I was involved with one of the bigger ICO right at the beginning of the ICO craze. I had pretty regular conversations with the project founder and was in talks to become the dev evangelist. The project had raised ~$5 million in ETH (this is when ETH was trading around $80). Despite the fact that this project had raised a crazy amount of money the whole project was being conceptualized and coded by a single 23 old guy who was promising features that much larger projects with teams of the best people in the field were yet to solve. Not to mention the project was blatantly lying about it's PoW algorithm.
When I tried to point out that the project should use some of that money to organize the software engineering aspect the founder got pissed off with me accusing me of trying to run the project. They had a second round and raised even more money (in addition to the insane capgains on their first round).
I check the github from time to time and it appears they've got at least 2 other devs involved and may actually bring a blockchain to market but this doesn't hide that fact that the project needed nowhere near the amount of money they raised. Hell they could've used a couple hundred grand from the first round and literally just paid a team of people to build the blockchain for them. did I get off of a gravy train? Yes. But there are more things to life than money.
If you're launching one of these, you don't really need investment. You just make sure you own the first batch of currency and get rich if it takes off. If you need investment then you don't really believe in your own stuff do you?
That's not what a broker does. A broker is basically in sales. He takes company research done by analysts and tries to sell you company financial products. He doesn't care which direction you go as long as you do something so he can take his commission, and a little extra if you are buying a company product he might be trying to push.
A market maker is the guy who's tying to capture the spread, but they don't really go around trying to get the public to buy and sell.
Not sure if the answer is obvious here but I don't know much about finance, does 'spread' here mean the difference in the asset price from purchase/sale time (whether by market change or artificial markup) or the brokering fees involved? or both?
Any vendor will buy a good at say, $9 and sell at $10. In the US there are many pawn shops saying "We buy and sell gold!" - it's never at the same price.
#1: A smart gold trader will buy low, sell high.. they will buy more gold when prices are low and advertise to sell more when the price is high.
If they're selling pure gold at less than or equal to $800/oz then it's well worth it at this very moment with gold trading around $1200/oz right now. 50% profit ain't shabby.
its all speculation, speculation, speculation, just like the US stock market just less regulated, speculators get a bad rep but do more good than harm in an economy
Not entirely true. Even if you believe in your currency long term you still need money short term so that you can cover your own costs of living and the cost of hiring other people.
I don't know the degree of complexity or technical ambition of the project you were a part of, but it's not unusual for a 23 year old guy to write most of the Ethereum app. In fact, that's probably the reason why most ICOs are a scam, there's an insanely low barrier to building a proof of concept. The boilerplate is like 15 lines.
When it's so easy that any 20 year old backend dev can issue a token, you should already know that no ETH-based app should be worth more than the same business model applied to a fiat currency.
>the same business model applied to a fiat currency
Ding ding ding, winner! So many of these just have no point in being as companies, let alone as a token.
At The STC, we're going to end sex trafficking in just like Apple and Amazon (and now Google and Spotify) ended music piracy. To operate, we must be an extrajurisdictional company which makes cryptocurrencies a useful way to get investment and pay dividends. But we're not going to issue tokens -- only shares. Ethereum will help us keep track of share ownership and allow easy trading, but we're not a "blockchain company".
I hope we see a new wave of post-ICO companies using these technologies as a means to an end, not an end in and of itself. We're probably leaving money on the table by saying that and not hyping up tokens and tech. Oh well, we're going to create a valuable business instead.
Absolutely not a joke. We're very serious about fixing, in many ways, the sex industry. It is rare that one gets to work on a project that will significantly improve many peoples lives, tackle a serious social issue, and actually be profitable. What we're doing may be frowned upon in some countries. But it is morally right, and being ethical is a cornerstone for any successful extrajurisdictional company.
Our main founder has had this idea for a while. But it wasn't until last year that cryptocurrencies showed they're going to be around and usable for non-geek users. This is crucial as it allows us to contract people (marketing, design, photography, transport, security, boarding, and on and on) without having to run risky front businesses to handle money or try to convince people that this strange internet coin money is useful.
The ICO craze annoys us because it blinds people to the real possibilities. It is our belief that within the next few months ICOs will need to measure up to ventures like our own and show true profit potential or at least some commonsense business fundamentals.
Think more of an app like Uber (without the sexism) than a website. We are not a listing site or a marketplace. We take both sides of the trade, offering full support and customer service. We have direct relationships with providers. This puts us in a position where we have a real chance of detecting coercion and offering assistance. At a minimum this means access to our lawyers. We are aware this is a delicate and complicated matter with human lives on the line. A couple of us have direct experience in this area. We know this is not something that just code or any amount of decentralized blockchain buzzwords will solve.
I can explain more in private (details in profile), or shortly we'll have more public details available and I can send you a link if you like.
But suffice to say that in the cities we operate, we will end up putting a significant dent in coerced sexual services.
It is really the opposite of that. Pimps take a huge cut or 100% and generally have a more ownership-like relationship. Our platform is about providing services that empower individuals to decide how/when/etc they want to work.
The project is almost certainly Aeternity. They forked Zack's code, used his name to publicize their project and then paid Zack off to join their fork with tokens from his own chain! Zack is a smart guy but the whole thing is a shit show.
And what you described is one of the more "legitimate" ICOs. Many of them are outright scams. This one at least tries to do some token work while pocketing the massive amount of raised money.
Perhaps a stupid question since I haven't followed this too closely, but is it THAT easy to raise money with a project? I have seen some $50-80-100m numbers flying around recently.
There's gotta be a catch though. It's that old joke about the economist seeing a $100 bill on the street, but knows it must not be real or someone else would have picked it up already.
Why bring age into the equation? That's quite discriminatory considering the creator of Ethereum is just 19 years old. Aside from that I'm 23 years old and have been developing software professionally in the past 8 years. Age isn't much of a factor anymore.
In the case of Vitalik, he was smart enough to enlist people more knowledgeable than him when organizing the Ethereum project. For example, he enlisted a PhD, Dr. Gavin Wood, to author the real white paper[0] (also known as the yellow paper). while it's possible that at 19 Vitalik could've been studying real CS long enough to work out the truely difficult parts of implementing his vision, it's highly unlikely and, to his credit, he was smart enough to know that. People who think they are the smartest people in the room rarely are. The really smart ones are the ones who realize this and are humble enough to seek the expertise of others.
The problem is projects like these: http://bitqyck.me/ A classic hard-sell 80s pump and dump scam reborn in the ETH era.
Bitqyck came to my attention through a family friend with very limited understanding of cryptocurrency, but just enough financial literacy to be in an investment group being fed these scams by people they trust as technical leadership. I imagine, ultimately, these people will demand protection from having to vet ICOs themselves, and twenty years later there will be an awesome movie about this time starring Leo DiCaprio.
The problem is the whole idea of cryptocurrency as a growth investment. The symptom is a bunch of copycat scams trying to freeload on the broader market. Without the bull market of the early '90's, Belfort would have had no one to sell to. Same deal here. The root cause is the insanity happening in bitcoin (and now Ethereal, I guess).
Mark my words: this will all come crashing down. I can't tell you when or why, but it's not sustainable. Probably it will happen in a way that makes the bitcoin nerds "right" in some sense of personal justice: the PRC will close the great firewall to bitcoin traffic, or backdoor the protocol in some unsupportable way. Or the SEC will shut it down somehow.
So sure: when the crash happens cryptocurrency "would have worked" if not for the meddling government. But it will fail nonetheless, and all those people (again, most of whom are not investors in scams like bitqyck) are going to lose all their "money".
I take a different view of this. I remember the dot com bust. This is a lot like the old IPO mania. Out of those ashes the real companies with real products survived and the culling of the vaporware was healthy for the market.
There are a lot of people in the blockchain space that believe deeply in the technology and are working to see it to fruition. There's plenty that see a quick buck and will leave their "investors" holding the bag. This cycle is not new and I don't think it means everything regarding blockchain is a scam. It's just very reminiscent of mid-to-late 90's Internet mania
The worst of is that early adopters will cash out boat loads of money and use that fact to claim they were right all along, as if somehow the top of the pyramid making money proves it's not a pyramid.
Mark my words: this will all come crashing down. I can't tell you when or why, but it's not sustainable.
The irony: lots of people feel the same way about the "real" debt-based modern economy. A ridiculous Ponzi scheme, clearly unsustainable in the long run.
As always, the time horizon matters when talking about investments and sustainability. Given the right time window, everything works, and everything fails.
Only a matter of time until a group like shadowbrokers in some sense has ICO for managing rooted military/civilian infrastructure and occasionally "deploying"/commandeering (and supply chain, because jets and tanks wont work very long without such) around the world…
I haven't heard this perspective before. Can you elaborate?
What if the exchange rate were 1 BTC to 0.0000001 USD, wouldn't that effectively be a collapse?
Probably ICO's as a stable 'investment' vehicle in it's current form, as the market will eventually correct itself to match the real underlying value.
That doesn't mean there isn't a ton of real value being generated here or that it doesn't have the potential to be at the scale it is now. It just might be too much, far too soon.
Building companies and innovating is hard, flooding capital to it will boost the value generated but you can't simply manufacture it artificially by throwing money at it unless there is real talent and business models underneath.
Just look at that Circle startup that raised a record seed round based on a nice sounding team and a half-baked idea. Too much money can actually hurt some companies chances.
> Too much money can actually hurt some companies chances.
And you can't really emphasise this too much when the company is a couple of developers, a handful of lines of code and an idea expressed on a WordPress marketing site, and complete strangers are chucking coins that can be converted to tens of millions of dollars of hard currency in return for a token conferring no rights whatsoever, because blockchain > legal systems that actually enforce fiduciary duties. Investors are usually keen to ensure founders can't just convert investments greater than "fuck you money" level into into yachts. But some ICO founders have already got a lot more, and even if they start with nothing but good intentions, they must wonder why they'd bother spending it building a company that in all probability won't be worth more to them.
Not OP, but here's a thought that has bugged me for a while: The bitcoin block reward is currently 12.5 BTC which equals to about 42500$. Put differently, this means that the market currently values 1MB of (transaction) data on the bitcoin blockchain at over 40'000 USD and miners will (collectively) spend about as much for mining each block. This is clearly not economically reasonable, unless of course you believe bitcoin will for some odd reason become the only safe haven for storing wealth. In reality though the price of a crypto currency and its blockchain should depend on the utility it provides to society.
If the system works then it must be worth $40000 to the users of the block chain. There is a valid point to be made about energy efficiency but this possibly is right for the price of securing a global "bank".
Mining protects all transactions that have occured not only those in the current block. But yes, long term the block size will need to increase or transactions will need to pay much higher fees (probably as a result of transaction aggregation, e.g. Lightning channels).
If you want to really see what the environment is like now, read the bitcointalk ico announcement threads. It's absolutely insane. Very little of that stuff makes its way to hn.
People are raising money with 10 page vague 'white papers' with ideas that make no sense or are completely unworkable on the blockchain.
There is very little skepticism or research with these icos . Most of the commenters are trying to help the project and receive tokens in return, do tasks to qualify for free tokens ( bounties ) , or promote the ico so their token value increases
If there was a good way to short individual ico tokens it might bring some sanity
According to coinmarketcap.com volumes on gdax for btc and eth and $115mm and $53mm over the past 24hrs. If you didn't want to increase overall volume by more than 10% you could sell out to USD around $12.5mm btc and $5.3mm eth per day.
The SEC guidance galvanized us on not offering tokens. Instead, we are going to offer shares directly in the company, even if they are mostly issued via an ERC20 contract. If we are going to get heat from the SEC, might as well go all out and issue proper shares.
Plus tokens don't even make sense most of the time. You can't buy a Tesla car with TSLA and you do not get dividends/trading with a car. And no one outside kids at Chuck E Cheese want to use venue-specific currency.
I’m not particularly knowledgeable on the subject, but isn’t the purpose of the SEC to prevent unauthorized entities from selling securities — including company shares — to people?
You are correct. If we're going to violate SEC rules then we might as well do it right. Instead of dancing around the topic, using IP bans and a wink-wink-I'm-not-a-US-citizen box, issuing tokens for services that totally aren't investments, we'll just come right out and offer shares with dividends and voting. This was our plan all along, but the SEC guidance just made it more obviously correct one.
Even the SEC realizes that not all token sales are securities. Some people in the industry simply aren't getting it, they are creating a straw man which the agency isn't even arguing for.
> The agency said that it would focus on coins that should be categorized as securities.
So there are all these people on the periphery just HOPING for their prophecy of a heavy handed government breaking the cryptocurrency rush.
They read the headlines.
They create the headlines.
They purposefully don't read the SEC report or consider any information to the contrary of what they are expecting.
Despite S.E.C. WARNING? This is an article about everyone getting smarter and restructuring their offering where necessary, and continuing to move forward.
Even the WARNING in the SEC's DAO report two weeks ago acknowledged that not all token offerings were securities. But detractors and regulated entities with a legitimate reason to be skittish, used it as the WELP SHOW'S OVER GUYS argument which is completely unfounded.
> Nick Morgan, formerly a lawyer in the S.E.C.’s enforcement division, said that the security label was likely to apply to any coin that an investor buys with the expectation that it will increase in value as a result of the efforts of the entrepreneurs who created it.
The SEC still answers to the courts, and this consolidation of capital will allow these new organizations to take it to the courts efficiently. The Howey test from the 1940s did not consider this kind of asset to ever exist. It isn't an end all be all, it is a test.
The SEC is not mandated by Congress to undermine interstate commerce, it is created to provide confidence. So far, they've been playing it smart.
"To me, it seems odd that people would pay millions of dollars to reserve space on a new cloud storage network, and obvious that they're really paying that money for a speculative investment."
"If you do an illegal securities offering, people who bought your securities have a right to get their money back. If token prices keep rising everywhere, this is not a big concern -- why would anyone want their money back when they have such valuable cloud storage? But if the ICO mania fades, expect a lot of lawsuits from investors who are shocked to learn that they were buying unregistered securities."
Everybody and their brother with a soundboard has stated an opinion about ICOs and the SEC guidance. Literally anyone influential has said something and if they haven't, expect them to say it tomorrow.
The gradient of opinions is just as abstract as the weeks before.
It would be a mistake to take that as canonical just because you respect that particular entrepreneur's non sequitur criticism of existing token sales. When the argument is that not all token sales are securities offerings, not even the SEC has made that mistake, and the argument is that new token sales don't have to be securities offerings, but they can be too.
Here is what the SEC will never get: they will never get investor protection from this asset class. Their entire regulatory framework is around that.
Congress can modify the SEC's mandate to support this. Congress can create a completely new agency and regulatory framework to provide for more applicable confidence and protections in this asset class.
The SEC will never ever ever use the Securities Act of 1933 and the Securities Exchange Act of 1934 as currently written to ensure a fair market of all cryptographic token issuances.
> The SEC will never ever ever use the Securities Act of 1933 and the Securities Exchange Act of 1934 as currently written to ensure a fair market of all cryptographic token issuances
If the SEC categories an asset as a security, it has rule making powers over the trading of those assets provided an American buys or sells the asset, inadvertently or not. Many respected lawyers and lawmakers, as well as the SEC, say many ICOs look like securities.
Note that coins offered in ICOs being securities isn't a death knell to the concept. Just to the scammy elements of the market.
Disclaimer: I am not a lawyer. This is not legal nor securities advice. Don't be a dummy and treat Internet comments as anything but casual banter.
> Many respected lawyers and lawmakers, as well as the SEC, say many ICOs look like securities.
Yes, this is the crux of everything I've said, primarily that "many" has nothing to do with whats possible. Whether a future token sale chooses to register as a security or is completely exempt from securities frameworks because it is a product.
> Whether a future token sale chooses to register as a security or is completely exempt from securities frameworks because it is a product
The "many" I refer to are the people get to decide, legally, whether it's a security or a product. The polite thing for the SEC to do would be to announce a new rule. The less polite route, though still completely legal, would be to prosecute under the Acts in an SEC court [1].
Off-topic, sorry: Levine gets a lot of praise around here, and he does have a great talent for breaking down complex finance topics so that they're easy to understand and often entertaining to read about. That being said, sometimes he is awfully sanguine about bank misconduct and crimes. Edit: from the article:
"A bank that keeps very careful track of how much money it has, and who owes it money and whom it owes money, and sometimes does evil stuff with that knowledge -- that's fine, really."
It's his trademark sarcasm, and the subtle hilarity is one of the reasons I read his daily newsletter. That quote requires more context:
You're supposed to know where the money is! That knowledge and reliability is the central function of the bank; getting the dumb spreadsheets right is more important than moral probity. A bank that keeps very careful track of how much money it has, and who owes it money and whom it owes money, and sometimes does evil stuff with that knowledge -- that's fine, really. A bank that sometimes forgets who owes what to whom is the real menace.
That's an unfair quote, taken completely out of context. His articles frequently cover fraud and illegality in the financial markets, and he's never in favour of it.
The quote in question was pointing out how bad the latest Wells Fargo scandal is. A bank that can't keep track of money is in serious trouble and is woefully incompetent. The banks ripping off customers but accounting for the profits are evil, but at least they are being competent.
I think even with the broader context it doesn't sit right with me, because he could have easily made the completely serious and valid point about banks needing to be competent at their core functions without characterizing "doing evil stuff sometimes" as "fine". Totally possible that my sarcasm detector is broken right now but it seems like he's "only half-joking" here (another of his favorite phrases).
It looks like around 90% of ICOs are securities and "restructuring" them to not be securities would probably make them unprofitable and thus pointless. The only way for most ICOs to comply with SEC regulations is to not exist.
while simultaneously reaffirming that regulated broker-dealers can trade securitized tokens that are properly registered bringing trillions of dollars into the crypto space overnight when TD Ameritrade and ETrade starts trading these.
> This is an article about everyone getting smarter and restructuring their offering where necessary, and continuing to move forward
The article specifically states "only three projects have said they are canceling or postponing the sale of coins because of the warning." It's not a doom and gloom article. It's just saying the vast majority of ICOs are (a) probably noncompliant and (b) doing nothing about it.
> the SEC still answers to the courts
The SEC is an independent agency [1]. Congress delegated to it the Congresses' powers to make rules in and around securities with the Securities Act of 1934, as amended [2]. Courts grant agencies, like the SEC, wide rule-making authority [3]. In any case, the SEC "answers to" the courts in the same way the Congress does.
> the SEC is not mandated by Congress to undermine interstate commerce
The SEC is a creature of the federal government. Its specific jurisdiction is interstate commerce. In fact, one way to get around some SEC rules (though not all--consult a lawyer before doing something stupid) is to exclusively conduct your business within a single state.
If you read the Securities Act of 1933 there are TONS of ways to get around SEC rules. And as such I think your intrastate offering idea is a red herring, but I'll entertain you:
Did you know that anything that is super obviously a security can be completely exempt if it matures or expires in less than 270 days? Its written right there. Turns out there is a huge market called "commercial paper" that takes advantage of this specifically. I personally had no idea about it until I read the law itself.
And there are lots of exemptions. Most of them are completely impractical for most of us.
> Did you know that anything that is super obviously a security can be completely exempt if it matures or expires in less than 270 days?
The United States is a common law country [1]. Implicitly stapled to the law are rulings and SEC rules. TL; DR There are more requirements to the commercial paper exemption than just the 270-day tenor.
That said, you are generally correct–there are lots of exemptions to registration. For example, Regulation D provides a safe harbor within which almost all private-company stock is issued [2]. The trouble with ICOs, currently, is promoters seem to be overusing this "we're marketing a product, not a security" line. As a result, they're not taking advantage of these exemptions. Failing to qualify for an exemption is a difficult mistake to undo ex post facto. (The Filecoin ICO mentioned in the article does take advantage of one such exemption.)
> Disclaimer: I am not a lawyer. This is not legal nor securities advice.
Look, we know. Only armchair financial enthusiasts use those disclaimers, and you've made it painfully obvious and its a bit contrived.
Federal Reserve regulation D is not the SEC's regulation D that you talked about.
Regulation D is not an applicable exemption, neither is Filecoin's use of it, because the secondary markets where people are inevitably going to trade them have to be registered broker dealers to legally trade things that admit they are securities. Unlike private equity, there is nothing that functionally prevents people from trading cryptographic tokens, so it is better for now that the tokens themselves make sure they are NOT securities, not just 'exempt securities'. No matter what Filecoin did, there is still a major infrastructure problem that threatens to hamper all liquidity in this space, unless tokens are structured as products and distinct from the securities market.
We've been here before. The SEC tried to regulate commodities. The SEC tried to regulate commodities futures and commodities options. The SEC thought they were covered under the wording of the Securities Act of 1933 but ultimately that just made no fucking sense for commerce. So the people of this country and the representatives thereof created the CFTC.
And yet again, the SEC's frameworks makes no sense for this market, where assets can functionally be like a security, like a commodity, and like a currency simultaenously.
A new framework isn't out of the question. For new services and sales that happen to use cryptographic tokens, being unambiguously a product isn't out of the question. Being unambiguously a security isn't out of the question.
> Look, we know. Only armchair financial enthusiasts use those disclaimers
No, anyone that doesn't want to be legally liable.
If the other person could reasonably believe they have gotten legal advice, or a client-attorney relationship was establishes, then you might be liable.
Before you say that this would be ridiculous to assume on an internet forum, be advised that many lawyers nowadays have websites, blogs, allow starting a client-attorney relationship over a public question board, and such situations on Reddit have existed before.
Disclaimer: I am not an attorney, this is not legal advice.
It is still ridiculous. Just because some lawyers take on clients over the internet doesn't mean that you need to say 'I am not a lawyer' every time you discuss a legal question online. I have never seen a case of someone being successfully (or even unsuccessfully) sued for pseudonymous, general online legal commentary.
> Regulation D is not an applicable exemption, neither is Filecoin's use of it, because the secondary markets where people are inevitably going to trade them have to be registered broker dealers to legally trade things that admit they are securities
Filecoin appears to be using Rule 506(c) of Regulation D, a § 4(a)(2) exemption. Also, you don't need to be a broker-dealer to issue, buy or sell unregistered securities. (You do need to be one if you're doing those things with others' securities [1].)
> The SEC tried to regulate commodities.
Commodities-trading regulation predates the SEC by over a decade [2]. Every time securities law were written, commodities laws were rewritten [3][4] to explicitly carve commodities out from securities laws. Both agencies compete in the swaps market, due to their shared jurisdiction over securities-based swaps [5][6], but there are deeper reasons behind the CFTC's independence than it making "no fucking sense for commerce." (The short answer has to do with geography and the competing power centers of New York and Chicago.)
> A new framework isn't out of the question
I agree. But it will probably take an act of Congress to do this. In the meantime, some promoters are violating the law.
in your grandparent post, you are still linking the Federal Reserve's deposit insurance regulation, while talking about the Securities Exchange Commission's exempt securities offering regulation.
Classic strawman, I wasn't claiming Regulation D required anyone to be a broker dealer to issue buy or sell an exempt unregistered security. The claim is that reselling it freely requires you to go through or be a broker dealer, unless all buyers are accredited investors.
We've come full circle to the article's point. Barring an act of the Congress, most ICOs are conducting themselves in a way that is, under current law, illegal.
Bizarrely, some of these non-American ICOs still advertise in the US. I can't remember the exact ICOs, but some have paid for billboard ads, taxi ads, and so on. I suspect that the 'no Americans' is just a tickbox that they know is easy for their investors to ignore.
Doesn't matter.. if they aren't doing know your customer and facilitating money laundering that results in money funneling enemies of the US than they'll wind up in jail if they ever step foot on extradition ground.
Why are people throwing money at these? It makes no sense. You have no guarantee that they won't just run off with the money, except your trust in the operators.
This one is particularly baffling to me. $200,000,000 is a fortune.
We're all presumably working on our own startups here. Can you imagine getting $200,000,000 in seed funding without even starting on your project? Just absolutely WTF is going on there?
There's a theory that people with enormous paper ETH gains are just diversifying by buying into all the ICOs. And the ICO "fortunes" are also on paper; I don't know if there's enough liquidity to sell the $500M per month that ICOs are bringing in.
ICOs are probably best understood like companies, not currencies. As you observed, an ICO doesn't create any value since it's just moving ETH around. If the token value increases relative to ETH then you could say value has been created.
Tezos, staus and filecoin all have inflating supplies, they are the biggest icos in history. Bancor is essentially uncapped in how many tokens can exist.
because money is a bet against bets against bets (the day before and the day after snap IPOed--was $25 billion really created? Where did it come from--and where does it go?)
And part of how the money supply has billion-xed since 2000 and no one seems to notice
Old vs. new money. It's a lot easier to get money from 15.000 people who got so rich with BTC and ETH, they have money to spare, than to find and convince 15 Venture Capitalists to put up 1.4 million.
Futures for Tezos are already trading at 6x the amount people invested during ICO.
> It makes no sense.
In the short term it makes a lot of sense (600% ROI). In the long term: An Ethereum based on OCaml has an interesting potential.
> You have no guarantee that they won't just run off with the money
If the developers are not anonymous, while no guarantee, it makes it less likely. When you cross the road you also have no guarantee that the cars won't run you over. Some amount of trust is needed, whether for money or your entire life. Benefit of crypto is that you don't necessarily need to rely on trust. I doubt Tezos has contractual access to all the money they received, or are allowed to dump their shares as soon as it starts trading for real.
> An Ethereum based on OCaml has an interesting potential.
I see this kind of stuff a lot in the "cryptocurrency" space. When I was reading about Waves, for instance, one proponent unironically proclaimed that "It's built on Scala, which is a better architecture than Ethereum".
I'm no Scala hater, but surely stuff like the implementation language isn't the most important variable in evaluating a new altcoin / cryptocurrency platform? This sounds a lot like hand wavy mumbo jumbo that's meant to convince non-technical "investors" to part with their cash / BTC.
It's built on OCaml because of functionality and langsec - contract code and implementations written in procedural/objective languages are immensely unstable which is also why ETH smart contracts keep getting hacked.
Consider that not even the fucking inventor of Ethereum himself can write a contract without massive exploits.
Tezos - Participate in the governance of your cryptocurrency. Read the source code of any smart-contract on the blockchain.
As I understand it, the source code of tezos itself is stored on its own blockchain. Any modifications to the source are proposed by and voted on by owners of the tezos currency (weighted by how much they own). Also, unlike Ethereum, smart contracts are stored as source code on the blockchain, rather than as compiled bytecode.
Or create another language that compiles to the Ethereum virtual machine. There are several already, and at least two in development designed to be better for formal verification.
Yes that is what I meant - I don't know Ethereum as well, so I assumed Solidity is the already the level of the VM (the "assembly"). Thanks for clarifying!
Its still intense. Tezos would have to become a unicorn to materialized 600% gains on 200 mill. It almost definitely wont, and thus the irrationality dominating this market is bursting the seams.
OTH, the market cap valuations these things are using is kind of ridiculous, since a 200 million sale of eth would crash it into oblivion.
I am thinking a short position in bitcoin is in my near future. I am not saying bitcoin is doomed to fail but I am pretty confident this shit coin crazy is going to hit the fan sooner or later and it's going to drag the "legitimate" crypto currencies down.
I agree that BTC has been in a bubble, but if I had ever acted on this hunch, I'd be so far underwater right now. There's no telling how long the rally might continue, nor where the correction will settle.
The other commenter made the astute observation that the less leveraged way to make this bet would be to go long on some competing asset.
One of my personal indicators that Bitcoin is in a bubble is when Bitcoin articles on hacker news are overrun with people talking about their bitcoin related businesses, instead of being overrun with skeptics and people saying it's in a "bubble".
We have gone from %90 negative a couple years ago on HN to about %50 negative today.
To be fair, if bitcoin had improving institutional support, adoption, technology, etc., you would observe the same trend in HN discussion about it. That would seem to make it a problematic indicator of a bubble, at least on its own.
Of course, if one rules out the possibility that cryptocurrency is going to be a thing, then it's in a bubble by definition any time it's worth more than zero. This appears to be the underlying view of at least some commenters here.
When Bitcoin first hit $1000, many businesses started accepting bitcoin, even some hosters. Tipping bots became popular on forums, there were tutorials for old people on how to use bitcoin on TV and in the newspapers even, etc.
Now? I don't know a single business I use that offers bitcoin payments. All of them have removed it again. Bitcoin's actual value as currency has gone down massively.
Yes, it is used. A lot, even. But not as day-to-day currency.
Completely false. Occasionally you will read a newsstory about a merchant who stopped accepting BTC. But, as of today 160k+ merchants accept it, and there was never any large scale event where "all" of them stopped accepting it.
Your comment is irrelevant to the point being discussed: it's obviously false that "ALL merchants STOPPED accepting bitcoin".
Also this Morgan Stanley research note, and the reporting on it, is of laughable quality...
1) They don't release data: "Morgan Stanley, which based its usage analysis on the information, didn’t say which companies are using bitcoin."
2) They extrapolate from an insufficient number of data points: 3 companies in the top500 this year, down from 5 last year, accept Bitcoin. It's like saying Ferrari's market share is dropping because only 3 billionaires bought a Ferrari this year, down from 5 last year.
3) They attribute a quote to the analyst ("The disparity between virtually no merchant acceptance and Bitcoin’s rapid appreciation is striking,") when in fact it was a quote from Overstock CEO: https://cointelegraph.com/news/bitcoin-merchant-shunning-is-...
4) They claim Bitcoin's skyrocketing price is one of the causes of the decrease in payments. They present of course no facts to justify this theory, because it's false. In the past, anecdotal data reported by merchants has shown precisely the opposite: customers spend their newfound riches.
But it also makes sense "from the first principles": BTC is wildly deflationary right now, so there is a very strong incentive to hold BTC instead of paying with it. It's a flip side of "sheltering from the inflation" point that is quite popular among BTC enthusiasts. You can't have one without the other.
Shorting has got to be the dumbest way to invest. With a normal investment there is a ceiling to how much you can lose (the amount you invested) but there is no ceiling to how much you can gain.
The complete opposite is true for shorting, not a bet I would make on any certainty level.
You can just artificially limit your losses by bailing out when you lose as much as you shorted.
You run a small / theoretical risk of getting stuck in a short squeeze situation where you can't get out, but that risk varies substantially by security and there are often laws or mechanisms you can use to protect yourself.
This is my exact thought as well. The risk-reward of shorting makes the most sense when volatility is low. It is certainly the worst thing to do in an irrational bull market AKA bubble.
Good luck on the short . . . many hedge fund gods were "right" on the tech bubble but lost their shirts trying to short it before the exuberance subsided
Just in the past three months bitcoin has gone from $1500 to $3000 to $2500 to $1800 to $2900 to $2500 to $3400. You'd make more with a lot less risk just waiting for a dip and buying.
I've been testing this out over the past 6 days with $500 to see how it would actually work while keeping my current amount in. I've been working a bit more on the micro level, but it still is pretty consistent in its volatility (lol).
So far I have a 4.6% total return on trying to capitalize on the volatility. That's much less than if I had just held at the original buy. I'm going to keep doing it though to see how it works in long term flat and drop periods. When you hold yourself to rules, it also decreases maximum losses too. I see the strategy as a great way to make safe money relative to crypto.
Right now if the volatility and my returns hold for even just two years, it could be going from $500 to over 100K. It makes it really tempting not to increase the amount I'm playing with even slightly, but I have yet to see how the strategy fares on long term drops. I do have confidence it will perform well on long term flat periods though.
I've also been testing out the volatility with automated trading scripts, trading on the dimes and nickles. Unlimited amounts of trades with no transaction fees and this much volatility is a dream land. I started trading 4 months ago and turned 10k into a little under 75k. I was a bit late to the game, but I can't imagine how much some of the other automated traders are making.
A few notes on your comment here...keep in mind none of this is intended to be patronizing, in case my tone comes across that way. I just like talking about this.
> So far I have a 4.6% total return on trying to capitalize on the volatility. That's much less than if I had just held at the original buy.
If you compare the returns between those two strategies (buy and hold vs mean reversion), make sure you include comparisons of their beta profiles. Their risk measures are going to be very different.
> When you hold yourself to rules, it also decreases maximum losses too.
Speaking of rules, do you have a maximum tolerable drawdown for the strategy, or a number of consecutive losses at which you stop loss or retire the strategy? In order to add more rigor to your work (and so you know there is an element of empirical strategy here instead of just luck), you should conceive a set of priors for the strategy that allow you to set a hypothetical win rate. If you deviate too far from the win rate, or too far from a drawdown as mandated by your risk management rules, you should shut down the algorithm pending a review of its inputs and retire it if it's no longer working.
> Right now if the volatility and my returns hold for even just two years, it could be going from $500 to over 100K.
There are a few hypotheses implicit to your thought here:
1. Market volatility for the target cryptocurrency will remain functionally stable for the next two years,
2. Your strategy will remain functionally stable for the next two years,
3. There is sufficient liquidity to allow you to continually compound your trading strategy's assets with its returns for the next two years, from an initial outlay of $500 to over $100,000, without hitting capital constraints along the way.
Those are all testable hypotheses (which, technically, you're involved in doing), and I can't tell you if they're realistic. I wouldn't count on all three of them being correct though.
Appreciate the post/points! I'm not an expert in this at all myself. Frankly, all of this is picked up from less than 3 years of various small tests in various investment strategies. I welcome all advice/thoughts on this. As said, this is an experiment truly.
Could you elaborate on the beta profiles part? I can't say I'm very knowledgeable there. Assume I know very little about formal risk measurements.
As far as the rules I referenced, I have a max single loss but have yet to set a stop loss/retirement point. This strategy evolved pretty loosely based on the idea of capitalizing on the volatility and part of the reason it's an experiment is that I'm okay with losing the $500 if it comes down to it. It's still incredibly risky, which I am aware of. Part of the reason I'm hesitant to put in a retirement point is that I can see losing a significant chunk in certain scenarios (this algorithm is not yet automated, though it very well may be soon, which would mitigate this) that would still be less than the long term gains. For example, given the returns, the strategy could still perform well taking occasional hits of say 20% in one day infrequently (read a few times a year). If/when this algorithm is automated, I will certainly be building in stop loss constraints.
Fully agreed on the hypothesis and not counting on them at all, but I think they aren't incredibly unrealistic. I carefully chose two years in the post above because I don't see the volatility lasting much longer than that. Right now the strategy is incredibly liquid, and I don't see that part of it changing given the micro focus. No hold so far has lasted longer than 24h, and when this is more formalized, I see a hold time limit (as a function of loss/gain) being used to keep the lost opportunity cost down. I think the tuning will likely occur mainly over the next month or two, and after that I'll likely either stop or let it run.
Overall, I would still categorize this much more as a personal test than a scientific one. We'll see how formal it gets.
Even if you had a high degree of confidence that would happen eventually (which I'm not convinced you do), such a play would be absurdly risky, especially given no idea as to the timing.
It's also weird to assume that it'll "drag the "legitimate" crypto currencies down". It's much more likely that the legit ones will be a "safety" asset and only gain in credibility with large investors.
It's funny because bitcoin seems designed to fail eventually. The computational cost of mining is going up faster than hardware can keep up. That's a problem because maintaining the whole blockchain is dependent on the continued possibility of mining. When the mining becomes impossible it will be impossible to maintain the distributed ledger. But that won't actually happen. Instead the mining will get increasingly difficult and transaction rates will have to decline accordingly. It will eventually become unusable and of little or no value. At least that's what my (limited) understanding leads me to believe.
I used the word "legitimate" because the parent to my post did. The way I see it there is nothing legitimate about any of these so-called currencies. They are probably all Ponzi schemes in the end.
Bitcoin has a self-adjusting difficulty rate. If blocks are being produced too fast, it increases the difficulty (i.e. average computational cost to produce a block), and if they’re not being produced fast enough it decreases it. Thus, it should never become impossible to mine.
There’s also the block reward halving process, which is separate, but in theory miners will still be incentivized to mine even after it hits 0, due to transaction fees. If not, well, the difficulty will go down until they are.
Isn't that the problem, though? Bitcoin was supposed to be a medium of exchange. Cash for the internet, in other words. Investing means that people really aren't going to be doing that, and it's just going to sit on a dusty flash drive on the shelf.
Not in the least. Bitcoin has many uses, and is a fundamentally new technology. Naturally it's going thru the technology adoption life cycle and every few months/years it catches up to the wider levels of adoption and more mature use cases.
It will become a currency when most of it has been mined and it's in widespread use and there aren't billions of people who have never heard of it... the price will stabilize then.
It's an error to think that the only use of bitcoin is as a currency. (in the traditional sense)
> Bitcoin has many uses, and is a fundamentally new technology. Naturally it's going thru the technology adoption life cycle and every few months/years it catches up to the wider levels of adoption and more mature use cases.
I have literally only seen one use case where it makes more sense to use bitcoin than to use traditional currency exchanges and that is illegal markets.
The downsides (hard to use, one way transactions, high transfer costs due to low block size, super easy to get hacked and lose all your money...) all massively decrease it's value over traditional currencies. Illegal markets only put up with all of those downsides because companies/governments have specifically made it harder for illegal transactions to take place over traditional currencies.
If you are buying something online internationally and there is an exchange rate tax, use Bitcoin. It's rare, but it happens. And it probably will more and more. Look at BitPay. It's pretty straight forward for a retailer if they want to be Kool.
> Bitcoin was supposed to be a medium of exchange.
Who decides what it is supposed to be? If serves as a place to store value, then it can do that regardless of what people think it is supposed to be.
Maybe bitcoin will never be used for smaller, more common transactions, and it will remain solely a store of value. But I think it is simply a matter of time before a solution is found to the technical problem of creating a cryptocurrency (or maybe cryptocurrencies) that can serve the purpose of handling many smaller transactions.
Those aren't in any way mutually exclusive. There's always enough of a bitcoin supply (and it's divisible enough) to have sufficient liquidity for use as a medium of exchange. With the in-progress work on bidirectional micropayment channels, it's only going to become an even more useful medium of exchange.
Bitcoin is deflationary...meaniing there's a set limit that can be minted... once that limit is reached...all coins traded will be ones that are already in circulation--meaning there will be presumably higher demand, because of this, some are expecting BTC to go > 25k at some point in the future.
Technically it isn't yet. It is still inflationary for the next 100 years or so. It is currently making less and less over time, but it is in fact still making more than there are now. Eventually it will be deflationary though.
the financial past is littered with the corpses of BTC shorts.
Something to consider is that most of the ICO buyers would prefer to exit to BTC rather than exit to fiat currency. Possibly an ICO crash would make BTC go even higher.
Actually, short BTC please.. I need more fuel for my long position :]
> the financial past is littered with the corpses of BTC shorts.
It's also littered with the corpses of "very good investments" that will "make you rich quick".
Without any securities standing behind Bitcoin but the promise that it will go higher, it comes down to gambling. Everybody hopes that another fool will come around and pay more than they did before. Bitcoin represents nothing but a currently 150GB large database of transactions. There are no machines (that are useful outside of Bitcoin), no IP, just a few million hashsums on a lot of computers.
It takes some understanding of how the pieces fit together as a whole but Bitcoin is really the first distributed system of trust. Its a new idea but there it is the first digital thing that is unable to be forged and therefore it creates a system where you don't have to trust a counter party.
It combines the following to achieve this [ hashing algorithms as proof of work, public key cryptography, solution for byzantine generals, game theory incentives to secure network and transactions ]
The result is something that is both digital and scarce so it is a novel way to store value digitally.
Heads up. Bitcoin is likely to be forever deflationary until it fails. There are no capital controls to increase the supply which means as people lose their wallets it becomes more and more constrained. I agree that it's a trash fire that will never be adopted as a regular currency, but its value could go up for a very long time like any collectible.
There have been hundreds of forks that went nowhere because no one cared about them. Litecoin did well. Dogecoin was so absurd it surprisingly didn't die on the vine. Bitcoin Cash was a high-visibility fork that was expected to fizzle out. It still is, but it's being propped up by some number of factors.
The point is that cryptos' values are based on widespread long term confidence. That is something that can be replicated. But, it's not as easy as hitting [fork this repo] on GitHub. At least 900 fizzled forks have demonstrated that.
The money from bitcoin is coming from the liquidation of the current economy (stocks, bonds, dollars), go long on the US dollar rather than short bitcoin, your sentiment analysis for cryptocurrency does not match the market
I agree. I would also short crypto but it's too dangerous now as the tulip mania could still grow more before it pops. Once the bubble clearly pops then I'd start actively shorting as there will be months of bear market probably after the reversal.
>Once tre bubble clearly pops then I'd start actively shorting as there will be months of bear market probably after the reversal.
I seriously doubt that logic would work, because it's very possible that by the time you think the bubble clearly "popped", it has already reached the bottom. Not to mention that half the market is planning the same thing.
The trouble with shorting it is that shorting turns out to require a complicated structure to exist. Else you can do margin trading on a single exchange, but the actual margin trading bit is not very regulated at all.
> You can short btc on several platforms, including Bitfinex
There is a horrible counterparty correlation in this trade. If Bitcoin goes up, you're out your short and lose lots of money. If Bitcoin crashes, the exchange runs into problems and you probably lose your original investment. Balanced against those is the limited profit potential from a marginal drop in the price of Bitcoin.
Why would the exchange run into problems in such a case? Some are certainly more reputable than others, but for the most part there's no reason to worry there.
As well as the reasons mentioned by others, Bitfinex in particular is an exchange that is in deep financial difficulties. It has no working banking partners for anyone to withdraw USD, and their pseudo-$ currency 'Tether-USD' is rumoured to be massively over-issued to cover their account shortfalls.
Questions around the solvency of bitfinex have been circulating for years. Do they even allow USD withdrawals at present? Their actions are weirdly reminiscent of the long fall of mt gox.
There are failure modes that have plagued exchanges for centuries. Namely, when things go down (a) lots of activity happens in a short period of time, often leading to administration and technical failures, and (b) lots of people lose money which presages them (i) refusing to pony up and (ii) suing.
Is there an honest non-scummy way to raise capital through this mechanism for something without an inherent scarcity built into the system and that doesn't carry nasty future litigation risks (or at least doesn't carry them more than a SAFE or a convertible note)?
None so far. There's plenty of crowdfunding sites that could be used instead, but ICOs allow the companies to raise money before they even produce a beta of their software. They also have no investor protection, so the company has no obligations to deliver. Finally, these people know that there is a pool of investors out there who think that crypto coins are bound to increase in value, so they will throw money at any new coin.
The SEC's point is that it is already illegal today, and only the most egregious ones (e.g. Trendon Shavers, Charlie Shrem, Alexander Vinnik) will be criminally prosecuted.
I think the problem is less SEC and more money laundering. Something tells me not a lot of KYC is going on.. My guess is that any money laundering that causes grief for the US (ie, terrorism) will get people arrested and put in jail for a long time.
2) Start running it on your own machines and mine enough tokens for ICO.
3) Sell tokens. Profit. ??
Are investors at some point invited to run the mining chain on their own machines? Surely they don't just trust that the company raising money will do manage the accounting on their own.
In a lot of cases ICOs are built on top of the ethereum network, so no mining is necessary. Transaction fees are paid in Ether, and the ICO / token is setup as an Ethereum contract.
Makes no difference I think. Burden of proof is on the emitter.
Matt Levine at Bloomberg has it explained perfectly: The ICO emitters seem to have no idea that once the SEC declares an ICO to be a security, any US-person investor who had put their money in such an unregistered security and lost some, is entitled by the full force of the law to all of their $, paid back in full...
> All of their $ or all of their ETH? Most ICOs don't take $.
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Doesn't matter. Delaware law has allowed contributions "in kind," e.g. with labour. When something goes wrong, the promoter has to pay cash restitution, penalties and, often, legal fees.
Disclaimer: I am not a lawyer. This is not legal nor securities advice.
When I tried to point out that the project should use some of that money to organize the software engineering aspect the founder got pissed off with me accusing me of trying to run the project. They had a second round and raised even more money (in addition to the insane capgains on their first round).
I check the github from time to time and it appears they've got at least 2 other devs involved and may actually bring a blockchain to market but this doesn't hide that fact that the project needed nowhere near the amount of money they raised. Hell they could've used a couple hundred grand from the first round and literally just paid a team of people to build the blockchain for them. did I get off of a gravy train? Yes. But there are more things to life than money.