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
