This is really good to see. Separating the scam ICOs from the non-scam ICOs is only going to become more important in the future.
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I can't envision a future where they are anything but a scam. The tokens have no legal or economic connection to any business activity produced by the token creators so I don't see why any ICO token would be worth any more than any other besides hype.
They seem like Kickstarter bred with stocks - mostly an unenforceable promise of future products/services/magic to the users who buy the initial coins.
An employee where I work recommended we do our own ICO, but for the life of me, I couldn't figure out what it was that the coins would eventually be exchanged for. Maybe I'm just too dumb - he's objectively smarter than me, I'll freely admit - but it seemed not too different from shaking a cup to passersby.
Yeah, being very smart doesn't seem to be an effective inoculant against blockchain hysteria. Then again, the ICO scammers are making millions and I'm not, so, maybe I'm getting ahead of myself.
This flaw has not stopped many ICOs!
Sort of. For situations where the coin represents some ambiguous "share" of the project, absolutely.
However, when the tokens are used as an incentive mechanism for a fledgling decentralized network, I think it makes a bit more sense. Things like Sia or Storj or Ether or Ark where the token is there to function as a cost/reward for using/providing the service that the network provides (filestorage, smart contracts, decentralized cryptocurrency exchange) I believe that it actually does have some intrinsic value.
I think even in most of those cases it would make more sense to use Bitcoin or Ethereum, which users are more likely to already have, and will likely be less volatile.
Although I am skeptical of the utility of 99% of these decentralized networks (Storj seems at least a worthwhile experiment), I think that's a fair distinction since the blockchain logic can ensure that tokens represent some stake in the decentralized network.
Well, if the company ACTUALLY produces what was promised, and gives the token owners what they are owed, then it wasn't a scam.
What excites me most about ICOs is how accessible it makes organization. To get a group of 10 people to work on a common goal and share the reward is surprisingly difficult. The overhead of the legal and accounting costs makes it a non-start for anything worth less than a multi-million dollar venture. But what about all the opportunities below that? Local shops, gardens, and service based businesses?
I'd like to see a set of standardized smart contracts, where if you adhere to the protocols of the contract, investors can enjoy the benefit of certain expectations. Such as, the cap table being accurate. The distribution of shares will be known, along with the voting power of all members. The flow of income and payout of dividends will also be transparent.
If complying with regulation is cheap and accessible more people will do it. I'd like the SEC to open a github account and create regulatory compliant smart contracts. Let's welcome everyone into the business class and encourage local investments in our communities. That's my vision for ICOs at least.
Which ICO was not a scam ?
Scam =/= terrible investment idea. Tezos and Filecoin, for example, are not scams. They are serious projects that are attempting to bring something useful to the market. That said, they raised wayyy too much money, and may end up being terrible investments that don't return any profit, but that applies to many startups as well.
PlexCoin offered guaranteed 1300% returns or your money back. That is a pure scam.
Maybe I'm wrong here, but doesn't investing in normal startups require being an accredited investor?
I see ICO's as marketing investment opportunities to unaccredited investors. I thought unacreddited investors in the U.S. are legally allowed to invest in public stock, and approved securities (like bonds, precious metals, etc) and only a handful of other things.
The notion of accredited investors legal requirement to invest in tech startups is that tech startups are inherently very risky, and the average person shouldn't be allowed to put their life savings behind something so risky. By this logic, it strikes me as very odd that ICO's are legal for U.S. citizens to invest in, and my guess is it's because the SEC hasn't come around to regulating them yet.
Does that sound correct, or is there reason to believe the SEC (in the long-term) will be okay with unaccredited investors investing in ICO's of tech companies? Are there other things with a similar risk profile that unaccredited investors can invest in?
> Scam =/= terrible investment idea.
Any ICO marketed as an investment is likely illegal in the United States. Not necessarily a prima facie scam, but in violation of the Securities and Exchange Act.
Yes, I agree that many ICOs are being illegally marketed. Not all, however.
1) Filecoin and other ICOs are using Cooley's SAFT instrument in order to comply with US securities laws, and as a result, have limited marketing to accredited investors.
2) Lots of ICOs are banning US investors.
> Securities and Exchange Act
These are two separate acts: the Securities Act of 1933 [1] and the Securities Exchange Act of 1934 [2]. (Pedantic, pardon me.)
[1] https://www.sec.gov/about/laws/sa33.pdf
[2] https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_193...
Just because something is a good idea doesn't mean that it wasn't conceived or promoted specifically to scam people out of their money. Not speaking to Filecoin or Tezos specifically, but if something is a really good idea, why not take VC money or bootstrap it?
Many reasons. Here's a couple I can think of off the top of my head:
1) VC money comes with strings, and founders don't like to have the sword of Damocles hanging over their heads. (Although I think those founders are misguided, as I think most companies benefit from oversight).
2) ICO money is cheaper and plentiful. If it's available, why not take it? This is especially problematic when you have multiple companies pursuing the same idea. Take using the blockchain to create a data storage market. Filecoin raised $200mm+. Imagine they instead raised $3mm from VCs, and another competitor with less qualms raised $200mm. They would now have to compete with someone wayyyy better capitalized than they are. In the tech world, one company often wins the market. Being second could kill your company.
Is Uber scamming middle east sovereign wealth funds because they are letting them invest on crazy terms, when they could just as easily start turning a profit or go public? I think a company has a duty to: (1) disclose things honestly, (2) warn people of the risks, and (3) consider the danger of raising too much public money on the success of their venture. Beyond that, if investors wants to dump cheap money on them, why is it a 'scam' to accept?
Totally agree. The liquidity that ICO's bring to founding teams is a huge plus. It's going to better incentivize smart people to work on big, interesting projects. And get paid well to do so.
Wouldn't it also incentivize talent-less frauds to work on big-sounding projects?
Given the huge problems with current ICOs (Outright scams, or simply terrible investments), it seems that being smart or talented are not the qualities ICO 'investors' are looking for. I think the zeitgeist is that they just want quick pump & dumps.
For now, you might be right. But parallels could be drawn to the first dot com boom, junior mining markets etc. So much of new innovation is funded by speculation and stories.
Even the current public market interest in the blockchain space, regulated as is is, is mostly driven by a good story and a hope for the future.
This is how things work, and given a longer time horizon, the market will sort it out.
I like how you mention Tezos and filecoin not being scams.