All these ICO's have been avoiding any SEC regulation regarding private security sales by claiming the tokens are just a method to use/exchange services on their platform, not as an investment.
However, when ICO's like this one keep happening where only 100 "accounts" own 99% of the ICO offering, you pretty much lose that argument of the tokens only being there for use of the platform. It's a private security sale, and I only see one way this will end. The SEC will make a case out of one of the ICO's 100%. They do not take advertising to unaccredited investors lightly.
My only suggestion, if you are involved in any way with an ICO (developer, investor on the team pre-ICO, etc.), either get out of the U.S. now and/or make sure all operations are happening outside the U.S. I was almost involved with a company doing essentially what these ICO's are doing (not blockchain/crypto currencies), and fortunately I figured it out before being involved, but it did not end pretty for them. Like the IRS, the SEC/others will come down hard, not a matter of if at this point, it's when and who gets the beating first. They love making cases out of someone to set precedent.
With the general public playing into an overbought token market fueled by Asian countries for the most part, the regulators/SEC will come down extremely hard on this.
I think investing in Ethereum/Bitcoin is fine, just know what you're doing, record your cost basis for when you bought it. And seeing first hand what the IRS does to people who avoid paying taxes, just make your life easy, when you exchange back to a currency that is considered a currency by the IRS, just pay your capital gains on it and move on with life. The IRS will catch up and many people will go to jail for tax evasion. Don't be one of them. Obviously, all this only pertains to the U.S..
Also for fun, if you really want to see the hysteria around the Ethereum price right now, check out r/ethtrader/ or even the Ethereum FB group. People are throwing their entire savings into this while not knowing anything about it besides everyone in the group hyping it up amongst themselves. It's really sad. Ethereum is now actively pumped heavily on MLM sites/blogs. It's beyond gross. I believe Ethereum is an amazing project and am worried that this hype fueled hysteria, once it collapses on itself, will give Ethereum a bad reputation. It is a great protocol.
I think the notion of accredited investor is very discriminatory to small investors. It's basically says - if you already wealthy then you have an access to attractive investment opportunities with huge upside (and of course, huge risk), if you are just a middle class man then stay where you are (since your investment options with huge upside are severely limited and you don't have enough capital to make sense from investing in index).
The better version of requirements for accredited investors would be some sort of exam (hard enough to make sure you have solid knowledge about financial markets, financial instruments and risk/return relationship).
The effect of missing out on an upside is a lot less than taking a huge hit on the downside. It isn't discriminatory, it's protective.
It is sad but many people would put their entire savings and next months rent into a risky investment that is not publicly traded on a regulated market and basically lose their money most of the time because they invest on hype and because their buddy told them.
If an accredited investor loses his money, the nobody feels bad because they had the money in the first place and the means to either hire somebody who knows what they're doing or be responsible themselves.
I'd be fine with zero regulation on it all together, as long as I, as a tax payer, don't have to bail out all the idiots will fall for ponzi scheme after ponzi scheme. But do we let them dye on the streets because they lost everything? Hence why the regulation is in place.
You are also assuming that being an accredited investor gives you access to better investments, which is not entirely true. Many accredited investors lose their lunch on investments. Look at the number of hedge funds that beat a market index fund, it's like 10%. Or look at VC firms where 1 investment makes up for the loss of 10 others. Many never do get that return and just lose money until they're out. The best investment definition varies widely, and in actuality, most accredited investors would be better off just investing in an index fund because believe it or not, they don't know what they are doing most of the time either. Which is why many investments are high risk. So a test would not help either.
There other ways to protect small investors - education being one example.
If someone doesn't know how to manage miney they will lose it one way or another - be it forex, or or penny stocks. ICOs cannot possibly be worse than these legal things.
well education is supposed to be an answer to people having unprotected sex without consequence, but here we are, millions of STDs and unwanted pregnancies later
if people want to throw in everything they have into speculative currency, then they will. someone's gotta put down the law to at least try and protect damage to the economy when everyone loses their shirts
I think it is both. The regulation is removing the upside risk as well as the downside risk. Many professional investors are investing to real stupid things and losing their money, it is not that difficult to find examples.
All of them? Boiler rooms and stock frauds don't settle for a little bit of money, when they find someone to swindle, they take all of their money. It got so bad during the Great Depression that people actually hung bankruptcy judges.. Google "stock market fraud life savings" and you can find a litany of people who lost everything to these scams.
Do you have any actual examples? I googled your suggested term and found a bunch of people outside the US(lots in China a few in the UK, one in Canada) and a bunch of others who wouldn't qualify as accredited investors.
The great depression started before the SEC existed and was a completely different world.
Back to my original question I asked if it was easy to find examples. I have no doubt that you can find a few since fraud happens. But I think you'll find it difficult to find more than a handful.
Some people lost a lot of money on prosper.com, and at least in some cases, it was known that it was money they couldn't really afford to lose. See e.g. this (and be sure to read the last comment): http://www.bloggingawaydebt.com/2007/01/would-you-lend-75000...
I've tried to find more up to date information on him since that post is over 7 years old now and can't. Do you have anything more current or more details on the user pensioner?
ericscc.com appears to be gone as well as any of the other prosper forums I've found links to. Not really familiar with the site so is it basically dead or moved out of p2p or something?
The one forum site that still seems to be active is prospers.org, where pensioner was active as late as 2014. Not much conversation about prosper anymore, though (The old timers still there have thoroughly soured on p2p lending).
prosper.com itself is still in business. AFAIK they have pivoted to a much more conservative lending model. People who invested before 2010 or so generally lost money, some of them a lot of it, but the current model may be sustainable.
I think something that makes even less sense is that in theory this is to protect people from making high risk investments yet there's nothing stopping any random person who cares to do so from opening an account with a brokerage and spending their life's savings on far out of the money call options.
The idea isn't to stop people from doing something stupid but to stop people from trying to get people who aren't in a position to weather risk to do something risky to increase their own likelihood of profiting.
Forex has regulations for unsophisticated investors in the US.
Gambling is different in that the user goes into it knowing that they have a negative EV. Lots of people lose everything gambling no doubt but while they may hope to win they know the likelihood is that they will lose.
To raise from the public under the JOBS Act, you have to do your ICO through a regulated platform. As far as I know, none of those support blockchain projects, so it's not actually an option yet.
Plus you can't raise more than a million dollars or so that way. And there's a limit per person, so instead of just sending ETH, everybody would have to go through the platform's KYC, and declare how much income/assets they have.
In the meantime, people in countries with more economic freedom than the U.S. can just deploy a couple pages of code, make some basic efforts to block U.S. investors, and be done with it.
Also, to raise under the JOBS act, you pretty much have to do a full accounting audi to the same level as a publically traded company. And I think there is a limit of $50k for each person you raise from with a certain max in total raised. All in all, half of the money raised would go to paying for the funding to begin with, making it very very seldom used.
But if you own a token, you own nothing in the company, no equity, no promises, no contract signed, you don't have any right to any profits and Brave can say tomorrow that all the tokens are worthless. It's not so straight-forward that they raised investment, really they sold $35mil of a product. But IANAL, and you could easily be right, I'm just saying it isn't so cut and dry.
Depends on the token. In some cases, there's deployed code that enforces various rights...perhaps a share of fee revenue, or access rights to the platform.
Whether the code is already deployed, or depends on further development effort by the team, is one aspect of the Howey Test, according to Coinbase which released the results of some legal research on the subject: https://blog.coinbase.com/2016-12-07-blockchain-token-securi...
> BATs are tokens in a new Blockchain and attention-based digital advertising platform.
They are not refundable, nor are they securities or for speculation. There is no promise
of future performance. There is no suggestion or promise that BAT has or will hold a
particular value. BATs give no rights in the company and do not represent participation
in the company. BATs are sold as a functional good. Any value received by company
may be spent without conditions. BATs are meant only for experts in cryptographic
tokens and blockchain-based software systems.
Which is a fine attempt by their legal team to wash themselves of all liability by declaring that their coins are basically nothing, but words wont matter in the eyes of judges and regulators when a speculative market appears.
> People are throwing their entire savings into this while not knowing anything about it besides everyone in the group hyping it up amongst themselves.
Yeah reading /r/ethtrader it's 95% hype and 5% caution. I keep feeling conflicted for not buying in at ~$120-$130, and every day I think about whether I should buy in. But then I try to answer the question "what about Ethereum makes me believe it will be worth more than $(today's price) a year from now?" and I can't come up with anything other than speculation... Any advice?
>an overbought token market fueled by Asian countries for the most part
Chinese capital controls has a huge amount of blame here. Because the Chinese government prevents the foreign exchange market from clearing at a lower price, there's tons of unmet demand for converting Renminbi to anything that isn't subject to such restraints. Similarly, on the demand side - there's folks that would be induced to sell their foreign assets at a higher price if it was allowed.
So essentially, there's a "you can use this to avoid capital controls on your Renminbi" premium on all sorts of things. Real estate in Vancouver. Cryptocurrencies. Chinese companies acquiring foreign subsidiaries with no real business purpose behind it.
so doesn't this validate the usefulness of cryptocurrency? if people are using it to store and move value around the world in spite of government controls and fiat manipulations that is exactly why it was invented.
Move? Yes. Store? As little as possible. Chinese capital controls just means that the USD/Renminbi trade gets split into USD/BTC and BTC/Renminbi with an "arbitrage opportunity" against the official exchange rate that fairly compensates people for eluding capital controls.
With this process, it doesn't matter if BTC is trading at $1 or $1000. Chinese citizens can convert the maximum allowed from Renminbi to USD, buy bitcoins in USD, sell those bitcoins for Renminbi, and pocket the spread.
Brave got $35M, unless Ethereum crashes very soon.
Some parties can now set the price for advertising within Brave to whatever they want. If Brave becomes popular, they become rich. If Brave fails, they lost their money.
To me, Brave's value is due to its ad blocker. If they start shoving native ads into the browser then I'll uninstall it.
The set of technical users out there who will do anything and everything to avoid and block ads is not a valuable advertising space in any way, shape, or form.
The current tech already does that just fine, no need to have an ad network built into the browser that just overwrites existing ad networks on the page. At that point, it's no different than spyware/malware.
Is Brave showing any signs of becoming popular? Even within the bitcoin community where it would be expected to be most popular I only occasionally see people say they use it some of the time.
Right...this sounds like a good thing. People with big money invested will presumably want to set their prices such that Brave will succeed and they will either get a return or at least not lose their shirt.
If, for example, tens of thousands of people only had tens of dollars invested, they may be less interested in making Brave a successful platform because they have little financial incentive and little to lose.
how is this any different from raising money from VC firms? The distribution probably isn't any better, but at least everyone has the ability to bet on a company
Purchasing shares is much more than betting on a company. It's giving them money for a percent ownership of the company. Share ownership gives you voting rights on the company direction, a claim to the company's assets and profits, the potential for dividends payments, the right to sue directors for acting against the interest of the company, the right to recover losses from misleading statements and actions by corporate directors. These coins entitle you to nothing, and allow these companies to sidestep regulations that protect investors from scams. All these things were put in place because your average person doesn't know what they're doing, and they think stock ownership is just gambling. In fact, for many investors with little to no cash to invest, it is gambling. Can you afford a lawsuit to recover your $35,000, should your investment disappear into the ether because of malicious executives running a scam? Probably not. There is a very good reason why millionaires and high income individuals can become registered investors and can be solicited for funds by risky startups and nanocaps. The SEC doesn't want people who can't afford to recover from a scam to be solicited for investments. That's why publicly traded companies must file regular financial statements while non-listed companies must have investors go to them of their own free will.
"All these things were put in place because your average person doesn't know what they're doing, and they think stock ownership is just gambling"
In order to not be an "average person," you must make 200K+ in salary or have 1 million dollars in cash?
I'm not saying that ICOs are currently perfect by any means. There will be a NEED for some type of regulation and time for the market to figure itself out. Unless youre in the elite group of VCs or a very wealthy person, then you should be excited about the ability to be able to directly invest in a company. As far as voting rights, that can be implemented in the tokens.
This is still very new and one should assume that the current state of ICOs will change as people start figuring it out
Those opportunities are there for people who want to invest. The rules are in place to stop solicitations for investment, not investors. Anyone can go looking for these opportunities and participation is not hinged on being an accredited investor. The rules are to stop these startups from making promises they can't deliver to people who can't protect themselves when they don't.
Having participated in the very first ICO (Satoshi Dice), and seeing the field develop - it seems they are getting more and more professional every single year.
In 2017 we will probably see the first rating agencies for ICOs, plus distributed ways of doing due dilligence. It is quite possible that in a few years the investors will be protected as much, if not more, as in traditional investment opportunities.
It will be a dofferent model though - you will have scamcoins for speculators, but also many ways of gathering information about the startups, much more accessible and sensible than the current system. This may lead to naive investors being protected/educated well enough.
Look at the internet right now. Imagine that in 1996 the government required a ton of red tape to launch websites, and would pose limits on who can access it (so your grandma woukdn't put her cc numbers on a scam site)... That's how the investment environment looks right now.
Instead what we did was to allow anyone access and publish, and fight scamming by prosecution, education and built-in browser security. People are still getting scammed on the internet daily, but it's kind of under control, and the benefits far outweighted the losses.
> In order to not be an "average person," you must make 200K+ in salary or have 1 million dollars in cash?
Yes, those limits are inherently non-average so by definition it works.
Using monetary wealth isn't a perfect proxy for sophistication or intelligence but it does correlate and allows for risk tolerance by the fact that there's enough income to fall back on.
Equity in a company and the tokens the company issues are two separate entities. The tokens only have value because people speculate on them (though some tokens promise to distribute revenue to the token holders through smart contracts in the future).
It's possible we see companies in the future that exist solely on the blockchain and don't have a legal entity, and tokens effectively are shares in the company, with voting rights. But that's not what we have today.
The tokens only have value because people speculate on them
This is a bit weirdly stated for this case, I believe. The Brave tokens have value because they offer advertising space in the browser. You're speculating on the value of that advertising space, not so much on an altcoin/token itself.
Yep, as I said some tokens have smart contracts to distribute revenue - I don't know enough about Brave to say whether that's in effect immediately or something they plan to do in the future.
BAT tokens are already tradable on exchanges, and currently trading at 3x ICO price. The pricing is primarily speculative
That'd be a decent strategy for drug dealers hoping to legitimize their earnings, but I don't think there are any drug markets taking ETH yet; most of the drug profits are in BTC. It'd be pretty hard to exchange millions of dollars' worth of BTC to ETH in a purely anonymous way, so I doubt that the massive ETH raises have criminal sources.
Also I sorta doubt that Brendan Eich is a drug dealer :)
In-app purchases are a decent alternative. Give a mule some BTC, mule buys premium currency in your shitty game, your shitty game company sells the BTC it "acquired" on the open market.
Either way, you've got income from selling digital goods for cryptocurrency, rather than cryptocurrency with no socially accepted narrative for possessing it.
The more traditional route converts dirty USD into game company revenue.
Step one is recruiting some people to be a "customer" of your game. You give them $500 of dirty money, they go visit various retail establishments and buy $450 worth of pre-paid cards, then spend the balances on those pre-paid cards buying stuff from your game. Various banking institutions and app marketplace owners take their cuts, you wind up with clean money earned from selling premium coins to your "customers", which you then report as taxable income and use for whatever legal-market purposes you want.
So, the short of it is that it's a two-part scheme. Part 1 converts undocumented cash into pre-paid debit cards. Part 2 converts the balance of those cards into business income from selling digital goods. The receipt of cash gets offloaded to retail establishments that routinely handle such transactions. The delivery of goods is cheap and verifiable, and the payment for those goods goes through legitimate channels.
Compare to laundering money through a literal laundromat. If you double the sales through putting dirty money into the laundromat's cash deposits, you ought to be using twice as much power and water. Auditors can find that out. Selling twice as many virtual battleships, though? You've got customer accounts you've "delivered goods" to.
If I was a VC, I would be pooping myself. Quick, get on the phone with your old college buddies at the SEC / IRS, and stop this right now! The whole VC model is going to implode if companies can raise money like this. No equity, no dilution, no kissing ass... MADNESS
Ostensibly, the tokens here are representative of future services on the platform. Is this just a fancy kickstarter?
Was Tesla's model 3 preorder basically the same thing? They raised $400M dollars ($1000 down payment on 400k reservations) on future sales of a product not yet built.
If Tesla fails to deliver the Model 3, I assume they'd need to refund the down payments for all the pre-orders. Similarly, Kickstarter's rules say if the kickstarter is funded but then fails to deliver, they must refund the money (though I have no idea how well-enforced this actually is).
Meanwhile, if Brave completely fails and the BATs become worthless, I don't think anybody's going to get refunded.
Tesla's deposits can be refunded for any reason up until the car starts being produced. So all of those Model 3 reservations are refundable. And some people who wanted for a long time in the queue for Model S or Model X changed their minds (or got tired of waiting) and got refunds.
You can download the Brave private browser at www.brave.com. The Brave browser automatically disables all ads and tracking when you browse any website. The founder of Brave also created JavaScript.
Opt-in BAT ads. Like the bitcoin-based anonymous auto-microdonations in Brave Payments in beta-testing form today. We'll work to prototype and then propagate the BAT to other attention-based apps (browsers, games, video-players, and messengers).
I think it's ok to name Brendan Eich here. Just saying "[person who] created JavaScript" makes me think "that's either Brendan Eich or someone lying about having created JavaScript"
If he's chosen to be the CEO of a company again, then he's also chosen to put his social/political views on equality into the public sphere again.
And to make it more interesting... An average CPM is $2 (2 dollars for 1000 impressions). If you use the internet for an hour you likely generated ~200 impressions. You could in theory earn about $1 a day for casually using the internet (after Brave's/others' cut).
1. What effect does this have on the spyware/malware side current ads? As an advertiser, I pay some coins to show my ads. Are they still served from the same ad platforms they are today with all the tracking/spyware/malware/etc or are the ads served from some central Brave ad platform where all of that junk is rejected/stripped out?
2. What prevents one actor from buying up all of the tokens over time and opting to horde them rather than showing ads/paying out to users?
No answer to 1. I have no idea what brave's plans are. I can conceive of a locked down ad platform, both whether that would be acceptable to advertisers and worth the tech investment is debatable.
On 2, normal market dynamics. If tokens get hoarded, that increases the value of the remaining tokens. I assume that tokens can be split into arbitrarily small fragments.
There's also nothing stopping Brave from issuing more tokens (either indistinguishable from the original tokens, or a new type of token which is handled in the same way)
What prevents Brave from, instead of requiring these BAT tokens to show advertising on their network, just deciding to charge $ instead? If/when they do that won't it make these tokens worthless?
Nothing that I'm aware of, but nothing stops their users from using regular Chrome if the payments dry up.
There is also scope for click/view fraud also
Even if the original token pool is a fixed size, they could choose to issue another token pool later, so different token types could have different values
Other parties could use the same token scheme for their advertising and not pass anything on to their users
They conducted an ERC20 token sale on the Ethereum network. It sold out in seconds. The tokens (BAT - Basic Attention Token) are to be used to buy advertising in the "attention economy." The premise is really interesting, but the dynamics of the Ethereum token sale space are borderline insanity at the moment, and will continue to be until most of the fools are parted with their ether either by a company that fails or turns into a scam.
They sold off tokens which give access to advertising space in their browser, though the Etherium blockchain, and for a set amount of tokens per ETH. So they now own 35M worth of ETH, and a few entities have near-exclusive access to advertising inside Brave (but can also sell those tokens off).
Got a question on de business-model side of things: if Brave will block ads on websites, and replace them with their own advertisement and pay the user for looking at it, won't the owner of the website (aka the person that generated the valued content) get cut out of the deal? If so, assuming Brave succeeds, wouldn't it "kill the web", as there is no incentive to generate web-content anymore (a big % of websites gets financed through ads)? Am I missing something here?
The idea is that the Brave platform will allow users to send micropayments to content publishers. The micropayments will be in the form of "Brave Coins" which are like Bitcoins but specific to the Brave platform. The reason for this is that you reduce transaction costs to a point where it makes sense to send a $0.50 (or whatever) payment.
So if the Brave platform succeeds then you'll have a whole bunch of people who want to exchange cash for these "Brave Coins" so they can send micropayments. These early investors will hold all the Brave Coins and so they will get the initial influx of cash from people buying Brave Coins to use the platform.
Edit: Possibly the coins are being used by advertisers on the platform, not for micropayments.
My understanding is that the tokens (BAT) are sold to/for advertisers to allow them to purchase advertising on the Brave platform so that they can advertise on specific publishers' websites.
The tokens paid for by the advertisers will then go into the pockets of these publishers, while a small portion will end up with users to compensate them for their attention spent viewing those ads.
It turns out that I might have the concept correct but been slightly incorrect. Instead of being used as the basis for micropayments they will be sold to advertisers who will then use the tokens to buy ads on the platform. Same concept, where you have a bunch of users who "invest" by buying the initial coins and then sell them when the service takes off, but I was wrong about what they're being used for.
What's the incentive for a user to switch to the Brave browser?
What advantages does it have over a different browser using ad- and tracker-blocking plugins, especially now that the Brave browser allows ads from these ad providers?
Aside from the built-in ad-blocking/privacy features, Brave also allows you to pay publishers you support through their payment system.
It seems that with this ICO, Brave users can also start earning tokens (ie. Basic Attention Tokens) when choosing to view ads on certain publishers' websites. If I'm not mistaken, this new model is targeted to launch by the end of 2017.
Strongly seconding this. Finding Brave on Android was a huge moment for me. The mobile web is downright unusable on Chrome in Android and there are no good non-root options for ad blocking.
Firefox is dog slow (sorry FF), Opera crashes on me regularly, and I don't really trust any of the other 3rd party browsers.
If the only thing you can do with a token is sell it to a greater fool, you're participating in a Ponzi. It's all fun and games till the music stops, then lots of people are going to be left without chairs, and in these cases, life savings. This space has existed for over 6 years now, which ICO has generated revenue near it's "raise" ? Even 1M of revenue?
Bitcoin is boring, but it's a real currency you can use. Move fast and break things is a bug not a feature. If you can't buy things with it, it's not a currency, it's Russian roulette.
In the end this was a fail for BAT. Sure they got the money, but what would have been more valuable would have been a massive bunch of new incentivised users.
Given the speed with which this sold out, didn't they massively under-price their advertising space? At least versus the rampant speculation that happened.
Plus, I don't really see any reason to be impressed by "the founder also created JavaScript". That's just like saying "the founder is a famous fuck-up whose legacy has made you suffer".
Read the history of JavaScript sometime. It's not his fault that the language has so many flaws. He had 10 days to create it [0]! If he'd been given a normal budget and schedule and free license to design the language, we might've had something more like Scheme [1].
Around the same time, I added a scripting language to a complex desktop app. My initial prototype just used SIOD [1], but my boss took one look at it and told me to think again, that our customers would never accept having to use a lisp to script the application. I ended up using the VARIANT type heavily (this was on win16), leaning on OLE automation, and building something with C syntax and modules. No first class functions, no prototype object model. :(
However, when ICO's like this one keep happening where only 100 "accounts" own 99% of the ICO offering, you pretty much lose that argument of the tokens only being there for use of the platform. It's a private security sale, and I only see one way this will end. The SEC will make a case out of one of the ICO's 100%. They do not take advertising to unaccredited investors lightly.
My only suggestion, if you are involved in any way with an ICO (developer, investor on the team pre-ICO, etc.), either get out of the U.S. now and/or make sure all operations are happening outside the U.S. I was almost involved with a company doing essentially what these ICO's are doing (not blockchain/crypto currencies), and fortunately I figured it out before being involved, but it did not end pretty for them. Like the IRS, the SEC/others will come down hard, not a matter of if at this point, it's when and who gets the beating first. They love making cases out of someone to set precedent.
With the general public playing into an overbought token market fueled by Asian countries for the most part, the regulators/SEC will come down extremely hard on this.
I think investing in Ethereum/Bitcoin is fine, just know what you're doing, record your cost basis for when you bought it. And seeing first hand what the IRS does to people who avoid paying taxes, just make your life easy, when you exchange back to a currency that is considered a currency by the IRS, just pay your capital gains on it and move on with life. The IRS will catch up and many people will go to jail for tax evasion. Don't be one of them. Obviously, all this only pertains to the U.S..
Also for fun, if you really want to see the hysteria around the Ethereum price right now, check out r/ethtrader/ or even the Ethereum FB group. People are throwing their entire savings into this while not knowing anything about it besides everyone in the group hyping it up amongst themselves. It's really sad. Ethereum is now actively pumped heavily on MLM sites/blogs. It's beyond gross. I believe Ethereum is an amazing project and am worried that this hype fueled hysteria, once it collapses on itself, will give Ethereum a bad reputation. It is a great protocol.