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Ask HN: Anyone else scratching their heads about coin offerings?
121 points by curtkobain on Aug 19, 2017 | hide | past | web | favorite | 65 comments
* Where did the architecture and ideas and accepted rules around ICO's come from? Where were the discussions taking place? I would expect something of this magnitude to have a mailing list at least as active as LKML.

* 0xproject on their blog landed 24M in coin funding from 13,000 investors at $1800 each. Where are the online equivalents of roadshows and pitches taking place? Again, where are the free and open discussions around this taking place online? Show me a historic record. Its like these things popped up overnight.

* Assume, from above, that at a 3% acquisition rate, to acquire ~15k gross number (as claimed by them) of investors they need to reach an audience of 500,000 potential coin investors. Where are these 500k investors with 1800 to throw away hanging around online? Are they all actively looking at the listings? Talk to anyone who works in private wealth management.. trying to convince someone to invest is hard.

* Given the number of ICOs, either the same groups of investors is investing in multiple ICOs or the number of investors is massive. Lets say the latter, we would expect at least 10x the number of 0xproject target audience = 5 Million active ICO investors. Again, where is this happening? It should be possible to confirm/track this on bitcoin at least. Has anyone done the analytics on this?

* If these discussions are occurring offline, what group of people are driving this, and why? Are they preparing for an event where fiat currency becomes worthless? Should we be worried?

* Why is it that the teams associated with these things come from elite institutions like ivy league unis and investment banks? Look at the teams for coinbase and 0xproject for example, and compare it to the team of an elite deep tech startup for example. You need brains and hard work to create an hard tech startup. You need what to create an ICO funded startup? Looks like elite institution connections.)

Thank you.

There are no rules in general. There is an ERC20 standard, but that is basically "shared API" that all the tokens agree on, and that was created organically. Before ERC standard, people made up their own interfaces to tokens; now, they have a shared API. But these are technical rules. There are no other rules; everyone can create a token and dump it online, with no rules.

The discussions are taking place on Ethereum reddit, I suppose, or maybe on other Ethereum-related subreddits and forums.

Those forums are usually hives of scum and villainy, as you would expect. Scammers scamming other scammers.

Because of existing code, making a new token is relatively easy; you take an existing one and change some variables. Yes, it doesn't do anything useful, but it doesn't need to; you just need a pretty website, where you put """"whitepaper"""" and a pretty photos and some """graphs""", repeat the word "decentralized" a few time and you are ready to dump.

Since there is no regulation, those things are popping up one after the other. Want to create HackerNewsCoin for a new decentralized platform for programming discussion? Why not. Promise a release date for a very vaguely described project, far along in the future that everyone forgets by then, and you are all set. Does it make sense? No, but you get rich out of other people wanting to get rich.

Unlike with investing, there is no actual value being made here. Just people wanting to get rich quickly. There is no substance, just scams on top of scams.

In a way it sounds like a good way to trade virtual goods. As long as money isn't involved I see the benefit.

The harm comes when these coins appear on the exchanges

> Unlike with investing, there is no actual value being made here.

What's the value being made in investing?

People take the invested money and do things with it. They make products and provide services. Public market speculation provides some secondary benefits such as liquidity - the stock market does not function very well if it generally takes weeks or months to pair a buyer with a seller.

There is no product at the end of most of these ICOs - or at least, nothing commensurate with the amount raised. Most of them are purely speculative vehicles where money changes hands from ICO investors to second- and third-tier buyers. They are pyramid schemes that eventually collapse. Or the founders simply abscond with whatever they can. If there is a product at the end of a round of investment, the odds of it seeing the light of day are probably somewhat worse than kickstarter.

I'm just going to drop this in here, this is a quote from Patrick McKenzie during a live chat on Product Hunt [1] that John Collison tweeted out back in April [2]. It's an answer to: "What is one thing you believe that others disagree with you on?"

It's a pretty cynical view, but worth digesting.

> The fundamental innovation in Bitcoin the social dynamics of the gold rush phase, which distribute cryptocurrency tokens widely for almost free. This creates a self-organized distributed boiler room to market Bitcoin. Bitcoin needs nothing else to get as big as it has; this is convenient because it has nothing else. Bitcoin has no utility as a means of transaction or a store of value. The blockchain is the world's worst database. The long line of very smart people on the other side of this bet have been scammed, are scamming, or both. Bitcoin will, accordingly, go to zero with the inevitability of gravity.

[1] https://cards.producthunt.com/cards/comments/452743?v=1

[2] https://twitter.com/collision/status/850454173384454144

This has been the dominant view of HN since the beginning. The only reason I didn't buy bitcoin at $1 was because of what I read on HN. Now it's at $4,000.

Not saying you should go out and buy bitcoin now, but logic often doesn't predict human actions.

Well if you really believed it was a flawed technology but "fit for speculation" then you could have rationally bought in early just on that basis alone.

It's clear that many people buy a little Bitcoin and then become loud advocates for the currency; repeating the facts they like, ignoring the facts they don't; which has helped to power the increase in valuation so far, but has to run out of steam at some point (perhaps far, far into the future).

The underlying technology has interesting potential but I think we'll see it evolve through several generations before broad consumer utility (either direct, or through platforms) is realized.

That's the problem, HN's hivemind was saying it wasn't fit for speculation, and since I didn't know anything about it, I didn't even consider it.

Keynes: "Markets can remain irrational longer than you can remain solvent."

This ^^^.

But the bubble always bursts, and someone always gets stuck eating the soggy biscuit.

.. or that view of reality is missing important pieces of the puzzle. the idea this is "emergent" is laughable.

I highly doubt this is logic.

Bitcoin has no value, but neither has fiat money. So if using it has benefits over fiat money, it will become the preferred medium of exchange.

I can see a lot of benefits, such as a global currency (no need to exchange money when going abroad), no (hyper)inflation (especially helpful in unstable countries), wire transfer immediately (not needing to transfer money during bank business hours), pay with your mobile phone (you have it already, and in the future you don't need a wallet), no government interference (illegal activity).

Hard to predict if Bitcoin will prevail or not, but it's hard to deny that it doesn't have potential.

Bitcoin, like any money, is valuable only insofar as someone else will accept it for stuff you want.

Bitcoin has been becoming more and more valuable. And it is deflationary.

Patrick McKenzie needs to address THAT.

He conveniently ignores the magnitude of people that have gotten people that have gotten screwed by the financial system, cheering on how great capitalism is because he is a winner in it. People continue ignoring the trends. Wealth inequality is massive, those not in the upper crusts of American Society have seen their status of living deteriorate, and people are still surprised that they are seeking alternatives to the current financial system?

It has utility in that it allows transactions to take place that wouldn't be allowed in the same form with other payment methods

I think there is a non-trivial amount of money laundering happening through these things–the new markets, wider selection and total lack of regulation of cryptocurrencies give people more avenues to mask the source and destination of money. There is so much money out there that people want to move but can't because of where it came from, government controls, taxes etc.

Honestly, none of these ICO's are generating any real value yet. What is a widely used product that has been funded by an ICO?

Even 0x is a protocol for trading tokens. That implies you need tokens worth trading...

ICO madness is just a symptom of the crypto bubble. Which is itself a symptom of the tech bubble. Who do you think is buying into all these cryptocurrency assets - Software engineers and other tech employees with a large amount of disposable income due to the meteoric rise in tech salaries.

My feeling is that the success of ICOs is a side effect of the meteoric rise in value of Bitcoin and Ethereum.

There are many people who have become virtual currency millionaires. At that point anyone would be looking to diversify. Purchasing traditional assets would mean paying taxes on the coins. Purchasing ICOs just diversifies your coin holdings into an even more speculative asset class.

> Purchasing traditional assets would mean paying taxes on the coins

Purchasing ICOs would be a taxable event.

But one that is currently invisible to tax authorities.

Block chain transactions are not as opaque as you think.

As long as they are not looking that does not matter.

^this. Currently sitting next to someone at work in this situation. 10x'd some money betting on bitcoin, 100x'd the same money betting on Ethereum. Now he's betting on ico's hoping to win again. He's betting, not investing, in the same way that people put 100's of thousands of dollars on boxing matches.

It doesn't make sense to me. I thought BTC was supposed to decentralize currency. One currency to rule them all. Having dozens of different ones that fluctuate like this seem counter-intuitive.

Sure, it's still decentralized. But now in order to buy things, we'll have to realize some sort of standardization. Of course, there are things like the Pot Coin, which obviously has only been deployed for a certain purpose.

So maybe everything is relative to BTC anyways, just specialized for different markets.

Apologies for the stream-of-consciousness format.

I think we're just in the early days... things will formalize over time just as they have for current fiat currencies.

I wouldn't go as far as to compare the minds behind ICOs to the people involved on LKML.

The linux kernel developers that have jumped ship from LKML to bitcoin can be found on the bitcoin-dev mailing list: https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-d...

Also, bitcoin/linux developers should not be blamed for these ICOs -- many of these schemes are totally unrelated and would just as easily be using centralized databases for their shares.

Altcoins exploded in 2013 with their initial offerings listed here: https://bitcointalk.org/index.php?board=159.0

.. and since then you can go look up "ERC20" and find some Slack stuff.

That's a very un-Wikipedia article.


The text is much less neutral than normal.

Some subjects defy neutrality.

Abject fraud being among the leading contenders.

Such as? It seems fine to me.

Though the following may not answer many of your questions, I found these three videos to be very illuminating in regards to the blockchain and ICO processes and futures. They really helped me because I knew next to nothing about the whole field but saw lots of talk on social media and wanted to learn more.

https://www.youtube.com/watch?v=o1mkxci6vvo Investment Panel with Naval Ravikant, Meltem Demirors, and Garry Tan

https://www.youtube.com/watch?v=OnHRnlrO6bQ Payments Panel with Balaji Srinivasan, Elizabeth Stark, and Ryan Charles

https://www.youtube.com/watch?v=IrSn3zx2GbM A conversation with Naval Ravikant (who is very prescient in this field)

My previous summary of ICOs: https://davidgerard.co.uk/blockchain/icos-magic-beans-and-bu...

Truly the least substantial asset I have ever seen. I hope the SEC goes feral on them, and soon.

>I hope the SEC goes feral on them, and soon.

Why? Are you concerned about unsuspecting investors being scammed? Or are you hoping the SEC will swoop in and "prove you right" by regulating the value of this ecosystem to zero?

The unsuspecting investors. Crypto scammers are now targeting retirees, for example. e-Toro have ads on the tube. I think it's actually unethical to be marketing cryptos to the general public.

Pretty much every ICO is already excluding US customers out of SEC fears

And yet EOS.io had billboards in the US. Unless ICOs can show positive action to try to stop US buyers, they may have trouble - the SEC specifically stated it was going to look at what actually happens (does it look like a security offering that allows US buyers) over the boilerplate.

I'm also flabbergasted by the amount of cash (seemingly) that is going into this. I bought some ETH and already made like $2K on a $4K "investment". I'm willing to lose it all but feel like it could be around for a while so why not.

As far as the ICOs....yeah I don't get why you'd buy into that unless you truly believe in the vision and team, and so many of these stories are super shallow. I go with what other commenters are saying, that many of them are shams, they go big on FB/Google advertising to attract rubes, or they're being used for money laundering.

However, I also think that there's room for an ecosystem like this eventually, hence my investment. Just seems like early days and a lot of people taking money because they can. And maybe I'm just the rube though!

While I'm not part of any, I have heard from members of the existence of underground slack and FB groups of fairly sophisticated investors and early adopters (obv now all closed to public).

Some money is also from investors escaping currency devaluations or restrictions (ex. China). I've heard of quant traders who are porting public equity algos to crypto. Naval R. Also Said on a recent podcast that some cryptocurrency traders meet in person to do trades too.

Would be interested in hearing what other things people have heard (or can confirm). I have a feeling some big whales(or syndicates) are participating in market making bc of the small caps of some of these coins, and that may cause a lot of boom-busts. Regardless, I'm still really bullish on crypto/blockchain as a whole though!

Discussion happens on the two main Ethereum related subreddits: https://www.reddit.com/r/ethtrader/ and https://www.reddit.com/r/ethereum. At ethtrader, as a community, we've recently had an effort to put forward a set of criteria for evaluating ICOs, a test example of which is https://np.reddit.com/r/ethtrader/comments/6tg8up/ethtrader_...

they arent your typical investments. id think its more like the millenials version of a horse race tracks as a form of entertainment. it is astounding to see there is a rediculous amount of of money that gets moved around every day, so obviously these arent just your average kids, there are some big hands involved. it should be pretty easy for bankers/whales to get in and manipulate the prices as they please.

> Are they preparing for an event where fiat currency becomes worthless

You know what they say about fools and their money. It's taking money in with no actual repercussion if any of your plans fail. It's hilarious how formulaic they are all now. They take some already existent service idea, throw 3 "decentralized ooh ahh" points at the top, and then show pictures of 10 people's faces at the bottom (employees and "advisors").

It's very 2k era dotcom bubble "how do I get rich quick?"

Also keep in mind the growth of Cryptocurrency as a whole. New wealth is being created and reinvested.

For example, I participated in a token offering 18 months ago which has produced a sizable value. I then took 20% of the gain and spread it across new token offerings.

At scale, think of everyone whom invested in Bitcoin early and Ethereum at the ICO. Their gains are used to reinvest into the crypto ecosystem at the earliest stages, thus, keeping their fortunes regenerating and growing.

Does not pass the Tulip test:

Also keep in mind the growth of Tulips as a whole. New wealth is being created and reinvested.

For example, I participated in a tulip offering 18 months ago which has produced a sizable value. I then took 20% of the gain and spread it across new tulip offerings.

At scale, think of everyone whom invested in Carolus Clusius early and Bizarden just after Ogier de Busbecq sent the first seeds. Their gains are used to reinvest into the tulip ecosystem at the earliest stages, thus, keeping their fortunes regenerating and growing.

I completely agree. Many of the psychological principles that drove the tulip craze are present in the ICO ecosystem: scarcity, promises of skyrocketing value, a steady flow of new entrants, and early investors using gains to further fuel growth. We've seen this movie before. The human brain hasn't changed much since those days, and I have a feeling social psychology textbooks will be adding ICOs right next to the tulipmania section. I think everyone is hesitant to voice their concerns out of fear that they simply don't "get it." When you hear a panel of institutional investors say things like, "We're still figuring it out too, but we're going to make a ton of money!" that should make people gambling with their own money nervous. Early investors in multilevel marketing schemes and Ponzi schemes also make lots of money, but the whole thing ends up being a house of cards that stacks ever higher — often with increasingly financially-vulnerable investors entering the market as it gains a reputation of being a sure-fire way to make money fast. That said, I do think that some of the ICOs have solid teams and a good idea behind them, and the coins provide them with sufficient funding and network validation to have a good chance of building a company of real value. Many more don't have those ingredients and could very well end up imploding. But then again, I could just not "get it."

Easy to disregard via Tulip theory. I read that over two years ago with cryptocurrency, specifically Bitcoin.

Currency isn't wealth.

It's a means of transferring wealth.

Wealth isn't being created, it's being transferred.

(Absent some edge cases: the ability to conduct transactions that weren't previously possible, or to move funds out of a regime in which they are otherwise controlled -- though this almost always means violating legal currency controls and/or tax obligations.)

I don't have a good sense for the size of the ecosystem. I had assumed that 1.5Bil of some ico coin was X amount of ETH * current ETH exchange rate. But that if you actually tried to sell all of that it would collapse the market, so if gun to your head you tried to cash out with $1.5 billion USD you'd "only" get $100mil or something.

I dont know about offline. But this ICOs are investing heavily in various advertising platform. Reddit, FB & Adwords full of ICOs ads if you just search anything about blockchain.

Shameless plug: https://www.cryptoground.com/what-if?amount=1&coin=all&month... You can check returns of currencies here :P

To the beginners - Watch this video - https://www.youtube.com/watch?v=Pl8OlkkwRpc

Highly recommended. It's healthy to take a step back from all the 'money talk' and hear about why blockchain was invented. This is good for Mass adoption. Blockchain is good, the money run on Bitcoin adds it's piece to the pie.

These misterious investors could be the people who have large amounts of etc to invest and not interested in mass selling, you know, just a thought.

> Are they preparing for an event where fiat currency becomes worthless?

Worth less, maybe.

Tensions in North Korea? Maybe South Koreans buy digital currency.

Magnitsky Act or sanctions preventing Russians from moving money to the US or other countries? Maybe they buy digital currency.

Real estate market sky high, maybe people who sell take the profit and use it to buy digital currency, seeing as the stock market is also at an all-time high.

This got bumped off the front page rather quickly...

https://coinlist.co wants to be an ICO platform of preference, their first go is the Filecoin ICO. Issue with them is having to be SEC compliant which makes it pretty much US only (not strictly, however dealing with everything narrows the field vs here is the address, send ETH)

I also can't use my unrealized crypto-speculative gains to buy in, meaning that only accredited investors get a chance to pump/dump

There are a lot of people who regret not investing in Bitcoin early and who want to believe they'll get another chance now.

The "free and open" discussion is happening on Reddit and on various crypto forums like bitcointalk.org. There's quite a lot of it actually

My impression is that ICOs are motivated solely by greed. There isn't a whole lot here other than an insatiable thirst to make money.

And most of investments are motivated by what? Altruism ? Maybe 0.1% of all private investments are motivated by something else than "thirst to make money".

There are many ways to make money. One is to create real value. Another is to scam people. Still another is to take advantage of opportunities to seek rents or take advantage of non-monetized externalities like dumping pollutants into the environment. Yes, all investors want to make money. But some care about how it's made. Not all profit is created equal.

this is exactly what I was trying to say, but got downvoted

coin offerings are great, it keeps increasing the value of my bitcoin, so keep it up please.

Compare to the dawn of the commercial internet, and it makes a little bit of sense.

Most of us know the internet has been around in different forms for many decades, but it wasn't until the 1990s that commercial use took off. Easy distribution of information was the killer technology: web pages and search engines made instant trips to the library for the silliest questions a normal thing. Amazon was one of the first to get online retail sales right: they picked a fungible type of merchandise (books, which are 99% software and 1% hardware, so you don't really need to try before you buy a specific copy, which means you're fine with a mail-order shopping model). Clearly this wasn't just something cool -- it was a better way of doing things that are a part of everyone's daily life.

But then lots of other folks piled on with increasingly worse "me too!" ideas. Pets.com is the poster child: yeah, you can buy dog food over the internet, but _should_ you? But there was lots of demand in the form of people realizing a little too late that the internet was a huge investment opportunity, and "Amazon except for kitty litter" was close enough to scratch the itch, so the money piled in.

The most positive angle of the dot-com bust is that a lot of incredible technology did come out of it. Google was far from the first search engine, but it had the benefit of learning from the mistakes of Lycos, InfoSeek, Yahoo, AltaVista, and Excite. Facebook was SixDegrees except targeting an amazing combination of elites (top-tier colleges) and young adults experiencing newfound freedom + maximum horniness (college students). Even Microsoft has successfully reinvented itself as a pretty good PaaS provider.

So here we are. Bitcoin started ages ago, in 2009. Some people got it at first, and many to this day still dismiss it as a scam (though I know nobody who understands the technology and thinks it's anything but genuinely revolutionary). But increasingly, people are realizing that, like the internet, Bitcoin has introduced killer technology: decentralized distribution of truth. I haven't yet seen the Amazon of Bitcoin that so obviously connects commercial potential with this new blockchain technology -- perhaps it is Bitcoin itself, where a large percentage of the world stores at least some of its wealth there and it becomes part of the fabric of daily lives -- but there is no doubt that it will arrive, and that there will be more of them soon after that, and that there will be a day in our lifetimes when we can't imagine how we lived our lives needing to consult a government, or an agency, or a giant corporation, or a bureaucracy to learn the truth whether we possess liquid assets, whether we own property, whether we have a professional credential, etc.

Unfortunately (but just like the late 1990s), most of the current ventures are garbage, and nobody knows which is which. Moreover, some of them weren't even created in good faith -- just like IPOs in the late 1990s, some of these offerings are patently absurd. So lots of wealth will be transferred, much unfairly and much semi-randomly. Many people will be hurt.

But out of it will come the next Google, Amazon, and Facebook.

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