The SEC is being clear enough. "Take the money and run" is not an acceptable business plan. Doesn't matter if it's "crypto". Doesn't matter if it's "blockchain". Doesn't matter if it's "binary options".
This isn't a new thing. Previous generations of scams included "street railways", "real estate investment trusts", and "multi-level marketing". Read "Extraordinary Popular Delusions and the Madness of Crowds", which is over a century old yet will sound very familiar to anyone who's followed ICOs.
The history of scams should be taught in school. At least read the Wikipedia entry.[1] High school students should learn about small cons like the pigeon drop up through big ones like Madoff.
The SEC is mostly reactive. After the thing tanks and people complain, they go after people who acted like crooks.
i was a bit too young to observe but has anyone here seen something similar when the internet craze came out?
1) Were public companies changing their names to reflect the "e"/"i"? If so which ones?
2) Isn't the "i" from iPhone/iMac taken from the word "internet"? Okay it's a product and not a company name, but where does the distinction starts/ends?
Could we expect an incoming "bPhone" (blockchain) or cPhone(crypto), dPhone(decentralized) .. it actually sounds cool, right?
Yes, during the dotcom boom you could see a spectrum of behaviour, including at one edge companies that were almost purely a scam, basically "We're going to do this perfectly ordinary business, but _Internet_ so give us piles of cash" and at the other conventional businesses that really were heavily Internet related and only tweaked how they described their existing Internet work or moved that to the top of a document, such as Microsoft or Google.
In the middle somewhere a good example is Be Incorporated. During the 1990s Jean-Louis Gassee had founded this startup with VC money to pursue a new operating system and basically prove Apple (who he'd previously worked for) wrong. By the end of the century JLG's funding was running out, the VCs didn't want any more risk, Apple had chosen to take back Steve Jobs instead of him, and it looked as though Be would go out of business shortly, but the dotcom book offered a "Hail Mary" play.
Be re-wrote its history and produced IPO paperwork that emphasised this as an Internet technology offering in the heart of the dotcom boom. Be's future was now in the promising (but it turns out in the end, totally irrelevant and now forgotten) Internet Appliance market, they pivoted from their previous work (developing a personal computer operating system nobody was using), they went from talking about TCP/IP as a specialist corner case few users would care about to prioritising it as the main focus of their system, and so on.
It didn't work, Be Inc. ceased business after burning all the IPO cash and laid off all its employees without shipping any significant new products. But without the dotcom boom, that would all have happened much earlier, when the VC money ran out. Ordinary people who foolishly purchased Be Inc. shares in the IPO or shortly afterwards lost their shirts, and the VCs got their money back.
I disagree with your use of the term 'foolish' in hindsight.
We can imagine an entirely reasonable alternate universe where, by pursuing this 'Internet Appliance' idea, they ended up inventing the formula for what in our universe became the iPad. Apple's success was far from guaranteed at this time too.
So they (Be, inc) passed the buck onto the general public, and let them shoulder the immense financial burden of their failures? That's pretty evil, extremely devious, a whole lot cowardly, and an astonishingly good move business-wise.
It would be evil if they had intended to fail. I assume they intended to succeed. It turned out that Linux won the server market, but it was entirely plausible that BeOS could have won instead. At the time, lots of well-funded startups used Solaris/SPARC web servers, and many used NT, so it wasn't a foregone conclusion that open source would win. BeOS had a lot to recommend it over Solaris, not to mention NT.
If they "passed the buck onto the general public, and let them shoulder the immense financial burden of their failures" that seems to me like the definition of an IPO.
On top of that everyone and their mother founded companies that did 'something with the internet' and all those companies had a '.com', 'e' or something similar in their names.
Personally, I feel like the 'i' was mainly popularised with the iPod.
I remember people saying "Only eMachines can do the internet. That's why they have 'e' in their name, duh!"
And remember "Dot Com Guy?" Some dude in Dallas who as a publicity stunt pledged to stay in his house for an entire year and just live off of stuff ordered online? Today, that's quaint. Back then the very notion of ordering a pizza on your computer was like flying cars.
The very first time I saw the idea of ordering something online, was when Sandra Bullock ordered pizza online in the 1995 movie The Net. I was just floored, like I couldn't grasp exactly how such a thing would work and how it could really be possible.
The web was just getting started, but there were lots of online services already, like Compuserve, AOL, Prodigy, etc. so I kind of think people were ordering stuff online before websites existed - although my memory is hazy. Also, there were things in other countries besides the US - Minitel for instance?
I doubt we’ll see a mass market blockchain phone for two reasons:
1) blockchain adds overhead. Mobile is about efficiency
2) blockchains are only necessary for adversarial collaboration. Your phone is wholly owned and controlled by you, so there’s no need to host adversarial realities on it.
1) Light blockchain clients?
2) Umm really? Controlled by you? Not by Apple and Google who censor software (crypto as well) and such?
A bunch of companies are doing exactly that right now (can’t recall from the top of my head) and I honestly wish them all the best as the current walled garden situation is obscene.
ad 1) with a lot of people having more than one device, why not a block-chain app between just your devices to make sure information is shared between them correctly? It's all about finding a valid use-case, barely anyone does though.
> i was a bit too young to observe but has anyone here seen something similar when the internet craze came out?
Some, but because the money flowed differently it was more common to take successful business idea and start a new VC backed company with successful business + internet tacked on.
Existing companies were naming products with e/i, but again they got nothing close to the boost we are seeing right now with blockchain.
> has anyone here seen something similar when the internet craze came out?...Were public companies changing their names to reflect the "e"/"i"? If so which ones?
This is an age-old phenomenon. Why do you think there's a toy wagon called the "radio flyer"? Radio was the high tech product of its era, and planes...wow!
I was working then. As I recall, a lot of small companies did this. I can think of one public company that changed the name of a division, but not the whole company. I can't think of any public companies that recast themselves as internet companies this way; perhaps someone else can.
Isn’t the whole point of crypto-based currencies is to develop a system that has no need to be regulated by a government agency or any single entity at all? If this is about protecting the consumer, perhaps the consumer shouldn’t be meddling in a space that is still being developed where there are big risk factors at this point in time. Or maybe I just dont get it.
You are free to develop your own crypto-currency and do whatever but this isn't about that.
What the chairman is talking about are publicly traded companies suddenly turning to claiming blockchain-based pivots without substantial evidence to believe that they are being sincere and truthful.
This is almost a pump-and-dump scheme in just slightly different clothing.
But this is neither about crypto-based currencies nor it it (really) about the block-chain. It is about fraud, the SECs comment is a warning to publicly traded companies who consider to increase their stock valuation by claiming to work on stuff which (other) people (falsely?) believe to be a game changer while they are not (really) working on it or there is no reason to believe they could actually pull it off.
She is purporting that bitcoin is somehow "worthless?" and that all of Crypto would crash if people truly understood it. The Chairman's post is simply about being responsible about blockchain and the hype surrounding it at this point.
I would be vastly more interested in hearing her explain what blockchain really is so I can decide for myself if her outrage is appropriate than hearing about how she has to hide her internet activity from her boyfriend and how she is "in trouble" for not coming to bed like she said she would. Her personal comments on those things make her sound like a lunatic with a lot of personal problems, including both zero self control and a dysfunctional private life. This does not inspire confidence in me that I should just listen to her wisdom and do as she tells me to do.
Meh, my wife does the same thing if I'm doing something on the computer late at night. I get the "I thought you said you were coming to bed in 5 minutes?" treatment. Hell I might even joke about getting in trouble for it. In any case this is clearly not a tweetstorm where she's laying out her argument to change minds, it's just a rant. It would be interesting to read her views in an article.
I realize it is a rant. It is a rant in which she says she has never bothered to explain it because [excuses] and asserts that she doesn't want to hear your opinion if you didn't read the white paper 5 years ago.
So it is a lazy, elitist snob rant that asserts that she has no plans to explain it to us unwashed morons and we should just take her word for it. My general opinion of such attitudes is Fuck you, which is part of why I walked away from a National Merit Scholarship and dropped out of college in my youth.
I already said I would be interested in her explanation. But I am not holding my breath. Her rant suggests she can't be bothered to explain fuck all. She is too busy stroking her ego on twitter.
I saw that. I don't know what PGP is and I don't have firsthand experience with BART, though I inferred her remarks were not intended to say anything nice about it. Perhaps you could elaborate for me?
Well, PGP is an email encryption layer that's 20 years old and was very enthusiastically adopted by the privacy community. It actually has some uses, e.g., Edward Snowden used it to communicate with Laura Poitras. But it's too complicated for the masses and nobody uses it. Kinda like bitcoin.
As for BART, I only took the train a few times in my life so I can't really elaborate on that.
Thank you. The info on PGP is helpful. There is enough criticism of BART online that I can get the general idea that comparing something to it is not likely to be a positive.
Do what she suggests you do: read the original Bitcoin white paper.
Most of Twitter rants I post don't include the complete background of what I'm talking about. I assume the readers who are interested have some context. I'd like to think that at least some of them are useful nonetheless.
Remember a basic issue with things quoted on HN: they usually weren't written specifically to be discussed on HN. That's clearly the case here. Maybe you could direct any other concerns you have to the comment introducing Jeong's Twitter thread, rather than attacking Jeong herself.
She didn't suggest I read the white paper. She suggested she couldn't be bothered to talk to anyone who had not read the white paper 5 years ago.
Had she said "Those who are interested in understanding it can start with this white paper" and linked to it, I would probably be reading the white paper right now. But I don't actually know what white paper she means.
Last I checked, you aren't a moderator on HN. So how about you refrain from trying to police my behavior here?
Your take was bad. You posted it publicly. Pointing out the badness of your take is my birthright as a message board nerd.
I'm really not sure I understand how you get from snark about people showing up in her TL to cryptosplain Bitcoin to her despite her having read the white paper 5 years ago to feeling like probably you shouldn't have to read the white paper.
You've now heard it from two sources, me and Sarah Jeong: if you want to understand the background of what she's talking about, just read the bitcoin white paper.
You have an obnoxious habit of trying to police the behavior of other members here. I don't routinely call you out on it because I am not a moderator. But since you are all up in my business, it is well within my right to say back off. Policing my behavior is not some right of yours.
Edit in response to your unmarked edit: Please kindly provide me the link to said white paper instead of continuing to lecture me and I will have a go at trying to read it.
You can just Google for "bitcoin white paper". It'll be the first link. It is probably the most famous document to be called a "white paper" in the last 30 years.
> If this were about a minority group, there'd be outrage
People don't get a say on which race or gender (edit: sex) they're born as. That's partly why race and gender are protected classes. "People who own Bitcoin" isn't a protected class.
You consider "paranoid dorks" and "people who own Bitcoin" to be the same set? Even then, would you consider something like "you fatasses need to shut up and leave us normal people alone" fine?
I agree; her tweets were overly pointed. But calling an individual names, a group of people of voluntary association names, and an entire race or gender names are three very different things. Her core point, that a knowledgeable minority padded with a zealous, clueless majority, the latter on a roll misinforming the public, stands.
Edit: My comment was tongue in cheek. It’s kind of funny that not only genders are like the twin towers, but even saying that sex is determined at birth can be a sensitive issue.
Sometimes I like to point out that without any form of meaningful static typing, writing code in Ruby requires huge numbers of unit tests to verify what would be basic properties of a better programming language, where no such test would be needed. It's true: if I said that about Serbians, I'd get in a lot of trouble.
I agree, "Javascript is an inconsistent language" and "all you smelly nerds go back to your caves and leave us normal people alone" are pretty much equivalent.
Please don't make up quotes to attribute to other people, especially when it's not at all clear --- because you'd have to go read through a whole Twitter thread to find out --- that you invented the quote.
It's not only not clear, it's deliberately deceptive. 'StavrosK would have you believe Jeong is poking fun at nerds in general, and making comments about their personal hygiene.
My impression was she was making a statement about some nerds, yes, but people may interpret it as entailing a general slur.
Was it also deliberately deceptive to interpret Trump's famous statement about Mexicans as a slur on the whole group? I don't think so.
I observe people of all sorts making ambiguous statements deliberately in order to express bigoted opinions while not engaging with those who may be offended.
None of this implies I think defending "nerds" as a class is important - but I don't think being offended is necessarily "deliberately deceptive".
> If this is about protecting the consumer, perhaps the consumer shouldn’t be meddling in a space that is still being developed where there are big risk factors at this point in time. Or maybe I just dont get it.
You assume consumers don't have needs and are immune to incentives, and also that people running the coins are perfectly honest, and it would never cross their mind to architect incentives in such a way, as to predictably exploit those consumers.
>perhaps the consumer shouldn’t be meddling in a space that is still being developed where there are big risk factors at this point in time.
The issue isn't consumers meddling in blockchain currency. It's about consumers being dragged into blockchain speculation without their knowledge.
Grandma puts her retirement savings into some big, safe company. The suddenly the company goes from being an electric utility to being a blockchain speculator and goes bankrupt, wiping out her savings without her even having a chance to get out.
Vanguard is supposedly getting into blockchain technology to manage the indexes for their funds...[1]
I have seriously wondered whether I should consider avoiding them. Not just because blockchain=bad, but because I was thinking about how their commitment to minimizing costs could backfire someday, if not immediately.
I can, if said laws cannot be enforced. Thaf’s the whole premise of cryptocurrencies. Not that they don’t need to be regulated, but that they cannot be regulated.
Well, it doesn't work for cash transactions, so there's that. To clarify, with cash it's an honor system dependent on social norms. In most countries in the world it's failing badly, hence the term "black economy".
Sorry, what? ICOs and other scammy behaviors _are entirely public_. A company visible to the public comes along and starts selling "coins"/"securities". How exactly is it that this can't be regulated? Just because it's crypto doesn't make it unregulatable, these are people in the real world doing bad things--not some opaque UUID in a digital ledger somewhere.
And let's suppose someone came up with a way of selling these coins anonymously online in a secure way. Guess what! Nobody would buy them, because why would you buy securities from an anonymous online source that could just as easily be a 13 year old writing the modern remake of the 1994 hit film _Blank Check_?
That's inherently the issue here. It's not a matter of sending money/value/currency/whatever anonymously. These are companies that are coming out in front of the public in the real world, talking a big crypto game, then disappearing into the void with millions of real dollars. Or perhaps not disappearing, and providing no value to the people that bought into the scheme (contrary to the advertising they used). Or any number of other things that the SEC would have something to say about.
Just because it's "crypto" doesn't mean that its intersection with the real world is free from scrutiny and the rules of the governments of our real world.
Sure that's an option, but they could also do it the old fashioned way and have you buy something off them ;) At least if you get caught up buying something you shouldn't with cash they don't also get your transaction history.
I don't know why I have to keep explaining this, but cryptocurrencies can and will be regulated using exactly the same mechanism that basically everything else is.
The government makes some rules, asks you politely but firmly to follow them, observes carefully to see if and when you break them, and then beats you with a (usually, but not always, metaphorical) rubber hose until you choose to comply. Nothing about crypto interferes with this process, even theoretically.
In my opinion that cartoon is possibly unrealistic. I think many people might fail to recall a password correctly while drugged and being hit with a wrench. I suspect I would.
There is a difference between what the crypto community needs vs what the government thinks it needs. One of the goals of crypto is lack of regulation like you identified, but that doesn't mean the government doesn't want to regulate it any less.
There are all sorts of industries that would be ecstatic if avoiding regulation was as simple as opting out.
Regulation is typically unhelpful to the market, as it incurs unfair overhead. Blockchain based things can work in a decentralized way relying entirely on the protocol. Still, a blockchain without a community or developer group tweaking the protocol as time goes on is not a tenable solution. There is still a guiding hand but it is very slight, very gentle, and only used to keep things on course.
> If you are a public company, then you signed up for SEC regulation
If you are under American jurisdiction, you signed up for SEC regulation. Private American companies, offshore companies selling securities to Americans and perhaps even foreign overseas individuals transacting for securities in U.S. dollars are each, to varying degrees, under U.S. jurisdiction.
Since the subject of this thread is potential regulation by American regulators, it is presumed that we're talking about American companies unless otherwise stated. I don't think anyone has intimated that the U.S. S.E.C. is going to investigate blockchain speculators around the world.
What does it mean when a company pivots to blockchain? Does their business change fundamentally? Maybe I don't understand blockchain well enough but it seems more like an implementation detail to, not a fundamental change.
There definitely is a difference between talk and action.
Will be interesting to see if they actually do anything because in the end it will end up with a ton of litigation that they may or may not want to do.
> Before I move on to the next topic I want to raise one more narrow, distributed ledger or "blockchain"-related legal issue by means of a hypothetical. I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to (1) start to dabble in blockchain activities, (2) change its name to something like "Blockchain-R-Us," and (3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved. The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.
The key part of that comment is "without providing adequate disclosure" - it is acceptable for a public company to do everything listed above as long as the change in business model and the change in risk profile is properly disclosed; as long as what they're advertising (we're now working on a new super cryptoproduct!!!) to potential investors is actually true, and the shareholders (both current and future) are on board with what their company is doing.
Kodak had a very original idea to use blockchain technology to complement their existing business, targeting the same customers. It was done well enough that I bet they can provide a paper-trail of the idea that pre-dates what happened to the iced tea company's stock. They might get investigated, but I would bet confidently they'll walk away clean.
The iced tea company was the first to stumble upon the fact that adding "blockchain" to your company's name and making no other significant changes could boost your shares by 50% instantly. They have some plausible deniability that they truly intended to pivot the company and didn't know it'd have those effects.
The Kodak plan seems pretty good to me. Digital photograph copyrights are a solid basis for a coin. They're an asset class sensible people might want to make long-term investments in.
SEC completely fails to acknowledge that their regulatory burden is way too heavy for small blockchain startups.
If you want to be fully complaint with SEC to issue your tokens as a security you have to spend shitload of money on laywers and wait for approval for months if not years. In fast-paced world of blockchain, it's equal to suicide.
Another thing is deeply discriminatory concept of accredited investor. They said that it's to protect investors. In reality it means that most lucrative deals will be out of reach for not wealthy individuals. And I hate whole concept that the big brother prevents me for taking risks because they think I'm too stupid for thinking for myself.
And constantly referring to ICO scams is not excuse at all. They don't want to shutdown scammy ICO, then want to shutdown all ICOs including ones with exceptionally brilliant ideas.
SEC is not friendly at all and they don't want to adapt. If they were friendly and willing to provide lightweight regulatory framework for ICO and cryptocurrencies, they would be very welcomed by many in blockchain world.
This isn't a new thing. Previous generations of scams included "street railways", "real estate investment trusts", and "multi-level marketing". Read "Extraordinary Popular Delusions and the Madness of Crowds", which is over a century old yet will sound very familiar to anyone who's followed ICOs.
The history of scams should be taught in school. At least read the Wikipedia entry.[1] High school students should learn about small cons like the pigeon drop up through big ones like Madoff.
The SEC is mostly reactive. After the thing tanks and people complain, they go after people who acted like crooks.
[1] https://en.wikipedia.org/wiki/List_of_confidence_tricks