
Fools and their crypto - rbanffy
https://techcrunch.com/2018/01/30/fools-and-their-crypto/
======
cromwellian
Every few decades, libertarians need to be reminded why regulations exist.
Time passes, and people forget why the SEC, FTC, FDA, FDIC, OSHA, child labor
laws, et al were even created.

Cryptocurrencies created a completely anarchic monetary system, which people
have used to layer investment systems on top of. Naturally, low hanging fruit
scams and cons have arisen, and some form of governing structure will
eventually be imposed, if not by actual governments, then by the community.
Then more sophisticated abuses and negative externalities will arise, and ever
more sophisticated regulations will be imposed by the community to thwart
them.

In the end you may end up with something very much looking like a government,
where people with connections and leverage in the governing structures get to
decide the evolution of the rules, where a few players with disproportionate
wealth or hashing power, help elect those people to committee positions. And
once again, people will be looking to create systems to escape the defacto
control and cronyism imposed on the system.

I guess what I'm saying is, nature abhors a vacuum, and given human nature,
most systems will evolve to thwart the worse tendencies of the worst people,
opening opportunities for others to capture power. So in the end, rather than
seek to bring down our democratically elected government monetary systems via
technology, we should seek to evolve them with ideas from technology.

Because booting out fiat currency and rebooting with crypto really just forces
a painful relearning of all of the lessons we've learned in the last century
of modern finance.

~~~
viridian
I'm a registered Libertarian (lol) who isn't against reigning in ICOs. My
chief concern is regulation creep from problems that do exist, to problems
that may exist in the future, but aren't really a current concern. I find
targeting the latter gives a government a whole lot of elbow room to extract
wealth, via things like trade license fees, ICO officiation fees, a
requirement that a coin some some property that creates a weak binding with a
given fiat currency, etc.

It is worth noting though, that ICOs are primarily a problem because there are
a lot of hungry investors looking to 100x their returns, and don't have the
tech background required to dissect a whitepaper. Protecting the gullible and
uninformed from the manipulative is one of hardest tasks of any society, and
the fight is never ending.

~~~
prklmn
your point about needing a tech background to invest is like saying that one
should have a finance background to invest in an IPO. I disagree.

~~~
Cthulhu_
It's very much a thing over in Europe though, the new MiFID II directive is a
thing intended to protect investors - one implementation that (online)
investment banking sites have to offer now is things like a basic test, that
is, you need to prove you have half a clue what you're doing.

------
scandox
> Imagine you’re investing in Apple in 1980. There is plenty of risk involved
> and you’re still not sure this Jobs kid has what it takes, but do you like
> the idea? The mission? The product?

This is delusional. From Apple's Wikipedia:

"Between September 1977 and September 1980, yearly sales grew from $775,000 to
$118 million, an average annual growth rate of 533%"

They were selling products that people wanted for profit. Comparing ICOs to
this is ludicrous and seems to me to encapsulate the hazy thinking of this
entire sector.

~~~
monadmancer
We aren't there yet. Successful projects are building protocols with the goal
of developers using them to build next-gen products that people actually want.
Current speculation (a16z, polychain, ...) is that it will take another few
years for this rollout to really take effect.

~~~
CPLX
> products that people actually want

This part of the process is usually considered one of the first steps in a
successful business.

~~~
FabHK
> This part of the process is usually considered one of the first steps in a
> successful business.

You're absolutely right, of course. However, I'm reminded of this wonderful
(recent) quote by Uber CEO Dara Khosrowshahi:

"Business is actually surprisingly good for everything that the company went
through. The part of the business that is not going well is the profitability
part. We have some details to work out."

[https://www.axios.com/uber-
ceo-1516627656-77c68a5a-6d42-4c85...](https://www.axios.com/uber-
ceo-1516627656-77c68a5a-6d42-4c85-8ab5-284516cbcb69.html)

~~~
CPLX
I don't understand the "however" part.

People actually want to press a button on their phone and have a car show up
and take them somewhere seamlessly. Uber has been doing that since they
launched.

Doing it profitably and sustainably is another question. But the basis of the
enterprise isn't even a little confusing.

~~~
FabHK
I think we're on the same page.

My point: a business without actual products people want to use is not viable
(contrary to what some appear to think), but a business without profitability
is not viable, either.

(you're right, Uber has a slick product, though arguably because they
subsidise it.)

------
Thriptic
I will repeat myself from another ICO thread last week: you cannot have
investment vehicles where commiting fraud results in no punishment. It simply
doesn't work. Until someone figures out a way to even somewhat integrate ICOs
into the existing legal system, this will keep happening.

I have proposed one possible solution to this problem here:
[https://news.ycombinator.com/item?id=16208325](https://news.ycombinator.com/item?id=16208325)

~~~
Alex3917
> Until someone figures out a way to even somewhat integrate ICOs into the
> existing legal system, this will keep happening.

They're already integrated into the legal system. What new laws are needed?

~~~
Thriptic
You shouldn't be able to run one unless you're a registered company. It has to
be relatively easy to come after you for fraud as an investor.

Considering that this is a mechanism that is predominantly used to fund
projects or companies anyway, I don't think that's an irrational requirement.

~~~
fuddcoinn
all the same laws are applicable and fraud is fraud.

what is more interesting is that a variety of traditional control mechanisms
appear to be ineffective at stopping the two voluntary parties from
interacting whereas for banking and brokerages they are sufficient.

I'd hate to see a second useless set of laws be made, similar to "hate crimes"
(a crime is a crime - except when you say a certain something or think a
certain way?? wtf) but how would you even enforce a law requiring specific
criteria for an ICO when an anonymous 14 year old kid anywhere in the world
can do it in 20 minutes??!

i am of the thought that not every guerilla ICO has to be brought to justice
but the "rule of law" requires some semblance of respect and obedience and
I've been to countries where everything is up for negotiation and no law is
"rule". slippery slope. perception of authority should not be diluted if
possible.

seems the nation state's reach has started to exceed it's grasp....

~~~
rootusrootus
I've never understood the problem some people have with hate crimes. Don't we
already have plenty of crimes where the only differentiator is mental state or
intent? Hard to see how a hate crime classification is any different than,
say, Murder 1 versus Murder 2.

~~~
csydas
I would assume it's a perceived sense of lack of fairness in the sentencing;
to be clear, I share your position on hate crimes. They exist for the same
reason that we have both Murder and Manslaughter charges, because our system
of law considers intent as part of the sentencing.

But it is not hard to see how some would view such laws as unfair. Intent can
be difficult to prove and it requires interpretation; if you believe in clear
cut and easily understandable laws, then naturally Hate Crimes and other such
laws probably seem like a bad idea, and I get why that is frustrating and even
intimidating with how fast gossip can travel. The system itself is built with
release valves, but it's likely not much comfort for the wrongly accused.

I think that's a separate problem, however, which is just exacerbated by
perceptions of laws like Hate Crimes as opposed to being caused by the laws
themselves.

------
cdancette
There's a thing that bothers me with ICO, it's when people call it an
investment. It has nothing to do with an investment, it's basically a presale
for the service that the company will provide.

It offers you _nothing_ of what buying shares of the company will (except when
explicitly specified in the token sale) : no dividend, no voting power...

Expecting to earn money by buying tokens in an ICO is pure speculation, as you
expect the token to go up. But this goes against the real user's will to use
the service: they want a fixed price (who wants to use a service which price
changes every day?)

To sum up, buy tokens as you would buy presales in Kickstarter, to support the
company, but don't expect to earn money with it if you really it to be a real
service / product. And avoid ICO that make you the promise of earning quick
money.

~~~
stevekemp
Agreed 100%. Buying tokens from an ICO is akin to funding a project on
kickstarter - and we all know how often kickstarter projects fulfill their
promise..

------
AKifer
Now the red flags are:

1- Silly idea adjuncted with the blockchain label 2- No immediate answer to
the question "How this is going to make money ?" 3- A white paper without
substance, just a piece of marketing paper convincing you about the scheme
with lots of use case diagrams etc 4- Ratio of advisors and other fuzzy titles
/ technical people at 10+

------
nofilter
Serious question: are there any ICOs that aren't scams? Or are there any ICOs
that have raised money for something and have actually delivered that
something? Seems like everyone from children to grandmas are doing ICOs these
days and I've yet to hear about anything that _wasn't_ a scam.

~~~
tim333
I'd say there are some. Dragonchain for example which I invested in seems
ethically run and have delivered pretty much what they said.

------
KasianFranks
Separating bad actors and their crypto from good actors and their crypto is
where were headed next. Lessons in due diligence apply to crypto just as with
any other investment vehicle but it seems many have missed this. The crypto
space is being refined, which is a good thing.

~~~
sverige
Yes, I am confident that there are as many good actors in cryptocurrencies as
there are in any other multi-level marketing scheme.

~~~
KasianFranks
Many of them are MLMs but I'm referring to the ones that are not, the ones
that actually using the crypto capital for true innovation.

~~~
mrep
Name 1 that has used that capital to achieve over 10$ million in profit per
year.

~~~
KasianFranks
It's early days. Think Netscape.

~~~
simias
Name one use case for cryptocurrencies where they work better than existing
technologies and that does not involve buying illegal stuff online.

Seriously, I must be writing a comment like this one at least two times a week
lately on HN. I keep hearing "blockchain technology is here to stay, think of
the possibilities!" and I say that it's already showing its limitations and
people are scrambling to find real world use cases for them. See the Diamond
Coin story the other day, or that Kodak Coin thing. When you look closely you
realize that the technical side of things doesn't really hold up or could be
achieved using good old non-buzzword technologies.

Cryptocurrencies are amazing if you want to create a ponzi scheme or buy drugs
online. For everything else there's Mastercard.

~~~
rensgspzn
How about five?

* private transactions: your identity need not be associated with donating to wikileaks or buying a sex toy

* irreversible: no chargebacks or transaction reversals

* unseizable: protection against civil forfeiture, IRS account seizures for "structuring", etc

* remittance: send any amount of funds anywhere in the world with minimum fees with no 3rd party ever having access to funds

* exit from corrupt monetary policies: see Argentina, Venezuela

But apparently these don't apply to you personally so it may be best to
continue swiping your Mastercard™.

~~~
nerdshoe
Paranoid much?

In a world where someone will steal your account if you so much as look the
other way, this is a good thing?

Because paying taxes is for chumps.

Tell us more about those fees... You want your transaction to happen when?

Replace corrupt monetary policy with corrupt money. Flawless.

------
blattimwind
(Article is about cryptocurrencies)

~~~
gcb0
you mean cleptocurrencies.

------
mexicanandre
The one question which any of these Crypto ICOs dont answer is why do I want
to get paid/pay in their coin over actual cash! There is only drawbacks with
it!

------
Robotbeat
So is crypto-everything (keeping with the current stupid trend where "crypto"
refers exclusively to blockchain technology) in free fall, yet?

------
icodemuch
Hopefully a wake up call.. but probably won't be.

~~~
eksemplar
It won’t be. Every ICO I’ve bought into and the subsequently sold once it hit
the exchanges has made me ridiculously amounts of money. Some sells were
stupid, others were brilliant but they were all green.

My stocks have increased as well and hold the majority of my investments, but
they increased by 11% last year. My Cryptocurrency increased by 1153% in the
same period of time. As long as that happens Cryptocurrency isn’t going away,
even if it makes no sense.

It’s taking money from other people by selling useless shit, so it’s obviously
not going to last forever.

~~~
sumedh
> but they increased by 11% last year.

S&P 500 rose 23% last year, maybe you just invest in an index fund.

------
hal9000xp
It seems like I will continue collecting downvotes on this topic but I will
give yet another try.

I would not be totally against regulation and government intervention into
blockchain space (and any other space as well). In fact, it would be really
good for the space have reasonable but friendly regulation which would clean
up space from outright scams.

Unfortunately, governments usually don't try to came up with reasonable
regulation but rather killing regulation. One notable example is BitLicense
which lead to mass exodus of cryptocurrency-related companies from New York.

Real life example of sad result of such regulation:

[https://www.stellar.org/lumens/build/](https://www.stellar.org/lumens/build/)

> If you live in a restricted area — any country on the U.S. sanctions list,
> as well as the states of Alabama, Connecticut, Hawaii, New York, Vermont and
> Washington — regulations prevent us from sending you lumens. Unfortunately,
> therefore, residents of restricted areas are not eligible for an award.

This sentence is exact reason why I really hate regulators and people who are
very enthusiastic about big government cracking down cryptocurrency space just
because of few really stupid and obvious pump and dump scams on coins I've
never heard of.

Fortunately, I don't live in New York and US. I'm rather give here examples
familiar to Hacker News readers.

Another thing I hate about regulators is notion of accredited investor. Which
says:

[https://en.wikipedia.org/wiki/Accredited_investor#United_Sta...](https://en.wikipedia.org/wiki/Accredited_investor#United_States)

> In the United States, to be considered an accredited investor, one must have
> a net worth of at least $1,000,000, excluding the value of one's primary
> residence

Which basically says - rich gets richer and you poor little guy is too stupid
for participating in potentially highly lucrative deals.

I know what you will say - the governments try to protect ordinary people from
scams. Don't you think it's a little overshoot??? Instead of keeping so high
barrier of entry, the government could impose some sort of exams if you want
to accredited investor. Or as alternative, make sure a person won't put more
than 10% of early net income in high risk projects. That's what I would call
friendly regulation.

So I see how government try to regulate (just practically ban things) and I
tell - it's better having no regulation at all!

~~~
IncRnd
Some of the information you present is incorrect. One example: An accredited
investor doesn't need $1MM net worth in the US. The requirement can be
satisfied by just $200K personal income. This is stated in the very first
sentence of the wiki entry that you linked.

> _Which basically says - rich gets richer and you poor little guy is too
> stupid for participating in potentially highly lucrative deals._

It's more along the lines of having enough money to weather the value of your
investments disappearing.

------
XR0CSWV3h3kZWg
I'm guessing this was their address:
[https://etherscan.io/txs?a=0x931d387731bbbc988b312206c74f77d...](https://etherscan.io/txs?a=0x931d387731bbbc988b312206c74f77d004d6b84b)

It was a very small ICO, something close to 2 ETH.

------
m3kw9
There was this other load of shit that tries to keep track of every diamond.
Sure track the ones that are tracked!

------
ThomPete
So like Wall Street.

------
jancsika
I'll bite.

How does a slow, expensive, global time-stamping service which cannot scale to
billions or even tens of millions of users create a foundation for a sound
business model to track all the food?

~~~
mrep
That's to come in their second white paper which handles scaling which nobody
else has solved. /s

------
moltar
They raised $11. So basically everything went fine. They tried to scam, but it
didn’t work so they exited with penis.

~~~
kevinmgranger
Did you perhaps mean to write "pennies"?

~~~
bmelton
Doubt it.

[https://twitter.com/thelateempire/status/957527371221028865/...](https://twitter.com/thelateempire/status/957527371221028865/photo/1)

------
JumpCrisscross
"They created a credible white paper that, at the very least, tickled some of
the neophilic nerves, and they had an active, if scammy, social media
presence. That is literally all you need to run an ICO these days and they did
exactly as expected.

Then the whole thing imploded. On the 28th the scam shut down, leaving a
website containing a single word: penis."

------
r053bud
For real though...when will we stop using crypto to refer to cryptocurrencies?
Crypto is short for one thing and it's cryptography.

~~~
brosirmandude
This sentiment comes up in almost every crypto thread and I think it's a bit
misguided. It's referred to as crypto because...that's how people know it.

Google trends explains my point better than I ever could.

[https://trends.google.com/trends/explore?date=today%205-y&q=...](https://trends.google.com/trends/explore?date=today%205-y&q=crypto,cryptography,cryptocurrency)

~~~
blattimwind
It also shows that this conflation is very, very recent. I _assume_ this is
either because some people realized that there is "more than bitcoin" now, so
you can't keep saying "bitcoin" and mean all the cryptocurrencies, and they
just thought "jeez, cryptocurrency is such a complicated word. Let's just use
crypto!"

In any case, crypto has been established as short for cryptography for far
longer than any of these currencies existed. It is used in this way as a
distinguisher in many contexts (e.g. crypto-phones, crypto-locker, crypto
protocols, ....); calling "crypto-X" just "crypto" is unnecessarily ambiguous.

(either...or it's some guys pushing their agenda very hard in the last few
weeks)

~~~
salvar
However you feel about it, the change is happening. People clearly don't think
the ambiguity is as problematic as you do.

~~~
blattimwind
What makes you say that? Neither is it inevitable, nor do people not care, as
is evident by that literally every time an article using this term the wrong
way is posted, people _will_ post clarifications what the article is actually
about and express their annoyance regarding the issue.

Clearly, people _do_ actually care about others trying to coopt well-
established language for their often fishy schemes.

~~~
salvar
Yes, a small number of people do care about this -- how many comments are
these compared to the ones that are discussing the topic itself?

All I'm saying is: If you're going to try to tell people to not change the
language as people seem to want to change it, because you don't want the
language to change, then prepare for complaining for a long time with no
results.

------
johnklos
"Crypto" is NOT synonymous with cryptocurrency.

