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I don't think I'm stupid, but I still just don't get it...

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.




>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.

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."


Yeah, but the IPO Snap had to go through is heavily regulated to protect investors. ICOs are the wild-west.


I would argue that's a feature not a bug: the ease with which to potentially attract support. Similar to how kickstarter functions there is a lot of community feedback in the crypto world. If you want to you can find a ton of research on various ICO projects. Finally it's up to the investor to decide. The 24/7 liquidity and global aspect helps, in that the price exploration/valuation occurs continuously without opening price gaps.


This has been done before.

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.


With human nature people will take advantage of others who won't or can't know better and get excited by and react to hype. I think it's society's responsibility to prevent people from scamming others out of money - which is generally what stable economies do. I'm not saying blockchain doesn't have a great potential in utility, just not structured with how the popular ones (Bitcoin, Ethereum's Ether) have been incentivized - a stable crypto-asset would allow for utility without unreasonable or insane wealth transfer from occurring.


Absolutely agree. But society has to ways of making sure that there will be a minimum of fraud: let unelected regulators do the job or have a broad range of third party services/companies internationally issue advisories and reviews/audits. The answer to this of course is political/philosophical and crypto in general follows a philosophy of having the market i.e. Private solutions figure it out. That's especially more feasible as it's a global phenomenon.


SNAP is a traded equity listed on a regulated exchange that by its very nature has significant liquidity. Very different in practice


Actually not at all different in practice. It's different in THEORY but actually almost identical in practice. In theory, SNAP stock is legally classified as a security and recognized by the United States government as providing some kind of weird, abstract ownership of the Snap Inc organization (although all classical markers of ownership are not present in the stock). In practice, my post was pointing out it's basically as bad or even worse than a token.


It's not remotely 'identical' in practice.

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.


It's not weird or abstract. It's totally concrete -- the markers of ownership (dividend, voting rights) are missing but there is still ownership of the enterprise. If SNAP is sold, they are entitled to their share.


Liquidity may not be as different as you think. Volume on SNAP was $360M today; top ICOs are in the same order of magnitude. OMG was $67M, Qtum was $147M. (Bitcoin was $2B)


That's an interesting point re volume. But it still smells too much like 'Disney dollars' or similar - and I mean particularly in the instance of kik where they are looking to create an economy within their app developers. It's the same horse wearing different colours and it's not the sort of thing I would be rushing to get into (and I say this as a BTC participant at the 3c mark)


And they are traded globally 24/7. That's quite a difference from being traded in one stock exchange during business limited hours via a layer of brokers.


I agree to some extent -- I think the SNAP offering was a little ridiculous, and serious asset managers seem to agree.

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.)


There is still a HUGE difference between the two.

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.


>Owning a stock entitles you to a share of current/future assets/profits of the business.

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?


"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""

Yes.

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'.


The money from facebook's balance sheet doesn't end up in your pocket because they have a use better for it than you. If they can earn $1.1 on every $1 in their balance sheet then it's in your interest that it's not landing in your pocket. Dividends are paid out because companies have excess profit that they can't further invest to make more revenue. You as an investor can then redirect the money to another company X that badly needs it as opposed to facebook directly investing in company X.

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!


>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?

https://www.microsoft.com/en-us/Investor/dividends-and-stock...


I'm not talking about dividends. I made that extremely clear. A lot of companies pay zero dividends and also make it clear they have absolutely no plans of paying future dividends either so there is no expected value of future profits that peg the stock price. There is no rights of voting or any kind of classical definition of "ownership" pegged to the stock. Look at SNAP, hundreds of millions of dollars of volume is traded per day of SNAP on exchanges. If I removed the ticker name from my post, would you think I was talking about a token or stock?


It happens all the times, take a share buyback for instance.

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.


Fair example, but that's also not what I meant. The price of SNAP, FB, or GOOG stock isn't correlated with a potential buyback of only a small amount of shares back. That doesn't seem to be where the value is pegged. I don't think SNAP has done or is expected to do a single buyback in the foreseeable future. Hundreds of millions of dollars of SNAP volume is traded on exchanges per day. Where does that value seem to come from? My argument is that it comes from the same abstract consensus that makes tokens have the same behavior on exchanges, and literally just that. Nothing more. I know you won't agree, but I think you have an outdated view of what a stock really is. Newer stock offerings in tech like FB and more and more like SNAP are behaving like tokens rather than classical stocks. They show no properties of classical ownership aside from being registered with the SEC as a security.

>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.


> I think you have an outdated view of what a stock really is.

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.


So you're comparing to Kin being like a stock, why do they call them crypto-currencies then?


" why do they call them crypto-currencies then?"

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.


I don't think anyone that is well versed and highly accurate in the crypto realm calls these currencies. In fact, the proper term is token or appcoin. Not much except Bitcoin and similar forks/spinoffs (Monero, Dogecoin, Litecoin etc) are currencies.


I'm under the impression. That the idea of the token is that it would the method for which to use the service they claim to have built or will build.

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.


We've already got tokens that do this job just fine. They go by different names, like dollars, euros or pounds. Want to be even more amazed? Your potential customers already possess these tokens! That means they could pay you for your service right now, without having to jump through lots of hoops obtaining the tokens through some unregulated, probably-illegal exchange.

But no, go ahead and make your product more difficult for everyone to pay for. I'm sure that'll work out great.


The point is that these services work via e.g. the ethereum blockchain (and the best of them will actually have something to gain by being decentralized and trustless). Good luck sending euros to an ethereum address..

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.


"The point is that these services work via e.g. the ethereum blockchain (and the best of them will actually have something to gain by being decentralized and trustless). Good luck sending euros to an ethereum address.."

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.


You and the average american don't care about trustless decentralized services -- so what? If we only developed whatever tech the average person cared about, we wouldn't be typing here on this website today.


100% supportive of speculative tech development.

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.


As the case of the recent 'whoppercoin' for BurgerKing in Russia exemplifies, tokens also can take on the form of reward points. In a world where all of these various enterprise related token fields are 'shapeshiftable' fascinating economic incentives and dynamics emerge. Your investment in one tech project might thus allow you to eat for free for a year and if Burgers aren't healthy in your ideal world you might soon walk into a farmers market and pay electronically with tokens shifted. If everyone is a bank and investor - capitalist I guess you could say - then all of a sudden (central) banks face their 'internet moment' just like publishers, music, retailers did before them.


You're not eating for free if you pay for the privilege ... The future you describe where the value of everything is obfuscated by currency proxies sounds like something we should be trying to avoid.

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.


You'd be eating 'free' in the sense that one of your investments might pay off and as soon as you step into BurgerKing your token will autoexchange to 'Whoopercoin' - purchased by your wallet app refilling your Burger King wallet. In fact there might be subscription services that tell you when the whoppercoin market experienced a pull back allowing you to take advantage and invite your friends. Yes, all speculative but technically absolutely doable.


With a reference to the OP, good luck storing your data there too.


I'm assuming the difference being that the tokens (or crypto currencies) can be spent without payment processors or banks as middlemen. There are obvious downsides to this with fraud protection and the like. But it means money can flow without intermediaries.


Is unfair to call ISOs a casino. Casino are not outright scams and you know what you are paying for when going to a casino


At a casino, you are paying ~5% on the dollar and getting some entertainment in return.

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.


ICOs are more like a shell game.

https://en.wikipedia.org/wiki/Shell_game


I have the same problem. Using the tokens for their service later is a big uncertainty so I rather think of them as shares in the company's service and wonder when those sortof-shares will be regulated like the normal stock market.


I guess at the moment token are 'regulated' by their inherent cryptographic security that paper stock certificates purchased through a broker don't have. Whether the companies that issue them need regulation boils down to whether kickstarter or indigogo needs regulation IMHO. Which I personally think as a grown up and internet user you'd be careful enough to investigate on your own with due diligence and not spend more than you can afford to lose.


You can read a bit more about the token's intended use-case in Kin's white paper. Doesn't answer all your questions bit it's better than the article


You forgot the key thing: casino chips are redeemable!




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