
Valuing ICOs from fundamentals – ideas? - rs86
Hi, I am trying to come up with a theoretical justification for valuing ICOs, specially utility tokens - one that ultimately ends on cashflows. Any ideas?
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kylebrussell
Not sure that a model ending in cash flows really makes sense — most tokens
don't come with any obligation from some central organization to pass along
cash flows to token holders. Thinking about the flow of value through a
network probably makes more sense: [https://medium.com/@cburniske/cryptoasset-
valuations-ac83479...](https://medium.com/@cburniske/cryptoasset-valuations-
ac83479ffca7)

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meric
What about cashflows including goods or services?

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cvaidya1986
Here is an alternate simple five step process. 1) TEAM 2) TEAM 3) TEAM 4) TEAM
5) REALLY VET THE TEAM

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hluska
This is really complicated.

Let's say that I decide to run an ICO. I don't know what the hell I'm doing,
but I hear all these people making huge money and moving to islands that won't
extradite me back home to face charges. So, I clone Litecoin, fire up an
editor and GregCoin is born.

GregCoin is a utility coin. You see, I'm really good at telling people to fuck
off in eloquent ways. In fact, I'm world class. My token grants the bearer the
significant privilege of being told to fuck off in an eloquent way.

ICOs are completely unregulated, so I don't have an underwriter to make sure
that everything is on the up and up. And that's good because seriously, if I
wrote you a cheque, there's a very real danger that it would bounce so high it
would make a skylight where there was no skylight before. But you don't know
that - nobody knows that so it isn't relevant.

Good ICOs are transparent, so I'm very transparent. I have accounting
statements but they're not completed with GAAP/IFRS so you can't compare them
to any other ICO. This is also something that would make an underwriter run
away, but fuck underwriters! We need a completely unregulated store of value
because financial regulators treat us like we're all stupid. Besides, my whole
business model revolves around nobody discovering that I'm full of shit. It
would be really hard to do that if the numbers were true. To The Moon!

Nobody knows who I am and GregCoin is really really stupid. Is being told to
fuck off in an eloquent way a sustainable basis for a currency? But, holy
fuck, since Bitcoin, there are many people out there who want to brag about
1000x returns. So, it likely doesn't really matter if my token is stupid and
provides no real utility. All I need to do is show that there is a lot of
demand so all you need to do is get in on the Very Exclusive ICO, watch
GregCoin go To The Moon and sell when it hits $5,000.

I need to look more legit than I am, but thankfully, that's not too hard. I
buy 25,000 Twitter followers, hire a very good designer to build out my
website and hire a small army of ghost writers to make me look smrt.

Then, I hire a small army of influencers, some real, some imagined. For some,
I plead to their ego. You're a genius crypto analyst and I've been reading
your analysis for ages. Can I hire you as an advisor in exchange for x tokens?
Please, oh great crypto genius? For others, I hop onto Fiverr and buy
spammers. Who cares? I just have to show demand, not intelligent life.

Now that I've paid, demand is hopping, so I do a special pre-sale to reward my
earliest adopters. The ICO was going to be 1.5 million tokens at $5 USD each,
but my special early adopters have done such an amazing job building an
amazing community and creating something revolutionary that I want to put some
tokens out asap. So, I decide to release 250,000 @ $2.5. This means you get an
instant 100 percent return when the real ICO happens! Double your money,
guaranteed.

Those 250k token sell quickly. I run the exchange they're sold on, so I get
money for tokens, plus service fees but you don't know that. Also, you
technically don't know if any of those tokens even sold for actual cash money
because, again, I run the exchange (through a complicated series of shell
corporations) and its customers' privacy is very important because of GDPR.

Turns out that the exchange is a colossal piece of shit. There is a key in
localStorage called 'role' and if you change that value to 'admin', you can
access everything. But my customers don't know that. I don't even know that.
Hell, I paid my developers $250 on upwork. For that kind of money, they should
know how to build secure applications. Ironically, the criminals who discover
that are the most ethical administrators on the entire exchange, but if they
got caught, there's a real possibility they'd serve more time than me if I got
caught.

Then, three weeks before the ICO, I clone Litecoin again and GTcoin is born.
GTcoin provides a wonderful compliment to GregCoin. GTcoin grants the bearer
the privilege of being told he/she is a financially illiterate shithead.

Since they're complimentary tokens, I give out two GTcoins for every GregCoin.
My early adopters go wild. Not only did they get pre-ICO action that
guarantees they'll double their money, but they got two free tokens that are
going To The Moon for every one GregCoin they have. That's gotta count as a
250% return. Does Warren Buffett get 250% returns in two weeks? No, he's a
tool of the corrupt, hyper-regulated system. Only my genius investors saw the
opportunity and got in early.

Now, I don't even need to pay people to promote my shit. My early adopters are
so eager to show how smrt they are that they blow up their Twitter/Facebook
feeds with news about the ICO. To the fucking moon!!

Then, my ICO hits. I take the money, move to Wontextraditemeistan, and do
copious amounts of cocaine with hookers until I die of syphillis. The tokens
are fucking worthless because the utility is provided by an empty shell of
lies. There may have never been any real demand at all, or maybe the coin
trades, and early investors find greater fools to take them to the moon. Who
knows and frankly, who cares? My tokens did what they set out to do. Anyone
who still owns them has been told to fuck off in an eloquent way and they are
financially illiterate shitheads.

\-----

Now, imagine that I'm running the same ICO, but this time I'm honest. My token
provides real utility and I know what I'm doing. My financials are solid. My
organization is solid. This ICO is legitimate.

Would anyone even know that second ICO exists? What kind of detective work
would it take to unearth that ICO #1 is bullshit? How well does that even
scale?

That's a beautiful thing about regulation. At least with public companies, I
can read their audited financials and compare competitors because they were
prepared with the same rules. And, I can trust that the exchanges give every
investor relatively fair access to market data.

If you're looking to value an ICO, I think the first step has to be to vet the
team and all its claims about both past and future. But, realistically, if you
do that five years ago, would you buy Bitcoin??

