[elevensies]

I just realized, I'm severely confused about what Filecoin is, and possibly ICOs in general. I assumed "ICO" was analogous to IPO. If a token is essentially a bearer share that is coupled to the payment system. No reason you couldn't create the coin, run it privately until you get some revenue, and then offer it, as IPOs are usually done.

But when I search Filecoin's website for "revenue" and "profit", I only see references to the participants in the system, and not the token holders.

https://www.google.ca/search?q=site%3Afilecoin.io+revenue

https://www.google.ca/search?q=site%3Afilecoin.io+profit

I did a quick search of the top 5 tokens on https://coinmarketcap.com/tokens/ and I'm not immediately finding any clear statements on how profit is made and distributed.

A question for people who are better informed, is there any kind of list or tracking on tokens payouts? Something like this (https://arxiv.org/abs/1703.03779# ), but for non-ponzis?

[JamesLeonis]

See ICOs as what they are trying not to be. In this case, many of these ICOs are bending over backwards to avoid being classified a security by the Howey Test, thus getting SEC attention. In this way, the company can raise money by "pre-selling" their token before the product is built. To throw a little sugar on the deal the developers also implement the ERC20 token interface so the tokens are transferable, giving rise to alt-coin FOREX-like marketplaces as tokens behave like currency.

The best analogy is if Chuck-E-Cheese pre-sold their tokens before they built their franchise location, and then people started Forex trading in anticipation of using their tokens in the future arcade. Chuck-E-Cheese uses the sale to finance the building of said franchise. Of course, this is if everything worked correctly and the owners didn't bounce to Spain with all your money, leaving you with some useless tokens.

[erc20]: https://theethereum.wiki/w/index.php/ERC20_Token_Standard

[lojack]

ICO can mean any number of things, but typically refer to a token that is tied to something that isn't its own currency. I'm assuming the Filecoin is redeemable for data storage on their network, but I'm not super familiar with that technology specifically. To give some other examples...

Tether is a token tied to fiat currency

NEO Gas is used for compute time in their smart contracts. NEO also has a currency that is used to mine gas. It can be a little confusing, but one of them is a token and one is a coin. This is different than Ethereum, where the currency is also the token used to pay for compute time.

I can dig deeper and give examples of how some of the other tokens work, but unfortunately I'm not super familiar with the other tokens in the top 5.

And, yes, ICOs can be tied to some number of shares in a company. In these cases, the token is redeemable for a share of the company.

[elevensies]

Ok, so I think I can understand Tether. A token represents a share of a bank account balance. So the organization that controls Tether buys and sells the coins to keep the balances balanced. So the value of the token is predicated on the existence and continued support of the company. The on-blockchain nature is valued for transaction processing, and allowing it to be wired into other contracts (I presume), not for decentralization, because you have to trust the Tether organization, N=1. Otherwise Tether would just be a database and a website, backed up by some bank accounts, i.e. a bank.

Are you aware of any tokens that don't rely on some kind of managing external organization's voluntary continued support? Or at least anything run like an ETF, where someone can deliver a basket of assets and get them tokenized? Or the inverse?

[lojack]

NEO Gas is an example of this. Gas is a token that represents a fee that can be paid for executing the smart contract. Unlike Tether, when a smart contract is executed the Gas is consumed. NEO uses a consensus algorithm called proof of stake, so more NEO Gas is created using a coin (neo shares) which represent your stake in the consensus. In this case both the token (gas) and coin (share) have value, but the token can be redeemable for something -- smart contract execution.

Here's a list of fees associated with the token: http://docs.neo.org/en-us/sc/systemfees.html

[thisisit]

Well on Tether, refer to this: https://news.ycombinator.com/item?id=15482289

and the comments. Sorry I am not sure how to pull the comments to my post in the link.

[thisisit]

Most of the coins, like filecoin, exist only in the whitepaper. Quite a lot have a roadmap of releases. There is no actual product, users or even a alpha or beta release. So I don't know why are they even thought of as IPOs.

Sure ICOs are platform for raising money but only in the riskiest sense. In some cases people are paying only for the R&D to be done by "core" team on some unproven but maybe tenable idea.

As for the profit mechanism, most of the cryptocurrency rely on finite and deflationary nature of coins to provide value. If say filecoin is proven to be valuable, finite nature ensures the price increases in short term all the while block rewards (coins given to miners) tapers off to ensure the coins are always limited.

[computerphage]

Tokens do not have to be bearer shares. Filecoin isn't.

[al2o3cr]

For a lot of these, the only use of the token at launch is speculation - you're buying tokens that might be useful with the system the ICO is building, if they don't go broke or pivot first.

IIRC there was some discussion about "tokens that do something" versus "tokens that may do something eventually" potentially being different with regards to SEC regulation, but I'm spacing on the details.

[thefalcon]

Matt Levine has been musing on the topic for a while, and I appreciate his take on things. Here's a decent primer: https://www.bloomberg.com/view/articles/2017-06-15/blockchai...

[wmf]

You can think of a token like a share in a (distributed autonomous) company that promises to never ever pay dividends. Thus you'd only buy it if you think the price will go up.