It is like Kickstarter but with people feeling they will have some return to their investment instead of a product and some merch.

> Doesn't really seem like a sound investment.

You're conflating the economics of currencies with the economics of companies.

Not really.

Fiat currencies today are issued and backed by governments. When the government fails and the country falls into deep debt or other issues, they currency becomes devalued.

So everything is ultimately backed by something to an extent. In this case if it's an ICO it is used for transact with this company on their product, which is the underlying backing. So if the company falls apart, it would stand to reason that the coin would drop in price, since it isn't backed by anything.

Not saying they are the same, simply pointing out that there is a link.

You can also look at the currencies of countries and their value compared to other currencies when they go through various economic turmoil.

Agreed. The whole point of owning a token is the idea that some person will eventually demand it because they require it for something they want. Either some transaction in the token ecosystem, a dividend, or _something_. I find it really hard to believe most of these tokens will have long-term demand.

Fiat currencies are issued and backed by banks that lend that currency to nation state governments. There are only two countries left on the planet still in control of their currencies...Iran and North Korea.

> Fiat currencies are issued and backed by banks that lend that currency to nation state governments

There are three types of money: central bank reserves, physical currency and commercial bank money. The U.S. government (Fed and Treasury, respectively) directly controls the first two down to the cent. Commercial banks "make" the final one, but to get the right to do that they have to agree to Federal Reserve jurisdiction (internationally, this happens with central banks entering into swap agreements with the Fed, i.e. opening "accounts" with the Fed into which the Fed deposits U.S. dollars whose--since this needs to be said--quantities it gets to track).

My understanding is the 'Federal Reserve' is a collection of private corporations/banks founded in 1913 who lend money to the US treasury at interest paid as dividends.

> My understanding is the 'Federal Reserve' is a collection of private corporations/banks founded in 1913

A common misconception, but incorrect [1]. The Federal Reserve was created by an act of the Congress in 1913 [2]. Part of the confusion arises from private banks holding "shares" in their respective regional reserve banks. These "shares" are less "share of stock" than "you are regulated by us" membership accounts with an archaic label.

The history you mention, of a private organization gradually falling under the purview of public regulation, is closer to that of the Bank of England's [3].

> who lend money to the US treasury at interest paid as dividends

American banks are required to hold a lot of their capital in safe assets, i.e. U.S. Treasuries and things that look like Treasuries. So yes, banks lend money to the government and then get back interest. If you'd like, you can do this too [4].

[1] https://www.frbsf.org/education/publications/doctor-econ/200...

[2] https://en.wikipedia.org/wiki/Federal_Reserve_Act

[3] http://www.intriguing-history.com/bank-of-england-history/

[4] https://www.treasurydirect.gov/indiv/research/indepth/tbills...

useful links, thank you.

It seems to me like the whole value proposition of ICOs is getting people to think of a currency as equity in a company.

It is completely disgusting. We started by calling our ICO an IPO and making a note that we are selling shares, not tokens. But people still want to see a whitepaper and hear about tokens. And despite clearly saying we accept physical dollars [cash] for payment of services, people still think we are selling tokens to buy stuff with and comment how little sense that makes.

In the end, we decided to go along with the ICO terminology because it was too hard to fight perception. We still do the right thing: We're selling an unregistered security, shares in our company, and will pay dividends.

In short though, people trying to do the right thing are punished, and the people that overhype and do the ridiculous approach are highly rewarded.

Exactly. People don't realize that the "product" (if you can call whitepapers that) is completely decoupled from the Token s value. Of course the product could indeed use the Token but they don't have to and it doesn't make sense in most cases either.

I am wondering if 2018 will bring a deflation, maybe even a burst to the crypto bubble. It's all fairy dust right now anyway.

Not necessarily. Companies still need to charge you for a service, so instead of buying something directly you buy tokens from them and then use them.

That has been in use by companies for quite some time, just that the tokens were primarily used to actually work with the companies service, rather than trade them as an independent entity.

I could see how that could work in theory (and I'll be excited if that's actually happening!), but aren't most of these ICOs for products that don't exist yet? It seems like the token buyers take on risk as if they are investors in the company without getting a stake in the upside.

Any ICO from a newly formed company is entirely at risk. An ICO from Kik or Telegram is different to an extent in that there is already an entity behind it.

Of course if there were no "blockchain" they would simply issue tokens like everyone has in the past, where you exchange money to get a token, that you can use in the app, and that token is locked into that app. So you can't use it elsewhere, but it still has some value as long as the app and users exist since you can sell your tokens to other people if you no longer need them, assuming that transferring of tokens is allowed / acceptable.

But then it wouldn't be block chain, and it wouldn't get any hype =]

Games have been using this for years and years, so there's really no difference here.

One side likes to point out the internet bubble, the other side likes to say well look at the internet now. What's missed though is the massive companies that were built in the middle, that really changed our daily lives. Amazon, Google, Facebook, Apple, etc, these companies changed how we live our lives and then Banks and everyone else realized the benefits of offering connected services directly to a PC or a phone and again there were tremendous benefits to consumers and end users.

At the moment, there is no benefit, outside of a large remittance and some tax avoidance that can be accomplished through cryptocurrency, and certainly there's no functional product company in the crypto space, outside of the exchanges which make money through people simply trading currencies, but returning no real value back to the world.

But aren't all these app creating their own coins? Doesn't that mean the tokens are only usable in that app?

I agree. But is explicitly not that. Often your currency is backed by nothing at all, with no potential for it to even be worth anything.

> Often your currency is backed by nothing at all, with no potential for it to even be worth anything.

If enough people make Pascal’s Wager, then god effectively exists.

Except most ICOs don't offer such equity - instead they offer a token of questionable value and/or utility.