Maybe the actual benefit is just interoperability with other crypto-
currencies?

------
sillysaurus3
"Step 1: Tell literally everybody in the world about an initial coin
offering."

------
nikolay
I'm tired of these scams. Worst of all, tech guys are getting involved. We are
like chemists going into drug manufacturing or physicists making A-bombs! But,
of course, this is not much different than the plethora of iFart apps or
brainless startups that steal money from investors, essentially, and then they
crash like there's no tomorrow. At some point, HN didn't pay much attention to
these, but recently there's a new wave of the crapto attack, and this no
longer is my oasis from the world's bullshit that's echoed pretty much
everywhere.

~~~
brianshaler
I'm with you, but it's not necessarily new. HN has always been a blend of STEM
and money/hustle.

------
fowlerpower
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 bunch of money, much like a kick
starter campaign. The people buying an ICO buy it for a quick buck and a lot
of times they end up selling these coins from the ICO for 10x, see BATs.

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.

~~~
richardknop
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 new buyers. Usually after listing of your
token on exchange you get a fresh infusion of speculators and gamblers which
allows the earliest investors to cash out but most people end up losing money.

~~~
creeble
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.

~~~
richardknop
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.

------
silverbax88
FTA:

 _ICOs conclude once the coins or tokens are tradable in the open market._

This is a part that has eluded me thus far: how are the new coins tradable on
the open market? I'm genuinely asking - most exchanges don't support all
crypto coins, and certainly not the dozens of new ones being created. How does
one invest in an ICO and then 'cash out'? I see the ROI stats on some of these
ICOs but I'm curious as to if those investors are basically sitting on that
ROI hoping it doesn't evaporate before they can sell. Can anyone provide
insight here?

~~~
ksahin
Almost all these ICOs are made on the Ethereum blockchain, there is a standard
that almost all ICOs uses which is called ERC20 :
[https://theethereum.wiki/w/index.php/ERC20_Token_Standard](https://theethereum.wiki/w/index.php/ERC20_Token_Standard)
Exchanges knows how to deal with ERC20 tokens so sometimes theses token hits
the exchanges 5mn after the ICO is over (exchange like liqui.io or Bittrex).
So no people are not sitting on their ROI since there is liquidity for these
tokens

~~~
erikb
The meta-coin basically. You have to admit this is a very well designed
scheme.

------
erikb
> So, is this the new revolution in fund raising or another pyramid that is
> soon to explode?

Everything is a pyramid. The question is just for how long it lasts. I mean
there was a pyramid called monarchy that ruled the planet for a few centuries.
There's capitalism which will be replaced by something else, maybe 20 years,
maybe 500 years from now. Instead of worrying about the pyramid-ness of
something it's much smarter to decide whether or not it is currently under- or
overvalued and what the trend will be.

And here starts my opinion: I think crypto coins are currently way overvalued.
They exist for longer now than most people spend in university. And yet a real
market value hasn't been established yet. The one possible true market value,
micro transactions, seems to have been overcome by simple small step
technological evolution. It was a huge thing around 2010 that nobody could do,
but now it's common to pay sub-dollar prices on all kinds of things online.

Also opinion: The reason why people are willing to spend so much money on ICOs
is that they hope the bitcoin dream will repeat itself. And as is often the
case: if the dream is strong enough, it seems to get fulfilled, because so
many people pour their money and energy into this hope. But I don't see what
there is besides the hope.

Many people will be disappointed when they find out there wasn't much besides
their own self-illusions.

~~~
dave_sullivan
> a real market value hasn't been established yet. The one possible true
> market value, micro transactions, seems to have been overcome by simple
> small step technological evolution.

A real market value, in the sense that "something is worth what someone will
pay for it", has been established. There's just a lot of people scratching
their heads about it.

What's the real market value of diamonds? Or gold? In the apocalypse, you
can't do anything with either, but I think you'd have a hard time making the
case that there's no "true market value" to these goods, even if you find
their utility dubious.

~~~
erikb
Yes, diamonds are such a pyramid that is kept alive by pure market controlling
efforts like monopoly and advertisment, just like crypto coins. Gold however
has some market value by being impossible to artificially create, by being
limited, by being hard to come by and by being hard to transport, all combined
in one item.

Yes, you concluded correctly that I see a strong relationship between market
value and utility. I'm not sure if market value is the correct word for it,
though. English is not my native tongue. There are two values a product has.
One is trade value, the other is what you call utility. I believe the trade
value of crypto coins exceeds their utility a lot. And I believe they have
nearly no utility at all, because otherwise it would have shown by now what
the utility is. I also believe it's totally possible that trade value can be
kept high without utility for a long time, thus "people are willing to pay a
big price for it for a few years" is not a proof of utility to me.

------
fiatjaf
In the past history of ICOs, did anyone gain from participating in the ICO
more than they could have gained by buying the coin later in an exchange?

~~~
Subcide
Yes, though usually not by just holding. ICOs with small caps often list on
exchanges at a decent % profit in the first few days, while the people that
missed out on the ICO buy in. The link the other user posted obviously doesn't
take this into account, and only tracks holding the token indefinitely. In all
likelihood, a LOT of people profited on the ICOs that ICOStats lists as
negative right now.

~~~
beager
This sounds like the same dynamic that institutional investors use on IPOs,
where only privileged players get to buy in the IPO, and they sell through a
pop fueled by hype or an underestimated target. Shares hit the general public
and by the time you've got a few quarterly calls in, the true value is set and
the long road begins, while the institutionals and earlier investors have
already cashed out some good gains.

If democratizing access to ownership offerings for the purpose of quick sell
off is the major benefit of ICOs, what does this do for serious businesses?
Why would they choose an inherently less stable and less secure (cf. DAO hack
on Ethereum) medium if it primarily benefits the investors and not the
company?

Beyond that, it remains to be seen what IRL innovations can be enabled by ICO,
whether more easily or necessarily vis a vis traditional fundraising vehicles.

------
notadoc
Surely this is a sort of top indicator.

I was at a social event recently and some remarkably non-technical people were
talking about bitcoin. It reminded me an awful lot of the wall street adage
about the shoeshiner/waiter/driver talking stocks...

~~~
vocatus_gate
Friend of mine is a model in NYC. She PM'd me last week asking about putting
money into Ethereum. Now she's not stupid by any means, but she's pretty far
from the demographic typically associated with cryptocurrencies. Was kind of
eye-opening to me about how far the hype is reaching right now.

------
fny
Look at this gem of an ICO: [https://humaniq.co/](https://humaniq.co/)

WARNING: This site has been identified to potentially trigger vomiting for
people with morals. Viewer discretion is advised.

~~~
vibrolax
I was most impressed by the "cartoon" illustrations of the board, advisors,
team, etc.

~~~
hellbanner
I noticed the same thing.. I would expect a financial company to have clear
photographs, bios

------
nateberkopec
The fact that this is on "fxempire.com" is really all you need to know, isn't
it?

FX trading and daytrading are two forms of legalized gambling for the upper
class, so it makes sense that the same crowd will be interested in
cryptocurrency. Such people are generally aware they are speculators and
participating in a high-risk activity, so, fine. But what I worry about is the
"dumb money" that follows. I saw Twitter ads for a "Bitcoin IRA" today. If
you're putting your retirement savings in Bitcoin...

------
lawless123
Initial scam offering.

~~~
nikolay
I thought that the number of idiots and greedy people in tech is in limited
supply, but it looks like I was wrong by orders of magnitude!

------
CalChris
While I think they're incredibly clever, I'm distrustful of cryptocurrencies
and ethereum. So I'm putting ICOs into that basket as well. Still, they always
garner a lot of attention, probably for their cleverness.

On the other hand, I'm very interested in Hyperledger (IBM Blockchain) [1]
which gets scant attention here. Indeed this thread already has more comments
than all of the Hyperledger threads combined.

Hyperledger is strongly influenced by ethereum and bitcoin. But instead of
being slow (10 minute transactions), expensive (you're bidding for miners
time), and anonymous (anonymous), Hyperledger is fast, cheap and identified.

And apparently boring.

[1] [https://www.hyperledger.org/](https://www.hyperledger.org/)

~~~
hudon
You've got the right idea. Hyperledger and R3's Corda [1] are where it's at
for distributed ledgers (fast and cheap, as you say). Blockchains add
censorship resistance and that's their primary feature, not a weakness as you
state. You can put in ledger entries and know that no one will arrest/kill you
for it, and because anyone in theory can be a transaction validator, all
ledger entries get validated. This means the tech is not useless but it's a
whole different market. Hyperledger and Corda are to make the existing
financial networks more efficient. The blockchain is a new financial network
for censorship resistant transactions (think activism, capital flight, buying
drugs, scamming people, political donations, etc.).

[1] [https://www.corda.net](https://www.corda.net)

------
idibidiart
Every new technology is feared at first.

I have $0 in Bitcoin or any other cryptocurrency and I was there in 2009 when
Satoshi was marketing Bitcoin to those of us at the P2P Foundation. I have to
say ICOs may be the killer application for a semi-perfect medium of
speculation like Bitcoin.

------
paulgb
> An IPO is a onetime sale with multiple intermediaries involved in the
> process of determining the conditions, pricing, etc., whilst ICOs can have
> multiple rounds of fund raising [...]

The rounds aren't really "initial" after the first one though, are they.

~~~
deepvibrations
Token Distribution might be a better way to phrase it. At least this is how
Eos named their fund raising- it takes place over 341 days, launched a few
days ago and has already raised over $600M...Crazy times! Anyone investing
should be careful, as there are a lot of scams out there.

------
pishpash
The name itself is a bit scammy.

------
dreamdu5t
From these comments it looks like HN is now behind the times. HN crowd seems
totally ignorant of crypto space, economics, and where it's going

------
ereyes01
Much has been said about risks to investors buying into ICOs. What about risks
to startups selling ICOs? Should every startup be fundraising via ICOs right
now or risk missing the gravy train?

~~~
richardknop
If you take a look at startups raising money with ICOs, they are usually based
in some sort of exotic country in Asia or something like Gibraltar. I think
there are couple of reasons for this.

1) Tax avoidance 2) "Safe" jurisdictions (so they don't have to worry about
any repercussions in case they just run away with the money)

------
fny
So how exactly does one change these currencies to fiat? Is it even possible
or are you trapped with the currency until some type of exit event?

~~~
lrvick
That is what exchanges offer for a fee.

------
Kiro
How are these token actually used after purchase? For example BATs. How are
they tied to Brave, technically speaking?

------
jayeshsalvi
If cryptocoins are equivalent to shares in the company, what is the equivalent
of dividends?

------
swrobel
"though even rating agencies have been known to get it wrong from time to
time."

Lol! Financial crisis, anyone?

~~~
colordrops
And it wasn't that they got it wrong - they chose to rate bad securities as
AAA to their and their cohorts benefit.

------
princetontiger
How would someone convert crypto currency to real cash? is it even possible?

~~~
vocatus_gate
There are a multitude of websites. One of the most well-known and reputable
US-based sites is coinbase.com

------
jcoffland
Usually this kind of blatant negativity would be down voted to oblivion but
for some reason HN has a special place in it's heart for crypyocurrency
haters.

~~~
wwwv
It's worthwhile to note that not a single once of the thousands of "ICO"
things that have been launched in the last year have actually done anything of
value. They all generate hype, raise money, and then give up and go to work on
other things. It happens over and over again with no memory of the past
failures, apparently.

That said I wouldn't fault you for believing that a lot of the $xM raised in x
ICO just turned out to be largely the creator seeding the pot and a minority
of other people buying into something "big". You could even take out a loan,
there's nearly zero risk other than the operator of the ICO running with the
scratch.

~~~
TeMPOraL
> _It 's worthwhile to note that not a single once of the thousands of "ICO"
> things that have been launched in the last year have actually done anything
> of value._

I honestly thought there was like a few of ICOs to date, and that the whole
thing is like a month or two old. Does anyone track these things? A
continuously updated list would be great!

~~~
bismark
Here is a list I've come across, I'm not sure how exhaustive it is:
[https://www.smithandcrown.com/icos/](https://www.smithandcrown.com/icos/)

