ICOs are as hot as dot-com companies were in 1999. The dot-coms were created like mushrooms in the night, often with hopeless business plans. Many were scams. Most of them are worth nothing today. A few great companies, like Amazon, and eBay, were however born.

We have all read that many ICOs are scams or "pump and dumps". Are there any genuine ones? What do they offer you?

Quite often, the genuine ones offer the same thing as the scams, i.e. they offer nothing.

Genuine ICO or Scam?

There could be a valid business behind the ICO, but you don't usually get any share of that business in exchange for your money. Generally a "genuine" ICO is linked to a business - a genuine business, or at least a proper business plan. Usually the business says it will use the proceeds of the ICO to expand its business or fund reserves and future growth. Often they will try to find some kind of use for the token they are issuing. e.g. "You can use our tokens to pay for listings on our website"

Genuine businesses will also explain the risks in the white-paper:

Example of risk warning from ICO White-Paper:

What do you get if you buy tokens in an ICO?

As general rule buying the token is like buying a piece of digital code. It offers you nothing in exchange, - no dividends, no bonus, no income, no votes, no share of ownership of the business.

Companies can print their own money, and call it an ICO

The company creates the digital code ("coins", or "tokens"), at a cost of zero, calls them "goods for sale", and then sells them to you. The company just made a nice fat profit, which benefits its shareholders and employees, but not you.

Greater fool theory

All you have to hope for, is that some fool will buy your tokens from you - that's assuming you can even find a place to exchange them at all.

Examples from a "genuine" live ICO:

In this Steemit article, you can see some photos from the White-Paper of one of the so-called "genuine" ICOs . I deleted the name of the company and ICO as I don't want to be linked to it in Google searches.

This company has staff, shareholders, sales and a business plan. It is in the process of launching an ICO this month. I won't say the company name. There are 16 days to go in the ICO token sale. The company website claims that 436 million tokens of EUR 0.10, each have already been sold. That's 43.6 million euros already raised.

The company has published a "White paper". It's 126 pages long. Most of the white paper describes the business of the company. This is interesting background, but of little relevance, since the tokens do not represent any kind of ownership of the business. Here's part of page 107 of the white paper which spells this out, (I deleted the company name):

You get nothing except a worthless token.

The white-paper spells out in multiple places that the tokens confer nothing on the buyer. They say the tokens being issued are not a digital currency and are not a payment service. They say the tokens "do not represent an investment". "They are not a security nor a financial instrument, and do confer any direct or indirect right to the company's capital or income, nor do they confer any governance right within the company"

When a company sells you "tokens", it is selling something it just manufactured

Below is an extract from the management business plan of the company selling these tokens. It shows their revenue projections, (in euros), for the next 4 years, starting with 2017 until 2021:

As you can see from the above, the company believes that most of its revenue will come from selling tokens!

How many tokens is this company selling? How many is it issuing? Is there a limit on the number?

Answer: According to the company web-site, it has already sold 436 million tokens at EUR 0.10 each. There are 16 days to go in the sale.

In this case, the company originally said that it plans to issue 1 billion tokens, of which "350 million will be issued in the ICO (excluding any potential stretch goal)". Given that, at the time of writing, they say they have already sold 436 million tokens, it seems that they are more than willing to use the "stretch goal". The rest of the 1 billion tokens being issued will be given to existing shareholders or retained by the company to fund future operations.

There appears to be no-limit on how many tokens could be issued. In other words, every time the company runs out of money, they can simply issue new tokens, assuming there are some suckers willing to buy.

Legally, this company is not a scam. It's a genuine company. They are offering to sell you something worth nothing, and tell you as much. It's your choice whether to invest. Maybe it's not quite a scam, but it's definitely poor value for money. To buy the tokens, you have to claim to be a professional:

Here's another extract from the White-Paper:

To regulate, or not to regulate?

Whilst almost all of these ICOs are lousy investments, the question is whether we need a regulator to protect us. Regulator or no regulator, fools will always be easily parted from their money. That's how they learn. Even if the fools lose their money, some great companies will come into existence. If we regulate, these companies won't raise the cash, and we may never see the benefits.

Your opinions are welcome!