What I think is most bizarre - I have friends with really decent businesses that try really, really hard to get a few hundred thousand in funding. And yet I see the most _terrible_ ideas with an ICO cap of 20 million dollars. Still people throw in the cash. Ideas with literally no need for a blockchain. But "everyone will be able to spend the token on [insert terrible idea]!"
'The most bespoke electric hypercar! With blockchain!' http://www.arrinera.io/ - I mean really?! I heard someone talking about "LGBT on the blockchain" the other day - "We'll aim for a conservative $40million ICO." Ridiculous.
> decent businesses that try really, really hard to get a few hundred thousand in funding
At a certain point I have to wonder if this is working along the lines of a lemon market. Coin investors don't know for certain whether they're being scammed, so they want an offer that will have positive expectation even after adjusting for scam risk. But founders do know, somewhat, the value of their ideas - and honest players are bounded by what they can actually return, while the deluded or dishonest can promise the moon. Eventually it only becomes possible to get investments by lying to people.
There are forces that should act as a brake here, of course; a sober idea asking for $200k ought to have lower risk than a stupid idea asking for $20M. But for some reason, that sort of risk discrimination isn't really happening at the moment. Maybe investors are over-eager, maybe the scam rate is so high at all price points to bury useful information, but it certainly looks like bad ideas are actually doing better.
People aren't buying those coins because they think there's a good idea there. They're buying them because they think they'll get rich quick and be able to cash out.
If you're not an accredited investor and want to invest in a startup you don't have many options. Cryptocurrencies unlock that for a lot of people, even if the startups are absolutely awful.
I always wonder who actually validates the money when somebody says they raised $20 mil in a private ICO. What keeps people from just claiming that to make other investors more willing and give an appearance of legitimacy?
I'd actually go as far as to say that ICOs are fraudulent by nature. The ones that are not fraudulent by intent just have no idea what they are actually doing.
They know exactly what they are doing. They are raising massive funds in an extremely short period of time with no direct obligation to provide returns to shareholders.
I like to think that some of them at least try to advertise them fairly (as some kind of crypto-kickstarter campaign), but I agree that any company that raises millions in a few days or mere hours without owing anybody anything in return is bound to fail due to a massive lack of incentive to produce.
Yep, it's deliberate. They're the backalley version of a regular stock offering.
They're marketing themselves as "opening investments up to the people" but they're simply a way to get money from investors without any of the very reasonable legal securities and obligations that come with a company going public.
Mixed feelings on this one. Most of them are likely to be scams as its so easy to do. But there are also things like the Brave browser[1] with its BAT(Basic Attention Token)[2], which am very excited about. With the Ad revenue on Internet falling all around, with Ad-blockers increasing. Brave, with BAT, provides a new way for publishers to get paid. Interestingly it also has the potential to disrupt Google's Adsense model. So there is an interesting element of incumbent (Google) and disruptor (brave) in there.
The vast majority of cryptocurrency advertising is aimed directly at taking advantage of investors who probably don't know how to do proper diligence on such an early and untested technology.
I would put this squarely in the same vein as ads that might encourage you to 'buy our gemstone, it's going to be the new diamond'. Or 'our baseball cards are first edition and guaranteed to go up in value', etc.
Money today is worth more than money tomorrow. If you have idle capital and I have something valuable, I can cash in sooner and you can get a valuable resource. So there is a legitimate reason for me to sell you something that is guaranteed to go up in value assuming that I want money now more than you do.
That's not an endorsement of any asset in the crypto space, and I would never remotely suggest that any token today is guaranteed to go up in value.
I haven't actually seen "guaranteed to go up in value" pitches but I believe the ones that do work on certain people take a more subtle form.
It's a bit like how poorly written spam makes professional-looking phishing look more convincing to the average person.
The most effective scams are the ones that fool people who think they couldn't have been fooled. Heck, you see it all the time with car advertisements, etc.
> I always thought the "guaranteed to go up in value" claim was silly.
So would 99.9% of people who see that ad. Everyone knows that if it sounds too good to be true, then it likely is. Especially in a paid advertisement. Modern consumers are more than well atuned to not trust every ad they hear.
If they don't see the glaring risk in cryptocurrencies, as it is constantly mentioned as being in the media nearly every time it's mentioned, or if they didn't spend a minute Googling them to see the countless headlines about it's volatility before gambling on it then I really wonder whether their money would be going to a place of value elsewhere anyway.
Otherwise plenty of people know the risk and are still willing to bet on it because it is possible to gain quite a bit from the growth. I know many people who have successfully. And many who are in it for the long term because they fully believe in the technology. And there's nothing wrong with that.
You would think that 'great artists' would hold on to all of their paintings and not sell them, same with car manufacturers that produce 'limited editions'. Who knows whether the next 'Beatles' is out there, holding back all their recordings until 2050 so they appreciate in value.
Only if something has buyers does it have value, this is true with finance scams as well as real world over0valued items.
'The most bespoke electric hypercar! With blockchain!' http://www.arrinera.io/ - I mean really?! I heard someone talking about "LGBT on the blockchain" the other day - "We'll aim for a conservative $40million ICO." Ridiculous.