
Will Initial Coin Offerings Fund the Future? - bwertz
http://versionone.vc/will-initial-coin-offerings-fund-future/
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zekevermillion
The term ICO is horribly misleading. It sounds like IPO, which generally is a
liquidity event that happens after a company has become established. An ICO
happens before there is a company or business, in any meaningful sense. But
there is one similarity -- like an IPO, the sellers in an ICO are immediately
liquid. What could go wrong?

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DennisP
The aren't necessarily liquid for the full amount. It's possible to make a
smart contract that doles out the funds over time, or even lets contributors
vote on releasing funds.

Plus it's fairly standard to award the creators some of the new tokens, with a
vesting period of at least a year. The general idea is to used the raised
funds for development/marketing/etc, and the tokens as the reward; if the
project fails, the token will be worthless, so there's a strong incentive to
work at least until they can sell off the tokens.

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zekevermillion
OK, yes -- there are many cool technical possibilities. And per the other
commenter above, it's not as if this is any less rigorous than an average seed
round. OK, but when you have people investing multiple millions at a 100mm+
valuation, on an unproven team (and this is a charitable description in many
cases), pre-product, there is a risk that the opportunity is being mispriced.
There is a conflict -- on one hand, an ICO is "fairer" to developers in that
they receive immediate compensation, and a larger share of the opportunity for
the work they are doing. On the other hand, this mechanic is highly prone to
fraud and abuse.

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DennisP
I agree that some of the valuations are crazy. But that's not unique to
crypto. The same thing happened in the dotcom era.

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Animats
From the article: "Note that most of these ICO-funded projects have not
publicly launched yet." They probably took the money and ran.

The "DAO" crowd never delivered their Internet-enabled door lock, after two
years of hype. (If you want an Internet-enabled door lock, most of the big
lock manufacturers offer one.)

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kolinko
Er, TheDAO failed, but because of the hack that caused Ethereum hard fork and
the return of money to the original investors. The founders of Slock.IT never
received a dime.

While I was never a fan of the lock, TheDAO was an investment fund - there was
a forum with a few other prospective proposals, and they had some amazing
ideas regarding the funds' governance. There are some other, similar, funds in
the works now.

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robk
Fraud fraud fraud. These are 99% pump and dump schemes.

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drcode
This is true [1] but does this matter if even only 1% is incredibly innovative
and world changing? I think a limited number of these will almost certainly be
successful operations.

That said, I do not plan to invest in anything beyond ETH (ethereum currency)
because I have low confidence in most of these ICOs and it's hard to pick out
the right ones.

[1] It's true most of these are hare-brained schemes by people hopelessly over
their heads, including a fair number that are scammy. However, given how
little most of these promise (beyond saying something along the lines of
"we're building X and if people use it there will be an automatic payout to
coin holders") I think it's unfair and close-minded to just label them all
"frauds" a priori- Something can't be a fraud if no one is lying- Terms like
"pump and dump" and "scam" for some of these I think is fair though.

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throwaway2048
Yes, it does matter, nobody is going to trust the one honest guy when the 99
others are looking to rip you off for as much as they can carry.

Distrust and inability to ascertain quality before purchase drives out all the
honest players from the market.

[https://en.wikipedia.org/wiki/Market_for_lemons](https://en.wikipedia.org/wiki/Market_for_lemons)

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kolinko
While I agree that 95% of ICOs are not so good, so are 95% of e-mails in my
Inbox.

With ICOs, there are quite a few ways to ascertain the quality - regular due
diligence applies, even more so when there are so many eyes watching every
proposal.

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vbo
Bad actors don't invalidate the technology or the opportunities it brings
about.

ICOs open access to funding to companies outside the usual VC-preferred areas
and sectors. They also allow pretty much everyone to invest (though the ones
that follow regulation tend to disallow participants from US that are not
registered with the SEC).

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mintplant
The complete idiom is "a few bad apples spoil the bunch", which is the
opposite of the point you're trying to make here.

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vbo
Point taken, edited to say bad actors.

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brighton36
The sec will put a stop to these at some point. Probably sooner then later.

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beaner
This is a global phenomenon, not just happening in the US.

How would they enforce it?

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Rmilb
Who has jurisdiction over a functioning DAO (Decentralized Autonomous
Corporation/Organization)?

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a3camero
I would ask: who wrote the DAO code? Someone (or several people) tested,
developed and then deployed the code.

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kolinko
So did the authors of Linux, and nobody is chasing them when a hack appears.

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aqsheehy
Will scam coins fund the future?

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pavel_lishin
[https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...](https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines)

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ghotli
Whether or not it's entirely true, this is a good link to click.

