Funding Friday: Coinlist
Some interesting developments that we have been working on came public yesterday.
- Protocol Labs, a company that builds blockchain-based protocols laid out its ambitious roadmap and finally got around to announcing the seed investment USV and others made in it last year. My partner Brad Burnham wrote a blog post on USV.com explaining why we are so excited about Protocol Labs.
- Protocol Labs will be launching a token offering soon for Filecoin which powers a blockchain based storage network on top of its IPFS protocol.
- The Filecoin offering will be managed on a new platform called Coinlist which was built by Protocol Labs and AngelList.
- Coinlist will utilize a new kind of security called a SAFT (Simple Agreement for Future Tokens) that has been constructed to comply with existing securities regulations.
While all of these are interesting developments, particularly the architecture and roadmap that Protocol Labs laid out, I thought I would talk a bit about Coinlist given that it is “Funding Friday.”
Token Offerings have been going on for quite a while now. There are over 800 tokens listed on Coin Market Cap.
But US domiciled companies have not had a good way to raise money in token pre-sales and comply with existing securities laws. This forced a number of promising blockchain projects to domicile outside of the US, often in Switzerland, and organize as Foundations for tax reasons. A US domiciled company can wait until the token is live and functioning and sell it then, because at that point it is not a security, it is a token. But if you want to raise funds in a pre-sale for a US domiciled company, there has not been a good way to do that.
Enter Juan Benet, founder of Protocol Labs, and Naval Ravikant, founder of AngelList. They collaborated on CoinList and, with the help of a number of venture law firms and their investors, including USV, came up with the SAFT structure.
Naval put it like this in a Forbes piece yesterday on all of this:
ICOs are obviously a new and interesting form of funding for blockchain-based protocols. But it’s not clear that all of them comply with U.S. securities laws or that all of them are companies that have good native use cases for new coins. So, we wanted to use a high-quality coin and team to trailblaze a legal and compliant ICO.
If you are an accredited investor and want to participate in token pre-sales, check out Coinlist.
very clubby. what’s the membership fee?honestly, this feels like complete bollocks to me. it’s been created to solve the stated problem, but that isn’t the real problem. the real problem is that crypto has eaten the lunch of VCs, and in response VCs want to reclaim their position at the dining table. This will lead to the concentration of tokens in the hands of a select few. The market will be dominated by cartels manipulating supply and liquidity….and how will this achieve the widest possible distribution of tokens to ensure the most secure networks?
this is about raising money in pre-sales and has nothing to do with the tokens themsleves
does the pre-sale allocate token ratios to investors?- “A US domiciled company can wait until the token is live and functioning and sell it then”so they have allocation of tokens before the network goes live, but sell (if they choose to) after to comply with regulations. the pre-sale is about tokens.if i’m accredited and i invest $1 million i will receive a number of tokens that relates exactly to that sum of dollars invested, either in absolute terms or in proportion to the total invested by all investors relative to token supply (capped or uncapped).This is about creating privileged access higher up the food chain. This is anthropology. This is a group of smart monkeys trying to outsmart other monkeys. They want to sit in the higher branches of the tree.This is what Tezos has been trying to spin to the market. It insists that ‘donations’ and the allocation of tokens by the Swiss foundation are unrelated events. utter bollocks.
Read this post by my partner Brad.https://www.usv.com/blog/pr…I think he articulates where our hearts and minds are with this very well
It’s a great post – but this is where it starts to lose me:—————“The source of this market power is control over the data we all contribute as we interact with these services online.”—————I don’t believe it’s control over the data, I believe it’s control over the crowd…and I suspect you agree because this is why your very own ‘network effects’ thesis has been so powerful.Control over the data is a happy side-effect that *can* be powerful itself (if they use that data to help keep control over the crowd)…but it’s only a side effect or a power boost.Blockchain tech. is super interesting — but it currently has ZERO effect on the crowd itself (just the reality/nature of most protocol level stuff I think).The crowd will always follow the path of highest value with least resistance — much of the work being done related to blockchain tech. (that I know about) is not really moving the bar up on value or down on resistance…
a good read. Brad is always a good read. You’re ‘lucky’ to have him at USV.Naval – “ICOs are obviously a new and interesting form of funding for blockchain-based protocols. But it’s not clear that all of them comply with U.S. securities laws or that all of them are companies that have good native use cases for new coins. So, we wanted to use a high-quality coin and team to trailblaze a legal and compliant ICO.”Cute. If i’m reading between the lines (and Naval’s ears) i might wonder if i’m being encouraged to think that perhaps US regulators ought to be probing existing ICO projects for none compliance (finally get those Luddite regulators to be of some beneficial use to the ‘innovator’ VC industry by shutting down authentic innovation that has grown like a weed but is now ‘out of our control’), and that “high-quality” is a judgement call only VCs and their accredited investors are capable of making.Protocol Labs is ‘open source’. then i predict that its “high-quality” coins will be forked by the open crypto community.I must read Carlota Perez again, and try to think on where this kind of initiative has been observed before during the installation and deployment phase of technological innovation, and has worked.
AFAIK some dApps were selling their tokens with some % discounts to attract traditional capital. This method might the to-go solution for that need.
Some could say that CoinList, albeit inadvertently, is a land grab to wrestle the nascent token market and it’s potential riches out of the hands of normal non-US domiciled people and into the hands of US based accredited investors.Token startups will invariably list on CoinList for the myriad benefits that will proffer, indirectly removing, or at least delaying, access to their tokens by the majority.Whilst I appreciate the rationale behind this from a US investor and token creator perspective, I can’t help but think this stymies the promise of decentralised protocols and will likely tightly centralise the wealth they may create.
this is for US domiciled companies and, i suspect, will be largely used for pre-sales
Understood. But hereto, US companies had to utilise the Swiss route/go rogue, allowing presales open to all. Moving forward they’ll use CoinList locking out non-US/non-accredited from participating
In the pre-sale but not the token sales
Some of the comments I stumbled upon:- How did you find this? It’s great they are creating legal framework, but this defeats purpose of token sales in many ways.You want community so they have incentive to use product.- I am hoping this is *in addition* to a public tokensale. Otherwise it is extremely damaging to the spirit and nature of the space.- I don’t see why Filecoin would exclusively do this. Accredited investors would get a massive advantageThe first one, about community, I find right to the point.
If non-accredited investors (that really don’t know or care about the US laws) won’t be able to invest in ICOs organized by CoinList, I suspect this will succeed the previous ICO structures.Singapore also plays nicely with the token / ICO structure.
We plan to make an ICO in Turkey. Istanbul Stock Exchange had interest in this years ago.
Its going to have a strange kind of centralising effect in this space.. and that feels very akin to how angel.co has operated. As someone intimated above, it is going to push the center of gravity higher up the food chain.
.Money is supposed to be agnostic as it relates to its nation-state, hence the ease with which certain currencies can be converted. You use your Visa anywhere and they apply the appropriate (house favoring) exchange rate and voila!You never even see it happen.Securities are, however, quite nationalistic and the US is the big dog in domiciling one’s paper. London, Singapore, Tokyo are no slouches.I collect ancient bonds from the late 1800s and early 1900s — my favorite being Chinese because of the art work — and they were all issued in at least three to four languages. The front of the bond has English, French, German, Russian.Russian is the one that surprises me. The coupons are all in English.These securities were issued for infrastructure projects in China. Gives one an idea of how global money was more than a century ago.The coupons are all intact after 1949 when Mao took the helm and repudiated the Republic of China debt. So, they became art work.I doubt the world ever gets to an international SEC.JLMwww.themusingsofthebigredca…
Its truly a double edged sword.. more structure may be good, more elitisim bad. ~ But you know what else is very obvious? THIS IS ALL ABOUT THE MONEY.. pure and simple.
There are other efforts being made to open the game up to anybody, even with legal safeguards. I work at Neufund (http://neufund.org), based in Berlin, and we work to make this open to people including but not only investors.
I have no idea what this post is about.Not meant to be sarcastic – either I am too old for this groovy stuff or this is massively inside baseball or ……
it’s the same old story retold with new characters. money going to money.
.I agree more with you than your mother loves you.JLMwww.themusingsofthebigredca…
she loves me a lot 🙂
.As she should having carried you around for what? Nine months or something like that?And, let’s face it, she’s an astute of judge of well ….. everything.JLMwww.themusingsofthebigredca…
something like that. i was 12 days late. a supersized free rider ;)yeah, she is.
.Tacking toward weird for a second — I think the story of how people were born is illuminating.My mother walked two miles through a snow storm to have me at an Army dispensary.I was delivered by a psychiatrist, thereby being the earliest human ever to have had psychiatric care, which may explain some things.JLMwww.themusingsofthebigredca…
I think this is a timely post because it connects the ICOs and token world with the legal aspects, which are not currently great but can improve in the future. This is a starting point.
That feels true, but in the same way that 6 astro-physicists could be talking about an advancement in anti-matter energy sources and I was listening in.
Looking at your LinkedIn profile it seems like this can really help in your work with startups and add funding alternatives to them. Correct me if I am wrong.
Only if I have half a clue of what’s going on and why I would touch it.Which no one has ever been able to prove, not even Will.Dave Baker said he made a pot load on BTC and then sold it because it scared him – it feels insane bubbly, speculative. Like a penny stock mining play.
I agree that most projects sounds (are indeed) like that but it also lower the barriers of entry for good projects that don’t want to spend time looking for investors. If the fundamentals are good it can be a good investment no matter if it is following the typical venture sources or tokens.
Ok, now you are on to something.People are using it as bearer bonds, but finitely and explicitly limited.No wonder Fred loves it.
Don’t worry, it’s not you – it’s at least a couple layers of abstraction away from the average person having *any* clue what it’s about.Basically think ‘stock’ or ‘equity’ when ‘token’ or ‘coin’ is mentioned and you’ll prob “get” it…it’s not 100% accurate because I believe the token/coin does not really get you ownership like stock/equity does, but basic idea is that if/as the company grows in value, so do the token/coin value (and the market for them)…
But what makes the company grow in value?If Warren B was here….what is the moat?
That’s the secret sauce of each company…same thing you would see/ask on Angel List really.In the one example they give – they are going to build a system where people get FileCoin for letting others use some of their hard drive space…and people spend FileCoin to use a little bit of other people’s hard drive space.There will be a cap on the number of FileCoin that is ever created, so (in theory) the more people like/use the system the higher the value of a FileCoin will go.What they are saying is that given this idea, before it’s even built/released, you can buy some FileCoin right now cheap (and the money you spend to do that will help fund the development/adoption of the system)…with the thought that as it takes off, the FileCoin you hold will grow in value.So in that example, the ‘shared hard drive’ market is what is making the ‘company’ grow in value…but each ‘company’ would be different (with the same basic tech. play/concept of X gets paid, Y pays, and Z can bet early that X and Y will actually want to do their parts).Basically betting on supply/demand.
Holy Crap. Are you kidding me? The value prop of tokens includes the word bet?That makes a CDO look like a widows and orphans play.That’s unbelievably derivative.
Agree but that’s just how I understand it all — full disclosure, it might not be the whole story (personally I hope it’s not).Honestly though – I feel like most all investing is just legalized gambling…so this doesn’t feel all that different to me…just moving from the blackjack tables to roulette…and everyone’s got a system…
What they are saying is that given this idea, before it’s even built/released, you can buy some FileCoin right now cheap (and the money you spend to do that will help fund the development/adoption of the system)…with the thought that as it takes off, the FileCoin you hold will grow in value.Really good summary.
Don’t worry, it’s not you – it’s at least a couple layers of abstraction away from the average person having *any* clue what it’s about.I say: Someone’s ignorance is my opportunity.Isn’t that the beauty of everything the computer industry does? Exploit things that the average person hasn’t a clue about? Isn’t this what Microsoft did by doing it’s version of ‘confusopoly’?  I was able to exploit this way back in 1996 to my advantage in one of the things that I make money on (that I’d rather not mention but you know the answer). Just being able to do something that was easy but others didn’t know how to do. Like shooting fish in a barrel, to me anyway. (Unix skills learned in the 80’s came in handy but not as if that was hard to come by…)There is definitely a way to profit greatly from this. If I only had time to spend thinking about it. https://en.wikipedia.org/wi… And it made them stronger because as a result the ecosystem that was built to support the junk they produced locked in the demand for the base product. A perfect crime honestly. (Similar to planned obsolescence with autos making money off of inferior products.)
Re: This comment on Reddit makes a convincing case that cars are being designed to last longer than in the past:https://www.reddit.com/r/DI…
.Bullshit, Jimmy. You know exactly what this post is about — hustlers hustling money. It is the story of life. Started with the Devil in the Garden of Eden (regulated by the SEC) and that apple.It is like when drilling deals all became MLPs. New wrapper, same old hustle.”Nothing wrong with a solid money-making hustle,” said the hustler.JLMwww.themusingsofthebigredca…
Exactly. Nothing is as new as it sounds. The basic drivers of human nature are the same. As it relates to crypto currency and distributed systems, people make it harder than it needs to be. But that is indeed the case for every new technology yet to go mainstream. It is just the geeks having fun.
.Every fiefdom has its own unique language. I remember my first encounter with a halyard and learning the language of construction, real estate, aviation, the military.There is one universal nominative — shithead. Shithead translates to all endeavors.JLMwww.themusingsofthebigredca…
Polar opposite of shithead = breakfast?
This is a point of discontinuity between what the market’s need and what a VC does. Your observation is dead on. On one hand these “innovations” are so far away from being an elevator pitch to average joe that the risk associated with them is off the charts. On the other hand there is such a winner take all dynamic that a VC cannot afford to ignore them. Especially since alternative high return investment spaces are non-existent or equally risky (CRISPR ?, AI ?)Which puts us in this bind. Fred chooses to invest in them and by doing so chooses to discuss them in the same forum he discusses Quizlet. The latter’s business value and proposition can be explained to anyone before they finish their cup of coffee (tagline: “simple tools for learning anything” – on their website) while the former …. yeah.. not so much .. (tagline: “vc’s investing on distributed systems and hard math” – truth as i see it)…
The accreditation requirement of CoinList by US standards might be a buzzkiller. I’ve invested in numerous ICOs without it and profited nicely without that requirement.
ICO = ?
Initial Coin Offerings ~= Token Sales.Quoting from CoinList:”A token sale is a public offering of not-yet-launched tokens to accredited investors.”
So intangible – we are selling shares in a gold mining company which will produce our very own flavour of gold.Still waiting for someone to capture tokens in a way that makes me go – “Damn, everyone’s going to do that.”
Ah, but you left out that your version of gold will be sold in coins, each sequentially numbered, and the highest number will be 10 million. Got’a get most of the details of the scam, uh, I mean deal offering, right!
. Yeah, well, what could go wrong with that?JIMwww.themusingsofthebigredca…
that’s what i’m saying in my comment. agreed.
I have been actively allocating a tiny bit of my crypto earnings to ICO’s. I am not an accredited investor. This is going to block me out of exciting projects unless I know someone who is.I understand the US securities laws are the reason for this. It sucks I can donate to Kickstarter no problem but when I receive a digital token all of a sudden I can’t participate because I’m not rich.
I had exactly the same thought, was going to post when I read yours. I also think that it’s completely against the spirit of what ICO’s have been so far, of what I believe they “should” be.
You’re absolutely right. And VCs are terrified. You can smell it right in this post. It won’t work, though. The value for a company to go through them instead of a direct ICO and make less money is to get some kind of “VC respectability”. Who needs that? Shittier companies.As for the SEC… math knows no borders. Trying to clamp down will only push it all out of the SECs jurisdiction.There’s blood on the water.
This is the first of a few other important announcements that you can expect in the blockchain world over the next 6 days.New York is going to be the center of blockchain activity, today with the Ethereal Summit, and next week with Consensus (M-W), and then, the Token Summit which I’m organizing (Thursday).Blockchain mania.
I have big expectations from Prism. :)https://prism-launch.com
I am excited to be flying from Florida for Token Summit tomorrow. Do you know of any events throughout the week outside of the conferences to mingle with people in the industry?
It’s those ones. Each of them has evening events & related activities.
Here’s where this post took my head to…https://youtu.be/Q429AOpL_ds
This is really cool. Personally, I think this will help token sales to non-accredited investors in the long run by showing regulators that token sales are legitimate. Have to start somewhere.
Without some sort of legitimization, the axe could fall hard. http://www.coindesk.com/sec…
Filecoin sounds a lot like MojoNation to me.
The regulation will be interesting. Crypto has been regulated as a commodity, which means CFTC, not SEC. CFTC is a principled based regulator compared to SEC which is rules based. What’s interesting is if the companies “IPO” with a token, it could take IPOs out of SEC domain and put them under CFTC domain. Oversight of SEC is Senate Banking, and House Fin Serv Committees. Oversight of CFTC is Agriculture.
.This is an extraordinarily astute comment. Mind boggling in its earthy intelligence. This must be that Jeff Carter guy from Chicago who knows his shit.Well played.I dare anyone to read all the disclosures on an IPO prospectus and hold their lunch down.JLMwww.themusingsofthebigredca…
.The US Securities and Exchange Commission, like generals, fights the last war.Nonetheless, it provides a meaningful protection for investors and has the teeth to make enforcement a bite in the ass. Mess up? Go to jail.I am not a fan of the US SEC (PCAOB) because of their ham handed approach to the rules for the JOBS Act. They killed that baby, which they openly intended to.Having run a public company, I dealt with them regularly. My greatest transgression was the sloppy use of the term EBITDA — a non-GAAP term — for which they would send me letters admonishing me to derive the number starting with a GAAP defined term.They have no second gear and the sloppy use of EBITDA ranks, in their firmament, right up there with murder. Makes it hard to take them seriously.There are some truly horrific actors out there who are criminals and the lowest regulatory function of the SEC is at the bank robbing level.The creation of the classification of accredited and non-accredited investors is a legitimate effort to keep the sharks from eating the minnows.People forget that non-accredited investors can usually invest in a deal but with a strict limitation imposed by the SEC on the issuer. It is NOT the zero level as some preach.Not to be rude, but anybody who needs non-accredited investors in their deal is doing something wrong. On the other hand, it seems un-American not to allow a person to lose all of their money just because they don’t have enough to lose.The whole token money raising is a new wrapper on an old product — operators parting investors from their money with a paper (digital) instrument.The more arcane the “security”, the more shitheads jump into the game.I cringe when I hear about structures and methods to forestall the rules of the US SEC. Not because I am a fan of the SEC, but because these protections protect those who most need it.The better way to conduct business is to go see the SEC and ask them, “Can I do this?”No sooner do I say that than the results of the bitcoin ETF sagas (the second act Winkelvossian twins bitcoin ETF story) jump into my mind.Right now, this space — meaning the crypto-currency money raising — is getting more than a little frothy. There are going to be some horrific losses because not everybody can be a winner. This isn’t Tee ball, y’all.JLMwww.themusingsofthebigredca…
“On the other hand, it seems un-American not to allow a person to lose all of their money just because they don’t have enough to lose.”This quote is just gold!
To heck with the WSJ, CNBC, The Economist, Financial Times, Bloomberg, etc.: Instead, for important news, just read JLM. Strange situation, but not a joke, and actually true.
I just posted a similar comment. I found even doing accredited investor crowdfunding like AngelList, you get self-selected sub-quality. There is long term value in the blockchain for indisputable validation though, but the rest seem a bit snake-oil
.The thing about snake oil — a little bit goes a long way. And, then, there are the snakes.I am in favor of public solicitation, but we are a very odd collection of persons, this nation of immigrants we call America.Tech FOMO is a real thing and it is dangerous when you get into the securities arena.BTW, did I forget to tell you your comment was brilliant.JLMwww.themusingsofthebigredca…
FOMO, especially Tech FOMO, is an interesting thing when you unpack it a bit.1- Tech venture knows their old friend FOMO well, and still operates happily off it.I am reminded of an old Tim Ferris podcast where he asks Marc Andreessen how they avoid FOMO, and Andreessen’s immediate off-the-cuff response was ‘Oh….we know it and we fall right for it every time”.For a tech VC, it is entirely rational to invest even when they are driven by and self-aware about FOMO (provided it suits their investment thesis) because of how asymmetric their potential upside/downside is.Their sins of omission are usually more painful than their sins of commission.2 – On the other hand, a small/retail investor who gets into Tech (say into Bitcoin) does not know if they are being driven by FOMO and are taking on risk they cannot understand.Risk is different from Fear. Replace Fear with Risk in the equation.Put simply, for a small investor – the risk of being wrong can be greater than the risk of missing out.For a Tech VC – the risk of missing out is greater than the risk of being wrong.For tech venture and other tech early-stage risk capital – Risk management provides the umbrella under which FOMO lives.For others, Buyer beware.
Crypto was supposed to be about open and democratic ideas. This undermines the principles and values of the space.If in place in 2014, many that participated in the Ethereum ICO who were not accredited investors but now are, would not have been allowed to invest.
Very interesting, I’m working in the Smart Contract arena and I see that the complete lack of regulation could harm the complete ecosystem.
perhaps Tubby Bartles will form a syndicate i can join?
Regulatory capture. Destroys the spirit of crypto. It’s anti free enterprise. Rich boys partnering with nanny government to be the bouncers for their own private club. ICO minimums, because of its global scale, are sometimes very low. Like $5 minimum low. JLM’s precious hoi polli that he’s so eager to protect like children, are not at huge risk. This is new. Keep it away from the old.
Fred, with coins maybe eventually you will have something beyond just a way for drug dealers, ransom-ware dirt bags, tax cheats, etc. to get paid.Sure, broadly, encryption, public keys, IPFS, and more are and will be important.Yes, until someone finds a fast solution to the problem of the fundamental theorem of arithmetic — each positive whole number can be written uniquely as a product of primes. That’s easy enough to prove, but, of course, the problem is finding the primes for a number of a few hundred decimal digits constructed from the product of two primes — uh, large primes are also easy to find.Uh, as is well known, small primes are easy to find. Indeed there is the famous, comprehensive treatise A Short Table of Even Primes.But I don’t see it: The coin technology looks like a solution looking for a problem, and that’s too risky for me. To me, need to see a problem, see a solution, or see a hint of an opportunity to do some original research to get a solution, see the pair together.Then need to check a bunch of stuff — e.g., will the users/customers be there, are there some significantly powerful, valuable, proprietary, trade secret, technological advantages, e.g., Buffett moats, are there other advantages, e.g., network effects, high switching costs, forms of lock-in, is there a good solution as a Web site with a good UI/UX, etc.?I’m still waiting for this coin technology to find a problem for which it is a good solution for which the FBI, DEA, DHS, IRS, SEC, FCC, CIA, NSA, Congress, international banking regulations, etc. will be happy. Now maybe you have found such. Maybe.To me, going for years backing a solution looking for a problem is a hard way to make progress. Difficult? Yes. Impossible? Maybe not.But, warning: Academic seminars are awash in solutions looking for problems!
Lowering the cost of banking and financial services is a problem to solve. Ripple is an interesting case, it is an earthly application of crypto technology that is headed in that direction. It may replace SWIFT someday.I believe that crypto is just beginning to make contact at a structural level with our old “real” world. It has to, living each in the isolation of their own bubbles is not scalable, they must interface and inter-operate with other systems to grow and conquer. If this is true, nothing will stop the transformation.Of course there is a substantial part of it that it is hype and not so good implementations. But the core inside the technology has proven to be tough, it can fail gracefully and is far more solid than the technology and structures it is destined to replace or merge with.
I guess I’m just not being clear:Okay, there’re lots of crypto coins out there. Heavily they are used for criminal activities, e.g., hide money movements from governments, e.g., the US government.The governments, e.g., the US, want old-fashioned money, e.g., dollars. And now they want those dollars in a quite tightly regulated banking system. The system is now so tight that paper money, difficult to trace, attractive for illegal activities, is dead except for small change. E.g., if move IIRC $10,000 or more to/from a bank account, then there is a report sent by the bank to whatever — US Treasury, IRS, something.Okay, then the US government won’t like crypto coin money because it’s tough to track. Such money can be the basis of a whole hidden economy tough to tax, tough to grab legally, tough to know about as evidence in crime, etc.Well, somewhere, if someone gets a lot of crypto coins and, as they will, wants to spend them for the usual big ticket items, houses, cars, college tuition, yachts, backyard in-ground pools, season tickets at the opera, etc., then there must be a way to convert from crypto coins to dollars in a US bank account. That conversion will be tough to do, and the US Federal Government will want to keep it tough to do.After 9/11 IIRC the US went around the world and to each of the main national banks and arranged that money can be tracked, that, e.g., someone who walks into a bank in Rome with a suitcase full of $100 bills and wants to make a deposit will raise some eyebrows and likely generate some reports and then some questions about where the heck they got the money. That is, the suitcase looks like an effort at “money laundering” which can be used to pay terrorists, etc.Since the US has made it difficult to move around suitcases full of $100 paper bills, the US will be even more interested in stopping crypto coins.The motivation to do business with crypto coins is huge: Person A spends a dollar, gives to B, who spends it and gives it to C, …, X, Y, Z. …. Well, now each time that dollar is spent, there are taxes. So, there can be sales taxes. If the dollar is for salary, then there are lots of taxes, Social Security, income tax withholding, etc. If the dollar is to a company, then the company will have to pay income taxes. Spend that one dollar 100 times as above, and it will generate taxes of many times one dollar. But with crypto coins, the temptation is huge, and so is the opportunity, not to generate any taxes at all. Governments won’t want to lose the tax revenue.E.g., now there are inheritance taxes: Well, if the wealth to be inherited is just in the form of crypto coins, then the heir can just get the crypto keys and take control of the coins — no taxes involved.Net, the US Federal Government very much wants all forms of money in the US to be in terms of US dollars with all the larger transactions passing through tightly regulated banks that keep good records and make reports of larger transactions with no crypto coins involved.
I know everyone is excited about the democratization of venture/angel investing, but I got to say these ICO’s worry me in the short term. When I became an accredited investor and started investing on AngelList a few years ago (I am no longer an AI) I thought the Jobs act was a great thing for the “common man.” Now I worry that many inexperienced and uneducated people will be swindled from their hard earned savings. I have CNBC on all day and hear the “Yayyo” commercial multiple times a day telling people they are the next Uber or Lyft and you can make millions! There was no disclosure that over 75% of startups fail, no warnings of the risks, and no mention of revenue or product stage. I understand that people SHOULD read the fine print in the prospectus, and a person could lose all their money in the stock market too, but at least public equities have already gone through regulations to get to where they are now. I’m seeing the same mentality in crypto as well. ICO’s are perfect tools for ponzi schemes. Everyday there is a new pump and dump scheme, and it takes someone with some CS background to actually read the code to verify legitimacy. I see as ICO’s as a way for a startup to raise pre-revenue/pre-product money, typically reserved for bootstrapping or the “friends & family” round, but instead of being a few thousand dollars, they raise millions! The only way I see for a responsible ICO structure, is the smart contract forces an escrow of a significant portion of the capital raised (50%+), and if certain milestones are not reached, portions of the escrow are returned to token holders.
Now that is cool. 🙂
.Postage limit reached, adios, commentariat. A good date night to all, y’all.JLMwww.themusingsofthebigredca…
How does this impact your investment in Polychain?
The public should refuse to support any coins, blockchains, or protocols unopen to public investment from day one. To be democratic, the funding model must also be open to all.We should not accept the continuation of privatizing gains and socializing losses. We should not accept VCs, insiders, and regulators who accumulate and accelerate risk and dump it into the public in liquidity events.
is anyone actually seeing clear indications that regulatory authorities are lining up crypto in their cross hairs?
Please stop pumping little mini Ponzi ICO’s. Please stop shoving new tokens to get rich under the guise of “anti-spam.” Please stop trying to get rich on tokens. Storj and it’s stupid token preceded this stupid token.Blockchains are useful for an extremely limited set of circumstances. They enhance trust at extreme throughput and expense. If you can solve trust almost any other way, its better. disclaimer, I’m long as fuck bitcoin, however I know that it’s still risky, and has a rather unaddressed lists of vulnerabilities in it’s wiki, and has very limited use cases beyond emergent ponzi value.That being said, creating a digital scarcity to act as functional proxy for human productivity, thus money, is hampered by every new shitcoin. Digital scarcity can be ruined for a couple decades, and every new shitcoin enhances that negative outcome. Utility before pump and dump please.
heartily agree with the sentiments expressed here.. thank you!!
I read this post in the AM and then came back in the PM to read it again. Protocol Labs is building a stacked system because the entire concept is so new.Use-case – the world needs even more decentralized and cheap storage. Cheaper than Amazon and Google.To make this happen Protocol Labs built a new “file-system” called IPFS – Inter-planetary File System. This allows a bunch of random hard drives to work as one. Some of these drives are tuned for quick data storage (SSD) and some are tuned for archive-type storage.To incentive people to install and configure IPFS, Protocol Labs also built Filecoin using blockchain concepts. Companies that setup IPFS storage will be allocated Filecoin.Secondarily, Protocol Labs created this concept of a SAFT as a US compliant fund-raiser and their first pre-currency is Filecoin.Lastly, Coinlist is a web-view of what they hope will be a growing list of digital pre-currencies of which Filecoin happens to be the first.It took me researching this for a few hours to “get it.” These tactics are interesting and the first use case of cheap cheap storage and utilizing idle storage is fun. Sort of reminds me the episode of Halt and Catch Fire when Joe McMillian realizes he can create a business using WestGroup’s mainframe at night.
on Filecoin. isn’t price elasticity of demand for the token going to throttle the growth potential of the protocol? isn’t it going to ‘top out’ long before the total addressable market is addressed? I can see an economic dynamic at play that leads to a rapidly decelerating growth curve. how does that work as a proposition for accredited investors?Has Filecoin made a TAM assessment and fixed the token supply to it?
I must admit I see this as a turning point. I had been quite skeptical about ICO’s and token crowd sales. But I can recognise when the trend seems innevitable. This might be a move in the right direction, but after reading the comments below, I am less sure. I will be very curious about how to overcome some of the negative aspects of token offerings.
is Protocol Labs the expression of your “constellation of apps” post from some years back, the one where you were wondering out loud about how it might be possible to outfox Facebook?Are you planning to IPO PL Inc? Where’s the exit?