That SEC memo was weak. They should have made much more forceful statement. Thousands (likely tens of thousands) of US citizens are still investing in ICOs, there needs to be much stronger action taken to stop their gambling.

No, the SEC memo wasn't weak.

It basically said "we are watching this space" which will frighten anybody who knows that the SEC isn't in a hurry to investigate.

They can get you for things from years past (IIRC 10), so they don't have to rush things.

Because you and the SEC know much better than all of them?

You know we're talking about the same SEC that didn't saw the real estate bubble coming in 2007/08 (size > trillions, CDOs are obviously fine) or the dotcom bubble in 2000 (size > trillions, they approved the IPOs, right)?

If so, please give me reasons (instead of opinions or references to SEC "authority") as to why the ICOs in a 175 bn market are "dangerous".

If you want to learn more about the history what you want to look for is "Blue Sky Laws" there's a brief history here:

http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?artic...

The context was unsophisticated investors were being exploited without appreciating the risks involved. They thought they were investing when they were essentially gambling and the underlying security was essentially worthless.

My opinion is not important. The issue is lots of unsophisticated investors are betting their savings / money they can't afford to lose on cryptocurrency in hopes to flip their investment quickly and get rich. This is something which should be regulated so you can't just randomly dump your IRA/401k to buy some random cryptocurrency generated over a weekend by some person in a garage with shell company in Cayman Islands.

A guy who has his own garage would have some assets... which would be a step up for most ICOs.

If someone has the knowledge to create a cryptocurrency in a weekend, in a garage, and have the foresight to operate from a friendly jurisdiction, and convinces people to buy it; then please let me know who that person is so I can invest in them. I'd love to get them out of a garage and into an office to see what they can really do.

I can create a new cryptocurrency over a weekend. It's not really that hard and most of these ICOs are just copycats with few parameter changes. Projects which actually develop something new are very few so kudos to them. Majority are just quick copies of existing code and rebranding.

No. 2013 was a lot of clones of bitcoin with a few parameters changed. Nowadays ICOs I'm seeing involve a lot of very hard work.

The risk is that the teams may way under-estimate how much work it is (And I think that's what's going to cause them to fail)

but they are a lot more ambitious than you are characterizing.

This doesn't appear to be an accurate description of the ICO market as it exists. The hardest work in ICOs is the marketing. At the back end, they literally put in the fine print that the thing you just bought is worthless.

https://davidgerard.co.uk/blockchain/icos-magic-beans-and-bu...

Look up the EOS fine print. They took down the PDF, but I kept a spare:

https://davidgerard.co.uk/blockchain/references/EOS%20Token%...

TODO this evening: write up a blog post on the ICO for (I am not making this up) synthetic rhino horn dick pills.

It's literally saying "Give us your money and we will give you nothing in return"! WTF?!

And EOS has been one of the biggest ICOs. Also, despite the "no US citizens" bit, it's been advertising to the general public in the US (and in the UK). They are selling an ERC-20 magic bean to be traded on the bubble machines, and both buyers and sellers are going nod-nod wink-wink.

Offtopic, but I just finished reading your book, and you, sir, are very eloquent.

No it is still the same as Bitcoin clones in 2013.

These days ICOs are cloning the same smart contract template and just making small edits to it.

Most of the time they barely have any other code than just the slightly edited smart contract template and white paper which is also pretty much a copy paste with buzz words relevant to their niche.

And based on that they are raising millions of dollars.

Of course there are couple of exceptions of projects that actually seem to have some tech foundation (like Sia for example) but these are rare. Scam copy cats without any tech are majority of ICOs.

Their reasoning is "we have an idea, let's raise millions of dollars and we will hire bunch of devs to write the software". Mostly founders are non technical "idea people" so I would doubt their ability to even know if their idea is feasible.

Projects which start with strong technical foundations and don't try to raise money to build their tech (putting cart in front of the horse) are the solid ones. Projects which have no tech and raise money first, those are not likely to succeed imho.

> Nowadays ICOs I'm seeing involve a lot of very hard work.

For example? What ICO idea is not a previously failed startup? Distributed file storage that's been built a few times and each time turned out to be painfully slow and impractical? An iOS and Android port of the wallet software? Yet another browser?

From an HN link just under two weeks ago - http://build-a-co.in/

(https://news.ycombinator.com/item?id=15077117)

You can build an altcoin in basically no time, on-demand using a web frontend. How hard the shell company piece is I have no idea.

It really doesn't take a lot of talent or hard work to launch a coin from your garage these days.

Right. Now convince me to buy the coins, that's the challenge.

At the moment, the convincing doesn't seem to need to be very much, particularly where ICOs are involved. Copy someone else's white paper, post in a few forums with the word ICO splashed around liberally, and Bob's your uncle.

I think that's kinda why people are welcoming this move - there's a lot of trash coins and trash ICOs with no hope of anything ever coming from them, with a relatively low input of time and effort. But because they offer trade-able tokens and some of them might take off, and at least some of them might get a hype-cycle and increase in value whether there's any underlying value or not, and it's all new, shiny, crypto-magic-money...

I'm not sure this argument holds much weight. All investments have inherent risk. It's the job of the investors to assume how much risk they're taking. You cannot ban all digital currencies simply because a large amount of ICOs are poorly thought through, if not malicious. That would block a huge amount of innovation in a technology with huge potential to revolutionize many markets, if not all markets.

It's the equivalent of banning startups to protect investors from stupid/malicious founders, which has obvious negative effects on the economy. And with crowdfunding making its way to startup investment, it's not a reach to compare the two.

In this subthread I am arguing that someone who can create an altcoin or ICO from their home in a weekend is not necessarily a financial genius who should be paid millions, as it's fairly easy to do.

In other subthreads I am saying why I think the ban on ICOs might be welcomed, even if it could take the good down with the bad. I'm not arguing in any thread for an outright ban on digital currencies.

You only argued a portion of the point I was making. Simply making a cryptocurrency isn't enough. Differentiating in a way where I would be convinced to buy it, now that will obviously take genius since the mere creation of a cryptocurrency is commodity code. And it's not fair to say that just launching an ICO will mean an influx of money either, that is, token buyers are just shoving money into anything, because I can show you failed ICOs as well.

>> Differentiating in a way where I would be convinced to buy it, now that will obviously take genius

Evidently it doesn't really though, because we're in a stage where these are magic, and people are investing based on a little bit of hype which becomes self-sustaining.

There are lots of altcoins out there, most with not much value, but slowly trickling along. And there have been lots of ICOs of dubious value.

I obviously don't know what it takes to persuade you, personally, to invest. But it seems not to take much for the crypto-currency world at large to dive in right now.

You took the comment literally. I think OP's point is still valid. There should be regulations around sophisticated scams.

Most of these ICOs are utter garbage and the only reason people "invest" in a garbage coin is because they think there is some greater fool that will buy it off them.

To give them credit people have made many times their money buying and reselling but it would be idiotic to let this madness continue.

>it would be idiotic to let this madness continue.

Why? Inevitably the fools will just run out of money.

This "problem" seems to take care of itself.

Because these "fools" once they run out of money will be out on streets taking social security.

Then it becomes our problem again.

Isn't moral hazard awesome?

Yup, it is. Without something akin to moral hazard, we'd have a much more risk averse society, much slower economy etc.

We'd also have hoards of people starving in the street, as humans are not good at long term planning, or risk assessment.

So yeah, I'm all for "moral hazard".

Then force them to save a certain amount per month. What they do with their disposable income should be left to their discretion.

So now you are going to decide what consenting adults can do with their money, by deciding they can't invest in ICOs and other scam^H^H^H^H unregulated schemes until they have put enough away to satisfy you.

I'm not sure this is qualitatively different to a ban, really.

Better to force them to save a minority of their income than start micromanaging their entire spending with laws banning this or that spending.

I'm really not sure I see a difference, if you're going to start from the absolutist position that the state needs to butt out.

Either way, bans or forcing provision for retirement etc, you're taking the position that someone else does know best, and that they need protecting from their own spending behaviour. After that it's just a matter of degree.

My position is that there should be no social safety net provided at the taxpayer's expense. If one is going to argue that we ought to provide a safety net, and ought to limit people's right to decide how to live their own life to prevent this safety net from being unduly burdened, then I would respond that even if one were to accept that assumption, a less disruptive way of meeting this goal would be with a forced saving mandate, rather than trying to prevent them from bankrupting themselves in a roundabout way, through laws that prevent spending on allegedly frivolous/addictive ends.

But of course I don't accept their underlying argument at all. Just making the point that even if one did, their solution is not optimal.

Personally I don't want to live in a society without a safety net, or the other niceties of a modern civil society.

I also don't really consider it a trade-off - regardless of a social safety net, we ought to be restricting borderline scams. A lot of people aren't very smart, or are only smart in very specific directions. And they don't know they're not that smart. They can be taken in, scammed and fleeced, and this creates a problem not just for them but for lots of others too. This is why we restrict things like pyramid schemes.

I would love voluntary safety nets. I just don't like compulsory ones paid for at the taxpayers expense. It reduces choice, breeds corruption and unaccountability, and does not offer people the option to opt-out. But this is not really the forum to debate that, as it can get quite detailed.

As for those not capable of fending for themselves in a free market: maybe it would be a better idea to have a new class of citizen that, after passing a rationality test, is allowed to buy/invest-in whatever they want, while making the rest of the population in some sense wards of the state, with safety guards on their smartphones and PCs, and a state-appointed counseler greenlighting all of their financial transactions, or at least all of the entities they are allowed to transact with.

As for token sales, you can't categorise them all as borderline scams. It depends on the token sale.

I don't think voluntary safety nets work - it's precisely the people who wouldn't pay into one that are most in need of doing so.

Almost all citizens are badly informed and easily taken in by one thing or other. We look after each other in various ways. Civil safety nets and criminal law are part of those.

>> As for token sales, you can't categorise them all as borderline scams. It depends on the token sale.

Indeed, and many of them are without substance, riding the wave of interest in ICO tokens, and are borderline scams. I did not say all are, but enough that regulation in this space is more or less inevitable, and will be warmly welcomed by many.

There are a f*ckton of laws around IPOs and share trading, for good reasons.

I don't like the idea of a safety net that depends mostly on the contributions of those who least want to be party to it.

Regarding looking out for each other with bans on dangerous goods/services, I have no problem with a voluntary program that people enroll in to be looked after in this manner. We could have a state-backed coop that we voluntarily cede some of our rights to for a predetermined amount of time (e.g. 5 years), and over that timeframe, we are obliged to use the government's software guards on our smartphones/PCs, that prevents us from transacting with entities not on the government's whitelist.

But people should be able to live without those protections if they so choose. Accepting anything otherwise is accepting a servile existence for oneself and everyone else.

>> I don't like the idea of a safety net that depends mostly on the contributions of those who least want to be party to it.

Yet without such things we end up with millions in penury, risking starvation, because they never thought they'd be the one to hit hard times.

As for the rest, yes I get that you're a libertarian. I'm not. I understand its appeal, but it's a recipe for literal social darwinism, with those who are poor, unlucky or ill getting to die, free, in the streets.

Perhaps you could create a thread in an appropriate forum and we could debate the issue, because I don't agree at all that absent pillaging the rich with redistributive taxes, we'd see a worsening of poverty.

And even if we could save the poor with such acts, it seems like a very shortsighted approach that can't possibly be sustained over any significant timescale, given it depends on ignoring the will of an entire segment of the population. What kind of society could we possibly hope to create with such an adversarial approach?

> a forced saving mandate

There are not enough jobs at the bottom half of the economy for this.

Blue sky laws exist for a reason. Go ahead and google the term.