
The China ICO Ban - ot
http://avc.com/2017/09/the-china-ico-ban/
======
AndrewKemendo
ICO is a distribution service on-top of a blockchain system. That's not all
that interesting in this conversation.

What is interesting is the same thing that has been interesting from the
beginning of the blockchain discussion. Namely that these "coins" purportedly
offer an alternative currency to sovereign national currency.

I have always held the view that, the fundamental utility of doing commerce
through a currency that is outside of sovereign national control/purview is a
hard ceiling for any of these systems. Probably the biggest lever a government
has on their nation is monetary policy. There is no way that a government
would allow the subversion of that.

At the point in which any alternative currency based market becomes big enough
to matter within the boundaries of an existing currency based market, then all
a sovereign nation needs to do to kill it is make convertibility to the local
currency illegal.

China is basically saying, "look we don't even want to come close to this type
of alternative currency possibly getting huge" \- and the ICO method allows
pretty much anyone to convert Yuan to "coin." So they went ahead and did what
I have been suggesting would happen, but much earlier than I suspected.

The only way that wouldn't work is if nearly all necessary services, retail,
logistics etc... uses the alternative currency. In which case the native
currency has effectively failed and thus the government has failed as well.

So I don't see what the real upside here is, outside of very tiny, niche
marketplaces that require this kind of currency.

I haven't heard anyone actually respond to this line of criticism of
Blockchain.

Blockchain is a perfect solution for many things, but as a currency it's dead
on arrival IMO.

~~~
Iv
No. China has been pretty open and friendly to bitcoin so far.

What they fear is Ponzi pyramid schemes damaging the economy. Several ICOs
have reached a __billion __USD without any product and often anonymously.
These can bankrupt whole areas of a country. Now is the time to stop them.

Remember that their growth is exponential and one at a billion already puts it
high in the history of Ponzi schemes (Ponzi himself 'only' caused around 200
millions. Madoff is the recordman with between 50 to 150 billions). Let them
grow for more generations and there is a very big risk even for national
economies.

~~~
DiNovi
No, that is not their fear. Governments barely care about scams in general -
Madoff got off pretty lightly. The fear is losing control of monetary policy.
But IMO governments won't outright ban these but come to some sort of middle
ground where they get some sort of cut.

~~~
mrb
" _Madoff got off pretty lightly_ "

He was sentenced to 150 years. «Lightly.»

~~~
ShabbosGoy
"I'm not ashamed to admit it. When we arrived to prison, I was absolutely
terrified. But I needn't have been. See, for a brief fleeting moment, I'd
forgotten I was rich and I lived in a place where everything was for sale."

------
designium
One of the biggest issue is to make a distinction of what is a legit ICO vs a
pyramid scam/pure fraud.

Without a reliable source of truth, anyone can make a splashy website, add a
bunch of advisors, create a catchy "kickstarter" selling point and raise
millions.

The issue with regulators is that they may enforce the same kind of scrunity
applied to big financial firms to legit ICO and that can stiffle startup to
raise money.

My fear is that pushes the whole ICO game for only people who have the
existing expertise in working around the regulatory rules; then only big
players or people with big resources can play the ICO game.

~~~
aaron-lebo
Who cares? What makes ICOs good in and of themselves? The % of people who
actually need to raise tens of millions of dollars before they've built
anything is almost nil. It incentivises empty promises and bullshit marketing
and idea guys who have never built anything real in their life.

Those are bad incentives for those businesses and for consumers, because
they're the ones who ultimately pay for bad products.

------
bhouston
The large majority of ICOs I've read about are massive scams.

There is rarely any underlying value, but because of the hype you can still
make tons of money via pure speculation, celebrity endorsements and other
various types of pump/dump approaches.

It is way worse that OTC.

I think it is most self-aware scammers and the majority of the rest are naive.
The only ones I've seen that are not truly scammers are those providing the
platform for ICOs (e.g. Etherium, etc), because at least they are doing what
they say they are doing.

~~~
vasilipupkin
how do you make money via the schemes? if an ICO raises money, it has to
attempt to build the product, or else, the people behind it are highly likely
to suffer wire fraud charges. Meaning, you can't do an ICO, collect the money
and buy a boat. You'll likely go to jail.

~~~
bhouston
Are ICOs binding?

Can you claim failure after a best attempt at building the proposed product?

Can you build a shitty version of the product via outsourcing via Upwork to a
third world country. And then claim surprise when it barely functions at all?

~~~
vasilipupkin
I think if you don't put forward a bona fide best effort, you are vulnerable
to fraud charges. Yes, you can probably build a shitty version. But if it can
be proved via any email or conversation or some other means that this was your
intent, you will be vulnerable to fraud charges. You can't just steal the
money you raised in an ICO

------
justicezyx
Typical capitalism mindset:

If I see upward trend and there is a problem, then let me earn my profit,
government or regulatory bodies can come in when things go bad.

If I see downward trend, and I am afraid of loss, I will ask government step
in immediately instead of letting me die and fix the issue afterwards.

Why not the opposite?

Regulate heavily when it's not mature and when it finally proves it's
maturity, set it free.

Because that will not give a small fraction of the population the chance to
scoop in a hugely inapproprotional profit.

~~~
aaron-lebo
If you heavily regulate immature industries, you 1) don't know what to
regulate and 2) don't give the industry the ability to reach maturity.

It's the mature massive companies that are the danger to market and personal
freedoms anyway.

~~~
neom
That logic is almost akin to: I'm raising a kid and I don't know what a human
needs or how it will turn out so ¯\\_(ツ)_/¯

~~~
aaron-lebo
No because other people have raised children. As of 2000, nobody knew what a
mature social network looked like.

------
thesausageking
A guy who's an investor in one of the biggest ICOs of all time (Filecoin)
wants governments to not ban them. But it's not about him; it's about "beating
China to market". ok.

------
thrill
We have all the regulation that we need - it's already illegal to commit fraud
and enforcement of that law is sufficiently addressed. Anything else is simply
making it more difficult for valid efforts to be successful.

~~~
exogeny
That's only true under the supposition that the authorities are of a
sufficient expertise to be able to demonstrably prove that fraud.

Surely you'd agree that ICOs are a somewhat new thing, yes? And surely you'd
also agree that - having been through this once before in the mid 1990s - that
new market technologies have a disproportionate amount of fraud in their early
stages, which generates an attendant disproportionate amount of
destabilization against the progress of that technology growing mainstream
acceptance.

I'm not sure if ultimately this is a politics thing or what; if people are
getting scammed, it needs to be addressed. Full stop. I don't buy into the
whole libertarian fantasy (ie: if they were scammed, it's their fault; no
oversight!) because that puts a tremendous amount of power into the hands of
the least scrupulous people.

I don't really understand why people who believe in blockchain the most aren't
screaming until their heads explode about regulation, honestly. How do you
think it looks when people like Mayweather and Paris Hilton and friggin'
Gurbaksh Chahal get involved? How does that advance the technology? How does
that prove the value of the concept?

If you actually believe in it, you should be for regulating bad actors out of
it.

------
aaron-lebo
edit: there will be enough criticism of this piece, but here's a semi relevant
quote:

 _In the information age, the barriers [to entry into programming] just aren
't there. The barriers are self imposed. If you want to set off and go develop
some grand new thing, you don't need millions of dollars of capitalization.
You need enough pizza and Diet Coke to stick in your refrigerator, a cheap PC
to work on, and the dedication to go through with it. We slept on floors. We
waded across rivers._ \- Carmack

------
Nursie
Given what was said on business-insider I'd look at the statement to
potentially be far more far-reaching -

[http://uk.businessinsider.com/initial-coin-offering-china-
bi...](http://uk.businessinsider.com/initial-coin-offering-china-bitcoin-
ethereum-peoples-bank-of-china-law-all-crypto-illegal-etoro-2017-9?r=US&IR=T)

It could be that all crypto-currency trading, either between crypto-currencies
or from crypto-currency to 'fiat' in China is now illegal.

------
jbigelow76
\-- Slightly off topic --

I've got a dumb question as someone who only catches bits and pieces of crypto
currency stuff by way of HN and twitter.

Is an ICO a way to put coins out on the market and skipping all the mining
stuff? Does the mining still happen to release new coins or is the amount
floated at time of the ICO the total number of coins that will exist for
currency?

edit: added off topic note.

~~~
gruez
see:
[https://news.ycombinator.com/item?id=15176596](https://news.ycombinator.com/item?id=15176596)

------
Sharlin
This is the first time I've heard of "initial coin offerings" but eg. the
Bloomberg article doesn't bother to explain the term at all. I can't be the
only one, right?

~~~
Nursie
At least one seems to turn up in every ICO discussion on HN :)

AFAICT it's a way of issuing your own coins/tokens, which people pay for
(usually in ether) and they generally act as a sort of share of the enterprise
they are funding - promises of profit sharing etc are usually there. Many seem
to be rather worthless, and some ideas have apparently achieved masses of
funding based on some buzzwords and a white paper. These tokens can then be
traded, with values dictated more by hype-cycle than the actual progress of
any product.

IMHO it's part of the current trend of reinforcing and amplifying the wealth
of those that already hold crypto-currencies and are already plugged into the
scene. Witness the BCC fork a few weeks ago now ICOs, etc.

------
denisehilton
So that means no more Bitcoin mining in China? Why would they ban it when
there's a huge amount of revenue coming to their country.

------
voycey
I'm interested in how someone who says Bitcoin is a classic bubble has never
heard of ICO's, surely if he has enough information on Bitcoin to determine
that it is a bubble then he would have looked at the whole ecosystem and
understood what an ICO is?

------
seibelj
Please, please keep spreading FUD about ICO's and cryptocurrencies. Drive the
price down for a few days so I can buy more.

~~~
sgspace
How is this FUD when it is actual news?

~~~
nipponese
This is probably the first piece I'd read on the topic that ISN'T FUD.

