RE: Community Standards for ICOs: Do's and Don'ts
Nice list, but I have a few questions for you:
Suppose you have a product fully developed and want to distribute 90% of your tokens, does the no-cap still apply? Is it still an ICO?
Suppose you do it in rounds, does selling 1% for $10M and keeping 99% for the developers sound fair? Especially if the developers only need $10M?
What about selling 1% with no cap to set the price like EOS and repeating the process until you get what you "need"? Who determines "need" and "scope" anyway?
What about the value of a wide distribution and community buy in it generates?
What about allegations of centralized control caused by selling a small percent?
Don't the developers make much more profit by selling in the future (after they have delivered the product) and isn't the idea of "developers getting rich" the very thing articles like this are complaining about?
How do developers prevent copy-cats from stealing code if they don't have market effect of vested interest of token holders?
If only a small amount is outstanding wont this also inflate market prices and cause people to lose money when future rounds dump on the market?
These are tokens not securities, no one, not even the developer, can be expected nor demanded to do anything on behalf of tokens. If you want securities then you want to play under the existing regulations which will only allow the rich and connected to invest.
A few is 3! You have broken the "law of few" by 6. ;) It's all inchoate so no list can cover every scenario.
Yes. This is based on today's environment and the externalites to the space of an uncapped sale.
Sort of. Depending on the mechanism, it's "fair," but perhaps not advisable. The sheer dollars at risk are a material issue more than the valuation imo.
The team should determine need and scope. If they can't, they are probably not a good team. Refer to "raise money in tranches," a superior alternative to "raise all the money we can and now."
Distribution is important but can be solved by other means. No crowdsale will be perfect.
I am unclear on what this means. But at least partipcants ex ante know the valuation they get in the Gnosis scenario.
No, They only get rich in the future if they do well. It's conditional, not guaranteed, and it's aligned with the outcomes of their investors. This is why payouts in the future, vesting, not taking a big payday in the beginning, are important -- they align incentives appropriately. In the real world, I don't get paid my lifetime potential earnings up front in a lump sum. If I did, I would probably apply myself at work differently.
This is an issue for all FOSS and all projects in this space for the most part. One can argue that the more $ raised, the greater incentive for a copycat before there are non-monetary barriers. This is distribution issue and a delivering a working product/ecosystem, not a money issue imo.
Potentially no, potentially yes. This is why character matters in leadership. You need people who will do what's right for all stakeholders and balance the project's financing needs with investor outcomes. If AAPL needs to raise $5bn and it makes sense, that new supply of AAPL stock won't negatively affect the extant stock's value. Same goes goes Melonport or Dfinity's next rounds.
SEC has been clear as it doesn't matter how you want to lawyer it, ICO and token promoters have responsibilities to those to whom they sell tokens. I am not interested in securities law or lawyering Howey test, that will be done for us in the future. There is a clear expectation that if you have a project and you raise money, you are expected to do right by your investors (or donators or token holders). It's not a strictly legal standard (yet), but it's a very prudent ethical standard. Again, each project gets to choose for themselves. This is a standard the community holds projects to as determined by me.