I give you money, and in return I get...a token.
I can't eat a token. I can't live in it. I can't wear it. I can't buy Starbucks with it. It doesn't promise to return me more dollars or tokens if I hang onto it. It doesn't offer me any right to the governance or management of the money raised. It doesn't offer me a claim of ownership of some portion of an enterprise.
I read the article closely and its really just a lot nonsense. There is a lot of handwaving and 'community blah blah' but it lacks a simple, straightforward explanation of how these tokens are to be used.
I don't think I'm a stupid person, and I'm not trying to be obtuse. This just doesn't make any sense to me.
As best I can tell, the transaction which best resembles an ICO is buying chips from a casino. They have all of the qualities I describe above -- that is they're not good for anything. They can be used to gamble in a casino however. That is their sole usefulness. So I guess maybe that's how I should be thinking about it.
You can't do any of that with a lot of tech stocks actually either (ex: SNAP). SNAP pays no dividends, offers no guarantee of paying future dividends, you can't vote, you can't get more dollars if you hold on to it aside from the fact that someone else might speculate on it in an exchange. In a certain obtuse sense, newer tech stocks are becoming tokens and tokens are becoming quasi-shitty securities while trying to dance around securities laws. Honestly, I am not trying to troll, but I don't think there's any real difference between SNAP stock and Kik tokens in essence aside from a piece of paper saying that the SNAP stock is "stock" and the Kik token is a "token."
History repeating itself.
The easy ability for corporate entities to dupe smaller investors is the oldest scheme in the book.
The 1929 crash was dependent on it.
The 2000 crash was dependent on it - it was largely due to the fact that 'online investing' caused a flood of small-time money into the markets pushing up prices. When the 'smart money' decided to end it, they pulled out ahead of the dumb money and left others holding the bag.
The housing crisis had elements of this as well.
There is definitely an argument to be made that 'regulations hold people back' - surely - but without them there is a 100% guarantee that things will go sour.
And when I refer to 1929 - that's not even going back that far.
The entire history of economics is about this - the 'quandary' of why supposedly rational markets crash and burn so often. It's seems a rather apparent explanation would be the asymmetry of information (and greed) between some actors, and others.
Kik can do whatever they want with their currency, there's no oversight, no transparency, no nothing.
----> The whole point of doing an ICO instead of an IPO is because they can paper over and gloss over issues, avoid regulation and transparency, and take advantage of wide-eyed and under-informed speculators.
It's just a way to leverage over individuals keen to make it big on speculative mania.
If Kik were in a position to do an IPO - they would. But they can't. Because they are slowly dying, and have almost no revenues. That doesn't sound like a good position to be in. So how could they possibly raise money otherwise without a lot of smoke and mirrors?
Why not simply 'raise a bunch of USD' and then 'pay developers' some of that USD - instead of fabricated coins?
Because the terms of an ICO to them vis-a-vis 'investors' are incredibly better.
Yes - an argument could be made that 'regulations are onerous and limiting and create undue friction' - and that's on some level a good point.
But this won't end well in the long run.
These ICO's are speculative mania. They'll be a 'good investment' for some, but there's nary any actual value being created.
ICO's are 99% a 'net zero gain' scheme whereby a lot of money changes hands - and it will go from 'dumb uniformed people to smart, informed, empowered and slightly greedy' people.
The only long-run winner for these things are the Hedge Funds getting in early, backing the ICOs, and then dumping their positions over time.
ICO's are not a financial innovation.
You can't create value out of thin air.
But one significant difference is that SNAP shareholders have a residual claim on the assets of enterprise. In the event of a sale of SNAP (takeover or merger), they must be compensated. In the event of a bankruptcy they get whats left after all the other creditors (though that's presumably gonna be 0.)
Owning a stock entitles you to a share of current/future assets/profits of the business.
Even in the case the business is not making money you can still hope for future profits or at the very least in the remunerative sale of an asset.
And no, you don't necessarily need dividends, cash on the balance sheet is very real and there's plenty of ways it can end up in your pockets other than dividends.
Can you provide me with some concrete examples of famous, high profile tech stocks like facebook and snapchat giving a "share of their current/future assets/profits of the business" to stockholders? As far as I know, there is no promise of current or future assets that they will pay out or distribute to shareholders barring legal actions and demands of liquidation, forfeiture etc all of which are not part of the simple "stock owning experience" that can be used as a counter example here.
>And no, you don't necessarily need dividends, cash on the balance sheet is very real and there's plenty of ways it can end up in your pockets other than dividends.
Please do tell me how cash on facebook's balance sheet can end up in my pocket if I own FB common stock? What are some concrete examples that could happen. Then, how about some concrete examples that have actually happened?
Facebook. Google. Microsoft. Amazon.
--> A company does not need to pay dividends in order to 'return value to investors' <---
This is a common misunderstanding of valuation.
--> Whether a company pays dividends or not is technically irrelevant <--
The only real relevance in 'share buybacks' is the ability of the corporation to generated yield from that cash, more than the investor could otherwise. I.E. A large, doddling company who is sitting on tons of cash, but generating very little yield, would be urged to pay dividends. Companies like Amazon, which can generate more yield from re-investing - should do that.
Key point: stock ownership implies ownership of the assets - so whether it's in Amazon's bank account or in yours - it doesn't matter - if you own stock, you 'own' that money.
The only question is - do you want Amazon to 'keep investing' (because they are good/bad at it) or do you want the money transferred to your account (because maybe you can do better).
The increase in value of the stock is economically/technically the same thing as a 'dividend payment'.
A token has no value.
It's inconvenient to acquire entire large companies and then liquidate them.
So what we do is we divide the company into a million little pieces of paper that cannot be liquidated if you don't own all of them. Of course you are now mad that you can't liquidate your share but unless you owned all shares you couldn't liquidate them previously either. Nothing has changed in this regard.
Except ownership of miniscule parts of companies is now a whole lot easier and quicker. It's no longer a privilege of people with a multi billion networth!
A company uses its cash reserves (generated by operating profits or assets sales) to purchase back some of its own shares.
As the same 1 share entitles you to a bigger percentage of the business (the number of total shares has decreased), the stock price is pushed up.
After that you can immediately put money in your pocket by selling the appreciated shares you own.
To give you a specific example Apple has a buyback program open since a while. But it's a common practice really.
>After that you can immediately put money in your pocket by selling the appreciated shares you own.
Ya, you can sell them to someone else. The same way you can sell the token to another speculator. This statement of yours does not establish a substantiative difference between tokens and stock.
Yeah many people tend to believe that "everything has changed" every once in a while.
There are records of claims like that since the mid 17th century and continously thereafter.
The way I see it things tend to repeat themselves and never really change in the stock market. A more historical point of view could be eye-opening, at least it was for me.
> That doesn't seem to be where the value is pegged.
It is in a way or the other. In case of Apple there's a pretty direct evidence, in other cases it's more indirect.
You could see it as a floor price. Companies can be valued way more than the value they produce/own but it's difficult that they are valued less than that.
Cannot say the same of a token.
> The same way you can sell the token to another speculator.
The whole point here is that you DO NOT have to necessarily rely on other people expectations to make/loose money with a stock.
You DO have to with a token. That's the difference between speculation and investing.
Why is that? Say a company keeps on generating profits and making buybacks yet the price keeps on falling: it won't be long before it gets noticed by people with enough resources who can take control and distribute dividends.
This inefficiency is so easy to exploit that de facto the market just aknowledges the value pushing the price up.
Yes of course you can also treat a stock as a token and just speculate on it, just base your decisions on what other people will think that the others will think that you'll think etc.
But you don't have to ! You do have a choice, which a token doesn't give you.
They call then 'crypto currencies' because they are 'totally cool' and 'trendy' and full of 'hype and future' - to gloss over the actual facts of what they actually are, in financial terms.
Where there is undue investor sentiment, and an inability to map the real meaning of the financial instrument - then those issuing whatever-it-is have significant leverage.
The biggest story of the 2010's will relate to the fact that most in 'tech' are viewing crypto-currencies from a technological perspective, while not having sufficient background to see their relevance as financial instruments.
For example if you're ICOing a distributed data store. The tokens will be what you spend d to store your data and you earn tokens by being a data store.
What makes it also speculative and gives it value is that these tokens get traded on exchanges.
But no, go ahead and make your product more difficult for everyone to pay for. I'm sure that'll work out great.
Of course it's still up for debate whether it's necessary to have a separate ERC20 (standard ethereum token protocol) token, instead of simply paying with eth directly. One argument I've heard for this is to have the method of payment decoupled from the price volatility of eth, but I'm not entirely convinced by that.
Nobody cares about the issue of decentralization, but a small group of people, moreover, their concerns are not practical, they are intellectual. (Unless they are trying to do something illegal, in which case their concerns would be practical)
From the average 'token user of Euros or Dollars' perspective - the current financial system has incredible integrity. There is zero advantage in 'decentralization'.
There is zero risk from short term holding of any major currency. And they're massively liquid, especially in the natural region of that currency.
100% of 'Ether-anything' are nearly useless to the average person anywhere, whereas dollars are amazingly useful to Americans and others, for example.
If there were a single, global, well thought-out 'Ehther' type currency, that were used in major and minor transactions - I can see some theoretical value in that. Conceptually, it's not crazy. But in practice, especially in terms of these small, one-off ICO's - they don't make any sense at all.
But the point of tech is to create value, ultimately.
'Decentralization' doesn't necessarily offer anyone a whole lot of value.
Ironically, it may have value in low-tech places with totally ridiculous currencies. But even in those areas, using USD or Euros, or even RMB would be a better option.
Just like foreign aid restrictions often stipulate that machinery purchased with aid funds needs to come from the donor country, it would be a matter of time before fast food companies tried to pass off partial renumeration in coins redeemable only in the business, as a good thing.
Edit:I realise I'm making a leap from what you describe and being speculative. But this is the sort of thing I feel this road leads to.
With ICOs, in the long run, you might end up paying ~100% on the dollar and getting nothing in return.
The asymmetry between those issuing 'coins' and those buying is considerably greater than the 'average losses' of 5-10% or whatever a gambler might have at a Casino.
Also - a lot of Casinos end up losing money because they have to 'give too much away' to consumers in terms of the experience, food, drinks.
More wealth-per-dollar will be transferred to investors from ICO's than at Casinos.
Which is why Hedge Funds are lining up to back ICOs - and not Casinos - it's a better return for them.
I talked to a guy who runs a successful ICO prepararion consulting, just told him 'i am a successful developer who did these and those things, is there a way to partner with you to make some leverage out of it?' and he told me that there is nothing technical in what they do, that is a machine to make money out of money, like, you bring in $150-$1000K and make $5-$10M on ICO with minimal effort and luck needed, that's it. No programming needed, they copy-paste all the minimal technical stuff needed. They never ask 'founders' if they have any programming backgrounds or if they actually plan to build anything, just to avoid embarrassment as everyone kinda knows they aren't. More, usually they aren't even under their real names, which is sensible for a criminal.
Everything blockchain-related is at best a Ponzi scheme and usually, outright fraud, except the structures that provide technical means for these frauds, like Ethereum itself.
And yes, these events make me feel that the next financial meltdown is coming. There is already too much too easy money around. If blockchain was ready in 2009, that just couldn't happen.
Oh please. Quit your whining. Yes, there are criminals and fraudsters in crypto trying to squeeze money and run since it's not regulated, but "everything blockchain-related is at best a Ponzi-scheme"?? That's like saying facebook stock is a Ponzi scheme because Peter Thiel got it 100,000x less in price than the people who bought it today on the exchange.
What's not fine is that all or nearly all 'entrepreneurial' activity in blockchain space is aimed at pulling money out of pockets of clueless people, presenting it as 'investment', but really gambling. People who are building nearly all projects just know they aren't going to even start building anything, they are just after collecting money. Those limited who do, have no chance because their tokens will inevitably collapse too once this Ponzi scheme explodes, people will just sell every kind of shitcoin when they know it was a scam, and even 'investors' in those who aren't scams, will inevitably lose money too.
Also Facebook makes real world revenue and profit. Almost no blockchain startup has, or even builds, or even plans to build, a product, and almost all of their declared products are at the very least, impossible due to network scalability limits, or for the most part, even ridiculous by themselves. Plain fakes, exist only as words.
The credibility of their business to generate future profits as decided upon by investors who investigate their markets, the credibility of their team and execs, etc. etc..
Most ICOs are done because those companies would not stand a chance at raising actual money - by people doing real due diligence.
Doing an ICO is in fact, a pretty string signal that there is something not good about the situation.
In Kik's case, well, they have maybe 3 million daily actives, and it's slowly dying, nearly zero revenues. Can't do an IPO. Should make you wonder about putting money into a currency that is dependent on their 'ecosystem'.
You may want to look up the definition of a Ponzi scheme.
In Bitcoin there is no central authority, there are no paid dividends for that central authority to route to older members instead of newer ones, etc. Ponzi (and Pyramid) are very specific, the next time you copy/paste this rant "scam" should suffice without making you seem as misinformed.
Check out this framework put out by Debevoise and Plimpton and make sure you're NOT selling securities.
If your asset is a security, it won't have any liquidity because exchanges must now be licensed to be a security exchange (which doesn't exist in crypto-land yet), so there is no upside for investors. A lot of this is heavily pulled from the SEC's investigation into the DAO.
If you're selling a token/coin as anything else, it seems the SEC is taking these things by a case-by-case basis to determine if what type of asset class they are.
If you're looking to ICO (pre-sale and launch) use management and KYC (Know Your Customer) software. It saves a ton of pain and suffering in the long run.
And as always rule number one is: Don't commit fraud.
The article you link to places the blame for that "npm havoc" solely with the contributor you mention.
>Under our dispute policy, an existing package with a disputed name typically remains on the npm registry...
>In this case, though, without warning to developers of dependent projects, Azer unpublished his kik package and 272 other packages.
>It was abrupt unpublishing, not our resolution policy, that led to yesterday’s disruptions.
In the first 24 hours in which preregistered participants were eligible to buy equal amounts of tokens only 20% was sold. Now, almost at the end of day 2 during which contributions have been uncapped, around 60% of the total has sold.
Compared to other ICOs where they sell out within a minute or two, or where whitelisted participants snap up 75% on day 1, this is pretty slow. I think it probably won't reach the 75 million cap.
Here is why I didn't get involved:
1) They presold $50million tokens to polychain capital, pantera capital and blockchain capital at a 30% discount very recently. 1/2 of these tokens had no freeze and could be dumped on the market at any time. Polychain capital has already shown that they are willing to dump large amounts of tokens within days of an ICO if the price is right last month with 0x project.
2) They are offering 1 trillion tokens but minting 10 trillion, allowing them to basically dictate monetary policy. One of their employees even posted on twitter that they don't want "too much" price appreciation, and if it occurs they would intervene in the market (eg. dump more tokens into the market).
Come on. If you want me to buy your made up, meaningless, nothing token, don't take the piss by selling it at a massive discount to hedge fund dumpers, and don't tell me that you're going to control the price. If I'm going to take a dumb risk, and it is a dumb risk, I want the possibility of some upside.
Compared to other ICOs, the required pre-registering, first day buy limit and other things made this much less hectic for potential buyers, vs say Filecoin's one-hour window where you could actually participate. I'd like to see other ICOs adopt some of the practices that Kin used.
So we decided to raise money from unsophisticated investors in an unregulated market, where nobody asks such inconvenient questions!
Seriously, can you be any more devastatingly transparent? I predict that the SEC will not look kindly on this.
If I have https://foo.bar I have full rights to https://foo.bar/kik/
Any idea otherwise is absurd.
The guy who managed the ICO, Daniel Peled , is a major fraudster . Plus just Google his name, he has another failed startup . Wonder if his investors know that he runs two shows at the same time...
Those of you that are not yet corrupted by the 'everything cryptocurrency related is a scam' attitude: try to keep an open mind. Yes, there is a lot of shady stuff going on, but that doesn't mean there is no potential in this space. We are witnessing a creation of a new industry with tremendous potential to change we do business. You should be excited!
This article is, specifically, how Kik structured their ICO and what made it different than other ICOs. There's some interesting stuff to discuss there--Are these changes good? Should ICOs be more/less structured?
However, all the top comments are just "Tulips, Ponzi, amirite?" Ok, that's an opinion, but what does it have to do with this article specifically? Very little.
If you want to shit all over crypto, the two articles on the front page about today's crash should provide an outlet.