The way to fix it is through enforcement of the SEC laws. We aren't going to combat fraud without proper enforcement. The industry needs more regulation because right now most investors are getting fleeced and getting left with nothing because there is a large pool of unsophisticated investors.
This solution would give SIA the ability to regulate these ICOs and that has even more issues (what makes SIA authoritative)? SEC regulation even though seems like a bitter pill for people who are in the cryptocurrency space is needed for things to actually get done since every fraud basically turns away investors that actually want to fund a real project.
ICOs are mostly useless - they are great for the founders but useless for investors. For now there is the hype that delivers new and new greater fools - but that will eventually stop and ICOs will face the hard reality of not being a very good at aligning the incentives of founders and investors. The problems are numerous - starting from the general problems of crowd-funding which can work for big companies (i.e. the traditional stock exchange way) - but is dismall for startups, to the specifics of ICOs which don't actually offer any formal claim to investors. TSOs seem to stay at the 'general problems of crowd-funding' level. There is also the theory that ICOs can enable funding of development of open protocols (think SMTP) so that the claim is on the network not on the company. I find this theory very vague.
>Utility tokens exist to provide access to a good or service on a decentralized, blockchain-based network. [...] Siacoin is specifically designed as a utility token and has never been used for fundraising.
And yet it looks and behaves exactly like a speculative vehicle, just like all the other crypto coins.
>>Counterintuitively, developing a working Y-Coin network may actually decrease YCN’s value, because it would increase YCN’s usage. This is because, in order to access network utility, Y-Coin users need to spend their YCN. This, in turn, increases YCN’s token velocity, which puts negative pressure on YCN’s price.
This is clearly wrong. Value comes from demand for the currency, which increases when there are non-speculative sources of demand, like having an amount of that currency on hand for use in payments.
I'm the author, if anyone wants to discuss!
With securities you’re limited to 2500 investors before you need to do a public registration.
Massive correction like we see now https://www.coingecko.com/en is a good way for the market to readjust itself and wake up to all the ico greed is good
Security token offerings (STOs) are steadily gaining popularity these days, as was predicted for 2018.
A few relevant projects if you are interested in this subject are:
* Securitize.io who assists companies in raising capital through STOs
* GBX.gi who is creating a security token exchange for vetted projects and an ecosystem to provide such vetting (based in Gibraltar, where they have regulatory support from authorities)
* Kairos, a company out of Miami who successfully did a security + utility token raise earlier this year.
That being said, valuations for these security tokens are still crypto-exuberant. I was on the phone today with a company with $1M in revenue raising $20M at $40M pre-money valuation (i.e. a 40x multiple for a company that has little to no growth rate and an unproven business model). In all honesty, even though the deal is bananas by conventional VC standards, I think they will probably raise that money very quickly.
> liquid capital in the form of Bitcoin, Ether
Not sure that you're using the word "liquid" properly. Show me how you can convert $50M USD's worth of BTC or ETH into USD in three business days or less.
ICO: Initial Coin Offering