There's an interesting thread here analyzing ICOs as if they were startups. I'll give the counterpoint: they're investment scams.https://twitter.com/zaoyang/status/899008960220372992 …
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Replying to @patio11
Investment scams are big business! $5 billion+ a year in the US. But they receive substantial adversarial attention from regulators.
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Replying to @patio11
Scammer problems: you have to recruit marks, successfully transfer their money to a scam vehicle, exfiltrate, and avoid arrest.
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Replying to @patio11
Recruitment in traditional scams happens over phone calls (boiler rooms), letters, and every other channel people talk to each other on.
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Replying to @patio11
The fundamental innovation of crytocurrency is that it has distributed, self-organizing recruitment through incentive structure for adoptees
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Replying to @patio11
Now how do you get money into the scam vehicle? Material amounts of money start in the traditional financial system. This is tricky for you.
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Replying to @patio11
As a scammer, you can't just tell Milli Smith to take out a reverse mortgage and wire $800k to an account in the Caymans. Her bank says No.
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Replying to @patio11
So your options are e.g. suborning a listed company and wearing it like a skin suit, then having marks purchase shares of that company.
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Replying to @patio11
This is dreadfully inconvenient, because marks might not have brokerage accounts, and scaling the scam gets it shut down quickly.
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Enter the cryptocurrency ecosystem, which needs one node with plausible deniability and a bank uplink. Controls of other nodes irrelevant.
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Replying to @patio11
The cryptocurrency ecosystem has what strikes participants as a surprising difficulty in maintaining one node with a foot in real finance.
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Replying to @patio11
This is not surprising because that node's economic justification for existing looks a whole lot like money laundering at scale.
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