What really upsets me is that most of the whitepapers pumped out by ICOs today are emphatically not the way we best understand how sustainable new companies come into existence. Many contain big grandiose plans that stretch years and don’t admit the necessary network effects, new technologies, etc., for even modest success. An idea, a LaTeX installation, and WordPress landing page are a very low bar for raising millions of dollars, especially by today’s standards. With open source software and services like AWS and GCP, we should expect more.
Startups by definition are organizations in flux seeking their scalable business models, and claiming to have all the answers upon inception is an exercise in hubris and/or grandstanding. The late Steve Jobs did say that customers don’t know what they want, but many of these ICO firms don’t even seem to take the first steps in talking to early prospects.
1999 is calling, and they want their 18-month growth plans, 50-page business plans, and million dollar war chests back.
That's probably an optimistic view of the motivations of a lot of the ICOs. Your comment reminds me of an HN thread from about a month ago (https://news.ycombinator.com/item?id=15072257).
> How to make money in ethereum, from high to low risk ... 3. Even more profitable is kicking off your own ICO. Go through the checklist - fancy HTML5 theme that you can buy off of Themeforest and edit the HTML a bit for the landing page, create a Slack channel/Twitter account/subreddit, write a "whitepaper" that is easy enough for the shmucks you're targeting to understand, yet replete with enough pseudo-academic crypto jargon and irrelevant/unnecessary mathematical symbols to get the shmucks nodding their heads and pretending to understand how this particular algorithm/equation based on the "turing-complete ethereum blockchain" will "change the world" or "bank the unbanked" or, more importantly to them, appreciate 500x in value.
"What else ticks me off about this, is that there is absolutely nothing wrong with issuing stock in your company as tokens on a block chain instead of through brokers on a standard exchange. Just do it legally, for Pete's sake! Go to the SEC, or whoever the appropriate regulatory authority in your jurisdiction is, and get authorization to issue stock! Hire somebody to implement shareholder voting as block chain transactions. If the law in your area doesn't allow anonymous stockholders, then you need identified participants (and, inevitably, a Trusted system to assign or match IDs). It can work. It has advantages even. But after the meltdown that the scammers are bringing down on this whole form, it's going to be anathema, or even illegal."
Ironically, the first "ICO" to do it with full compliance, useful tech and good business model, will be huge. There is demand for it.
The other big opportunity is to come up with a framework that everyone can use to be compliant (e.g. An Ethereum with "compliance" mechanisms built into it will be a big "general-purpose" blockchain).
It's hard to understand why ignore compliance, when being compliant is quite simply going to be much bigger, sustainable and "good business" than all scammers put together.
I can't imagine blockchains ever satisfying all legal requirements.
At some point I expect some court to say "X shares were illegally transferred from person A, give them back". If we don't know where they went, it's impossible on block-chain to give them back, unless we assume the existence of someone who has the rights to make arbitrary changes, at which point there is no point having a blockchain.
Why can't you require that each wallet be signed by a party that identifies the person behind it? Then you find where the money went and you force them to give it back.
But I think really the statement of interest is here:
> ... at which point there is no point having a blockchain.
Lots of people have different reasons for liking block chains. Their reasons may disagree with yours.
> Why can't you require that each wallet be signed by a party that identifies the person behind it? Then you find where the money went and you force them to give it back.
And what if they refuse [despite consequences]?
> Lots of people have different reasons for liking block chains. Their reasons may disagree with yours.
I'd say the common/paramount feature is "decentralized, trustless ledger w/distributed consensus." Dillinger talks at length here about how "...the Trustless nature of Bitcoin was the main thing that convinced me Satoshi wasn't scamming." Yes, lots of private things calling themselves a "blockchain" exist. But those all submit themselves to some sort of authority/trust system. And it's likely the case that they do that in order to avoid the problem described.
IMO it's anarchy [good connotation] vs rule-of-law. Crypto-coin/asset systems can be ruled by distributed consensus but this feature is mutually exclusive with state-managed systems. When they intersect or when they're forced to intersect, we end up with an imbalance/mismatch.
That's why I added "despite consequences". Ok, now they're in jail and they still refuse. Now what? Ugh, lets go convince the peers contributing to consensus that we need to fork the chain and delete this transaction (like Ethereal).
This is just the tip of the iceberg BTW. What if they die or have a brain injury? Their password securing the wallet is now lost to the world. Now there's no way to reverse this transaction. We accept this risk with the trustless system of currency. But real estate, equities, this kinda stuff -- it just doesn't map well at all.
Forking the chain or otherwise building consensus may be necessary to recover the coins from those particular transactions, but it's not clear that we would need to do that. As an analogy from traditional currency, consider what happens if somebody dies while in debt. Their estate can be used to settle the debt, but if the money isn't there, creditors will go unpaid. There's no guarantee that all of the transactions that occurred with that money can be reversed.
One other potential problem is that if an owner of some Bitcoin dies, there may not be access to their wallet at all. However, if there is considerable wealth in that wallet, they should have incentive to pass that on to their heirs, in which case they may have set up a will or otherwise passed on instructions for how to recover the money. Whoever that money is recovered to can then be approached for settling the estate or what-have-you.
In the end, though, laws and the consequences for breaking them are (in principle) set up to incentivize behavior that is good for society. If you break laws, you face consequences. If you avoid those (e.g. court orders you to pay and you refuse), you face other/worse consequences (e.g. garnished wages, contempt of court). If the consequences still aren't strong enough or enforceable enough to maintain the peace, then society has a problem and new laws can be passed.
I agree with blockchains that represent something equivalent to money, which would include bitcoins.
The problem is using blockchains to represent shares in a company (for example). Ownership of a company can't be "lost", or "unpaid". Legally, someone owns each share of a company, and a court can declare ownership is moved. At that point, your blockchain doesn't represent reality any more (as declared by a court) and then, what value does it have?
That's definitely an interesting distinction. In that case, I would expect there to be consensus among shareholders to follow the court's order. That could be enough to force the transaction if the chain is unique to the company in question. However, it would pose issues if the shares are riding on a broader chain outside of their control, like Ethereum. Even if the chain was unique to the company, you could still have issues if you are using proof of work instead of proof of stake. Interesting problem.
Can a court actually declare that ownership is moved, or can they only declare that one is to transfer ownership, implicitly under penalty of something else if you don't? If you have a car and the court declares that it is my car now, that doesn't physically transport it to my driveway and you could steps to prevent that from happening (eg, driving it into a lake).
But when it comes to (I don't have a good term..) unique objects, like houses, or shares in a company, they exist and have an owner. A court can simply declare "you don't own that house any more, this person does". A business doesn't become ownerless forevermore because someone lost a private key.
With houses it's not always that simple. Often in real estate fraud cases an 'agent' will sell one person's house to another and skip town with the money. If the courts revert the deed to the original owner then the innocent buyers are still out all that money.
Financial transactions between real legal entities probably have no expectation that the transaction should be completely anonymous or trustless. Instead, they probably have expectations that the transaction mechanism can be trusted, and that they have legal recourse to make up the difference. Blockchains probably have very relevant uses, but using them to approximate our existing financial system doesn't seem to be that useful. All of our laws and the current system exist for a reason.
I'd bet on supply chain as the corporate/real world workload that makes the most sense. the distribution of the chain actually provides a relevant service in those cases.
It's easy to add a special party to a block-chain which does have the power to make arbitrary transactions.
Can that be abused? Yes. But all such abuse will be evident in the public record, and then the usual legal system can easily get involved -- which it already did anyway, if you're doing a proper IPO just with stocks tracked on a "block chain".
This happens surprisingly often when reasoning about blockchains: you start with some concern and follow the trail of logic to some form of necessary centralization.
For example, when someone on Twitter raised the problem of collaterizing smart contracts (no one is going to lock capital away in extended escrow, which creates an obvious enforceability problem), Naval Ravikant argued in response that a third party guarantor would be necessary. As far as I can tell, he didn't recognize the irony in his own statement.
The problem is trust: why would anyone trust anything other than THE third party guarantor, who has enough available capital and an established reputation for providing recourse?
Would you ever trust some random, small-time agent to collaterize a smart contract you're involved in? That's obviously foolish. Even trusting a mid-size agent is foolish. You don't know how these people are operating, and whether they might go insolvent the very next day. This is one of the primary reasons we have large, regulated, centralized institutions in the first place.
The first "ICO" to do it with full compliance, useful tech and good business model, will be huge.
Yes, Filecoin raised over $200M. But their troubles are still in the future. The ICO bubble may pop before any of their investors get liquidity. It's probably illegal for Filecoin to trade on any public exchange, so they need to create a "SecondCoin" exchange for qualified investors. And blockchain-based storage has some unsolved problems like low demand.
Being compliant is quite simply going to be much bigger, sustainable and "good business" than all scammers put together.
Any evidence of this? My impression is that 90% of ICOs wouldn't survive any due diligence.
I can't agree with "compliant = sustainable and good business".
Having worked in the most regulated business - insurance, and being there when more consumer protection has been implemented, I can say that there was no drop in scams and complaints AT ALL.
The fact that you have a license or a traditional VC money, doesn't ensure success or fair service. In fact, around 90% of VC funded startups fail too.
Legal or compliant doesn’t mean "not scamming".
It just means more expensive and hence restrictive..
It blows my mind that crypto-folks who promote inclusion and freedom call for regulation instead of finding new smart ways to deal with new problems.
For example, Bitcoin resolved privacy and re-use of addresses with HD wallets.
Problem with thieves - solved through hardware wallets.
I'm sure we have the capacity to deal with upcoming issues without someone telling us what to do and actually preventing GOOD ideas to be done without having to sell your soul. I understand VC's interests here, but they also need to understand that their value will increasingly be in the experience, contacts and network that they have, not necessarily in their money.
Having said all that, no, I'm not a fan of 99% of current ICOs. But still I don't cry on the shoulders of regulators. And those speculators who invest without any due diligence, usually with much lower $$ value than what it seems and with the vision of a 100x or 500x in a few months, well those will learn through experience. The market will clean itself from fraudsters.
It always bugs me when I hear someone who I know knows better use a line like: "Just do it legally, for Pete's sake! Go to the SEC" -- as though this was a matter of dropping a postcard in the mail. I'm confident that these writers know better.
The real situation -- as you can see in any of the stories about Blue Bottle's non-IPO, Hedosophia, etc -- is that "just do it legally" is rapidly approaching the regulatory singularity of "just get the NRC to license your new nuclear reactor design." Even for multibillion-dollar companies, "just do it legally" is becoming prohibitively costly. Compare to the 1990s, when sub-100M IPOs were not that weird.
This has enabled VCs to earn enormous monopoly fees, originally as gatekeepers to the IPO process, now as gatekeepers to a gigantic secondary market in "unicorns." Lambos all around.
As in taxi medallions, this bottleneck creates immense profits. Naturally, the spectacle of Uber versus the taxi mafia, or ICOs versus the VC mafia, creates a lot of passions. Especially among those with axes to grind.
There is one big difference: Uber provides a consistently excellent transportation experience. Whereas most ICOs are straight-out terrible. Let's hope that the sheep get separated from the goats, as fast as possible.
I'm not saying it's impossible to improve by orders of magnititude, but I don't think it will happen next year or the year after that or the year after that.
> Let's think about that for a minute. Would you buy stock in a business whose business plan was a giant marketing campaign to promote the value of the stock?
I hate to even imagine how many billions of dollars of scams and failures and thefts have been perpetrated by abusing people's faith in and enthusiasm for that technology by now. And I have no idea how we could possibly have prevented it.
If Bitcoin had stable value instead of a built-in boom-bust cycle then we wouldn't have crypto scam mania today. Dillinger praises Satoshi's honesty, but Bitcoin's monetary policy is "a blatant bribe to early adopters". https://www.gwern.net/Bitcoin-is-Worse-is-Better
bribe to early adopters? Same with gold and US dollars, a significant difference is the guy that created bitcoin didnt spend any of his bitcoin yet and didnt kill anyone to get them
I'm really interested in the stablecoin space but I don't think it's realistic to expect bitcoin to have started out as such. Firstly bitcoin was already testing some unknown assumptions (mainly "is our PoW scheme secure and scalable?") and it would be too confounding to also test "is our chosen stability mechanism effective?". Secondly none of the solutions Vitalik mentioned are easy at all; you need decentralized measurement, and all the solutions he presented have problems. Broadly speaking, if it were really easy to create a stablecoin - so easy that you think Bitcoin could have started out as one - a good one should have existed by now, but there's no good one so far. Thirdly, all of Vitalik's solutions require a volatile coin, which would presumably have increased in market cap over time and be subject to boom-bust cycles, all of which you object to. I also think the only approach that would lead to an effective stablecoin (ie one with a good peg) is one that uses other cryptocurrencies, external to the stablecoin, as collateral (eg MKR's approach), and that requires things like bitcoin to exist.
And yet, I'm not aware on any current cryptocurrencies that implement bounded estimator-based stabilization - not trying to be snarky, but stablecoins will indeed be pretty useful, if you think bounded estimator-based inflation would be "good enough" for stabilization, fork bitcoin (or build it on top of ethereum, idk if it's possible) and you'd have produced something valuable
> He wasn't trying to line his own pockets at the expense of others. In fact I don't think I've ever encountered someone so completely uninterested in personal wealth. You know the old saw about being able to get a lot done if you don't care who gets the credit? Satoshi doesn't want the credit. Two years later he walked away and left the pseudonym behind. And hard as this may be to believe, it looks like he doesn't even want to be paid for it. As far as we can tell he mined approximately a million Bitcoins and has never sold a single one of them.
That's rank speculation. Satoshi also didn't provably burn those millions of coins by sending them to a bunk address-- i.e. whatever the Bitcoin address equivalent is for "IF-I-HAVE-THE-KEY-TO-THIS-ADDRESS-THEN-THIS-HASHING-ALGORITHM-IS-BROKEN".
Unless Ray is one of the authors of Bitcoin he has no idea whether Satoshi was interested in personal wealth, or died, or was tracked down by a security service, or something else entirely.
Its true, Satoshi could have burned his coins. There are several legitimate reasons not to do so-- one of which is that it might have indicated a belief that bitcoin was a failure, and such a shock in the early days would have been bad.
If satoshi sometime shows up and starts moving his coins, that's fine by me. He deserves to be super rich, because what he created is revolutionary.
Notice he said "it looks like he doesn't even want to be paid for it".
But also realize, there's the satoshi coins, but there's no way to know how many other addresses he mined to, and that its quite possible he has 100k coins that have been moving since he disappeared and nobody knows they are his.
Or he could have started mining after he disappeared or started investing cash to buy them after, and still be very rich.
"I had created what I believe is the first digital-cash protocol ever to use block chains in any form - though it used them in a way very different than Bitcoin and its descendants. In that protocol each 'coin' had its own little chain that grew by one link each time it was transferred from one owner to the next. Seeing the idea come around again, in a very different form, was fascinating for me."
No, that is not a blockchain, but I can see what you did there, blockchain inventor.
> Make sure they have the ... authority to issue stock (yes, that's what the coins on the block chain legally are, if they're selling them at launch)
I hadn't thought about a launch of e-coins as stock. This is interesting and helpful, as someone who's only been lightly following blockchain and e-coin news. I have some fear of missing out, and Ray's perspective makes me think I've worried about the wrong things.
I don't know if other people have any dramatically different thoughts on the matter, but if you don't want to miss out but don't want the blatant risk of dealing in ICO's, it seems somewhat reasonable (nothing is reasonable or save in cryptocurrencies, really) way to involve yourself then I'd suggest having a look at just purchasing some of the larger coins (eg Bitcoin, Ethereum, Litecoin) and sitting on it for a couple of years. Cost average your buy in, especially since it's dipped a little recently. Then again, only at an amount that you could lose and not regret it too much.
I've been following the progression of the tech in general and have friends who try and play the ICO game, but it's just too fickle for me. I'm not ready to go full day trader over that stuff. However the long term trend (zooming out) tends toward:
---
Minimal attention > growing attention > hype and burst > pop and settle > stagnation > return to attention, and start over
---
repeatedly, and all generally on an upwards trend over the past ~6 years from what I can tell so far. Just speaking to the prices, here. Something different is happening with the ICOs and the ability to build upon the networks like Ethereum. It's hard to predict, and it's curious what all the calamity surrounding those gambles will amount to. I'm sure a few of the companies will stand out and remain, but most of it just seems so... poorly footed.
Semi-unrelated by Craig Wright who has (falsely) claimed to be Satoshi also claims Dillinger is his friend. Wright said Dillinger quit bitcoin due to the toxic drama. More likely Wright & his friend were early miners and not involved in the Satoshi persona.
On a more day to day level, a few years ago a lot of e-commerce pay-by-bitcoin options existed. You would not put this on the checkout next to PayPal because nobody was doing bitcoin then.
What I don't understand is why this never took off. People know bitcoin through the news, it is not new. In this time Apple Pay has come along nicely but not bitcoin.
Bitcoin has gone off on a tulips tangent. This seems at odds with what I thought the purpose was, being able to pay securely and without Visa getting their cut.
I use it at a small B2C shop and about 1 in 1000 customers does use it. It's a custom implementation I once spend a few hours on, so there's nobody taking a cut except the miners.
At this adoption rate, I won't invest any more time if it ever breaks. The transaction costs are actually higher now than they are anywhere else, and both PayPal as well as credit cards are faster. Next year, the new EU legislation will open the market pretty wide and I'm expecting (almost-)free, instant transactions to be available Europe-wide (our market).
I had actually forgotten all about it until a few weeks ago, when I accidentally started the wallet app, and got quite excited seeing the balance. I got accidentally lucky by speculating in BC for the last three years :)
I'll take a stab at guessing. I think in order for merchants to be paid in BTC or other crypto, it needs to be instantly converted to cash. Why? Because the value of BTC can swing wildly and retailers can't afford that risk when their margins are low. Also, BTC transactions can take 20 minutes to an hour to confirm sometimes, so that matters too at some level.
I think something like Tether, which pegs its value to the USD, might be a better approach for crypto-based e-commerce. BTC can more easily be converted to Tether, so it would probably work better for everyone involved.
I'm using it in a B2C shop with low-value transactions ($20 to $200) and I really don't care about the sort of volatility that BC has shown.
But, yes, the time to confirm is annoying: 1 in 24h/transaction_time orders miss that day's shipping deadline and are delayed by a day. More importantly, any delay > 1m requires the UI to accommodate for transactions that aren't instant.
But, as a retailer, these are rather small issues. What matters more is simply the lack of demand. We've offered BC as a payment method and its use has always been a rounding error in our statistics.
USD fluctuates wildly from my position in the GBP currency zone. But you don't get out of it - for the same reason you don't feel the 18.5 miles per second you're travelling through space.
BTC isn't taken as a currency because you can't live in its zone. Everybody swaps it into the currency of the zone they are living in - unless they are speculating.
You use the currency of the zone you are living in because everything you need is priced in that currency, and everything is priced in that currency because there is a strong taxation authority that demands payment in that currency.
Due to the limited supply of 24 million BTC, Bitcoin is deflationary meaning it will go up in value as more people adopt it. Govt print fiat currency out of thin air to encourage the population to spend on the economy. Bitcoin as the opposit affect as people use it for a store of value and a hedge against fiat currencies.
It's arbitrarily divisible, up to the limit of a float though right? So nominal prices can keep "decreasing" in bitcoin for a long time. Maybe that's just too much work to keep the prices reasonable?
Edit: they can't actually be using a float for money though, right? So what is the actual limit of divisibiity?
Yes, people could increase the subdivisibility -- and break a lot of JavaScript implementations in the process.
It's clear that Satoshi either had some affinity to JavaScript or was otherwise familiar with people who are crazy enough to do financial calculations using double-precision floating point numbers, from the fact that the upper limit of existing satoshis is so close to what fits into a double-precision mantissa.
I can't agree more with most of the article, but can't disagree more with the claim that everything is horrible, but would be fine and awesome if only done through the SEC.
The whole idea of crypto-anarchy was to avoid the SEC from the beggining. Of couse there will be scammers, but some people, or some other form of organization, will appear and do the job that SEC should do (and, frankly, doesn't) but in a way that fits the new model.
There are a lot of scams in the real world, and the government isn't capable of preventing them. In fact, the government itself is a giant scam, and you're not criticizing it.
He is a well known figure within the crypto community. He is also a very private person.
> Why should we trust him with this post?
What makes you think that you should? I'm pretty sure Ray would be the first to tell you that you shouldn't trust anyone, particularly not on the internet.
A cursory search reveals guy who was involved in BitCoin from the very start. For example, here's an exchange he had in 2008 with Satoshi over the design of Bitcoin:
Are you talking about the linked post regarding inflation ?
because it seems to me satoshi was pretty right, by saying that bitcoins will get rarer and rarer even if miners mine more and more thanks to powerful machines. Rarer bitcoins means prices going down ( what costed 1 bitcoin before probably cost 0.001 bitcoin now), not up ( which is the definition of inflation).
We're talking about Bitcoin so obviously you should trust no one. But most of this post is either his opinion or information that was already well-known, so I think we can get some value out of it even if we don't trust the author.
Startups by definition are organizations in flux seeking their scalable business models, and claiming to have all the answers upon inception is an exercise in hubris and/or grandstanding. The late Steve Jobs did say that customers don’t know what they want, but many of these ICO firms don’t even seem to take the first steps in talking to early prospects.
1999 is calling, and they want their 18-month growth plans, 50-page business plans, and million dollar war chests back.